Discussion in 'Economy' started by KissMy, Jul 30, 2010.
China has overtaken Japan to become the world's second-largest economy
Impressive but less so considering the population differences between the countries. This implies an inefficency in the Chinese Economy that could become trouble if not corrected.
What might that be?
Well the US economy is bigger with less people. Japan's was bigger with much less people. This implies some sort of inefficencies on a per capita basis.
I am not a student of Enconomics but more people to me should = bigger economy if each one was equally efficent.
there are at least three inefficiencies:
The state still largely determines where investments can go.
The industrialization of agriculture is being held back by population policies.
Internal leverage was so high in the 1990s that such data is no longer published. The guesses I hear and read are that internal leverage as a percentage of GDP is 2-5 times the US ratio of 324% of GDP (That is total debt public, private and corporate). Also China has its own unfunded liabilities problems.
This is not good.
The forth is massive government corruption basically bottom up corruption, with all the officials offering bribes to each other and covering up inefficiencies.
Market inefficiencies correct themselves, when left to do so.
Three fourths of China is as poor as Guatemala. It is rural and many people live in tremendous poverty on the land. Thus China has a very large population of 1.3 Billion, but only a small fraction of those people are working in manufacturing.
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