2013.07.23Part2[預言李氏王朝的衰亡,國企取代華資,大明皇朝的現實寫照,中國經濟撞上萬里長城,日本大選]

預言李氏王朝的衰亡,國企取代華資,大明皇朝的現實寫照,中國經濟撞上萬里長城,日本大選

2013年07月23日
主持人:蕭若元,趙善軒,林匡正


Paul Krugman: China’s economy has hit its Great Wall
Paul Krugman, The New York Times | 13/07/20

China’s new woes are the last thing the rest of us needed, writes
economist Paul Krugman.
Tomohiro Ohsumi/BloombergChina’s new woes are the last thing the
rest of us needed, writes economist Paul Krugman.

All economic data are best viewed as a peculiarly boring genre of
science fiction, but Chinese data are even more fictional than
most. Add a secretive government, a controlled press and the sheer
size of the country, and it’s harder to figure out what’s really
happening in China than it is in any other major economy.

Yet the signs are now unmistakable: China is in big trouble. We’re
not talking about some minor setback along the way, but something
more fundamental. The country’s whole way of doing business, the
economic system that has driven three decades of incredible growth,
has reached its limits. You could say that the Chinese model is
about to hit its Great Wall, and the only question now is just how
bad the crash will be.

Start with the data, unreliable as they may be. What immediately
jumps out at you when you compare China with almost any other
economy, aside from its rapid growth, is the lopsided balance
between consumption and investment. All successful economies devote
part of their current income to investment rather than consumption,
so as to expand their future ability to consume. China, however,
seems to invest only to expand its future ability to invest even
more. America, admittedly on the high side, devotes 70% of its
gross domestic product to consumption; for China, the number is
only half that high, while almost half of GDP is invested.

How is that even possible? What keeps consumption so low, and how
have the Chinese been able to invest so much without (until now)
running into sharply diminishing returns? The answers are the
subject of intense controversy. The story that makes the most sense
to me, however, rests on an old insight by the economist W. Arthur
Lewis, who argued that countries in the early stages of economic
development typically have a small modern sector alongside a large
traditional sector containing huge amounts of “surplus labour” —
underemployed peasants making at best a marginal contribution to
overall economic output.

The existence of this surplus labour, in turn, has two effects.
First, for a while such countries can invest heavily in new
factories, construction and so on without running into diminishing
returns, because they can keep drawing in new labour from the
countryside. Second, competition from this reserve army of surplus
labour keeps wages low even as the economy grows richer. Indeed,
the main thing holding down Chinese consumption seems to be that
Chinese families never see much of the income being generated by
the country’s economic growth. Some of that income flows to a
politically connected elite; but much of it simply stays bottled up
in businesses, many of them state-owned enterprises.

It’s all very peculiar by our standards, but it worked for several
decades. Now, however, China has hit the “Lewis point” — to put it
crudely, it’s running out of surplus peasants.

That should be a good thing. Wages are rising; finally, ordinary
Chinese are starting to share in the fruits of growth. But it also
means that the Chinese economy is suddenly faced with the need for
drastic “rebalancing” — the jargon phrase of the moment. Investment
is now running into sharply diminishing returns and is going to
drop drastically no matter what the government does; consumer
spending must rise dramatically to take its place. The question is
whether this can happen fast enough to avoid a nasty slump.

And the answer, increasingly, seems to be no. The need for
rebalancing has been obvious for years, but China just kept putting
off the necessary changes, instead boosting the economy by keeping
the currency undervalued and flooding it with cheap credit. (Since
someone is going to raise this issue: No, this bears very little
resemblance to the Federal Reserve’s policies here.) These measures
postponed the day of reckoning but also ensured that this day would
be even harder when it finally came. And now it has arrived.

How big a deal is this for the rest of us? At market values — which
is what matters for the global outlook — China’s economy is still
only modestly bigger than Japan’s; it’s around half the size of
either the U.S. or the European Union. So it’s big but not huge,
and, in ordinary times, the world could probably take China’s
troubles in stride.

Unfortunately, these aren’t ordinary times: China is hitting its
Lewis point at the same time that Western economies are going
through their “Minsky moment,” the point when overextended private
borrowers all try to pull back at the same time, and in so doing
provoke a general slump. China’s new woes are the last thing the
rest of us needed.

No doubt many readers are feeling some intellectual whiplash. Just
the other day we were afraid of the Chinese. Now we’re afraid for
them. But our situation has not improved.

New York Times News Service