Peter Wong ("Chinese economy will overtake America's - thanks to Chinese values of thrift and hard work", January 5) presents a highly novel argument for not only why the Chinese economy has experienced economic growth, but also why it will ultimately surpass that of the US.
According to this narrative, Chinese residents save more due to inherent thriftiness; Americans, on the other hand, choose to spend more and save less. His rather simplistic view of the differences between the two countries leaves out perhaps the most important explanation: financial repression.
That is, the Chinese government has not liberalised the interest rate mechanism nor the capital account in China; thus, state-owned banks pay below market rates for deposits, while Chinese investors cannot easily invest abroad at higher rates. Thus, residents have no meaningful investment options except for the real estate market and the stock exchange.
Of course, financial repression policies pay handsome dividends for the state. It provides the capital needed at below market rates to continue the investment boom, even as returns on capital plummet in certain industries. What's more, the argument offered up is even odder coming from a scholar at a research institute [Lion Rock Institute] that, according to its own website, promotes "free market values".
Apparently, the promotion of free market values does not necessarily exclude heavy government intervention in the financial industry to limit consumer choice.