Not one member on a panel of prominent economists believes China’s growth model is sustainable. Responding to the statement “China’s growth model, specifically the unusually high investment rate and low consumption rate, is unsustainable,” not a single economist disagreed.
The I.G.M. Economic Experts Panel is a survey is published by Chicago University and examines hot economic topic once a month. Fourteen percent strongly agreed with the statement, 57 percent agreed and 14 percent were uncertain.
Global markets have been trending downward since the start of 2016, with fears over the slowest rate of Chinese growth in 25 years and investors’ minds mulling over the geopolitical consequences of low oil prices.
Austan Goolsbee, a professor of economics at Chicago University who strongly agreed with the statement asked, “must we relearn the same lesson in the same painful way again?”
“As China becomes richer, it will resemble other rich countries: growth rates will fall; wages and consumption will rise; investment will fall,” said Oliver Hart of Harvard University.
In a slight dissent from the consensus, Princeton’s José Scheinkman, who was uncertain about the statement, sounded a note of optimism, “countries that grow very rapidly eventually hit a wall. Successful ones (e.g. Korea) return to growth after the stop.”
Investors worldwide have been shaken by China’s much-anticipated growth slow down. In 2015, China’s economy grew by 6.9 percent compared to 7.3 percent in 2014.
China is struggling to maintain the high growth rates, with which it has become accustomed and transition to an economy more focused on consumption rather than saving. But not everyone is on board with the idea that China should primarily be focusing on consumption.
“While higher consumption can support growth in the short run, there is little in economic theory that emphasises the expenditure side of GDP as a driver of growth,” said HSBC’s John Zhu said in a research note.
Jan. 20 was an especially dark day with indexes in Japan, Britain and France falling 20 percent from their highs in 2015, which puts them all in bear market territory.
Send tips to guy@dailycallernewsfoundation.org
All content created by the Daily Caller News Foundation, an independent and nonpartisan newswire service, is available without charge to any legitimate news publisher that can provide a large audience. All republished articles must include our logo, our reporter’s byline and their DCNF affiliation. For any questions about our guidelines or partnering with us, please contact licensing@dailycallernewsfoundation.org.