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What, me worry?
Why China can keep on going
September 2011Arthur Kroeber
Managing director, GK Dragonomics ResearchEditor, China Economic Quarterly
 
1.
China’s economy is an unsustainable investment
bubble2.
China’s housing market is an unsustainable
investment bubble
—”ghost cities” prove it
 3.
China’s investment is financed by an unsustainable
and rapidly rising public sector debt4.
China’s growth is dangerously unbalanced and
there is not enough consumption5.China is running out of surplus agricultural labor6.
China’s growth is about to slow sharply because of the “middle income trap” 
 
2
Six crises: the bear case
 
 
1.Investment bubble?
Fact: China’s capital stock is very low
 
2.Housing bubble?
Fact: China has a severe urban housing shortage
 
3.Too much debt?
Fact: Sovereign debt load is manageable and
finances productive investments
4.Not enough consumption?
Fact: China has the fastest growth in per capita
consumer spending in world history
5.No more workers?
Fact: Rural-urban labor transfer has a decade to run
6.Middle income trap?
Fact: There is no “middle income trap”
 
3
An answer for everything
 
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