Monday, July 31st, 2006
Barron’s gloomy China picture
Jonathan Laing, a senior editor at Barron’s, has written a piece for the magazine on ‘What Could Go Wrong’ in China. One of his most worrying comments is that “nearly all the economists, academics and other experts that Barron’s spoke with are bullish on China.” As Humphrey Neill says in the Art of Contrary Thinking when everyone agrees on something they are bound to be wrong. At the moment the consensus is that China and its roaring economy will dominate this century. But Laing says “a lot could go wrong with China”. Here’s a summary of his concerns:
1. A looming labour shortage due to a rapidly aging population
2. Environmental problems created by “lax environmental regulation” (contaminated water, deforestation, soil erosion, increase in coal-fired power plants)
3. Lack of water quality and availability constraining growth
4. Growing corruption at all levels of government creating misallocation of resources
5. Income inequality surging
6. A runaway investment boom built on soaring credit growth
7. A shaky banking system creating financial risks
8. Fragmented markets preventing economies of scale
9. Intellectual-property and copycat problems
10. Protectionist and economic nationalism of trade partners
11. Inefficiency: China consumes three to four times the energy the US to produce one dollar of GDP
Word Count: 188. This entry was posted on Monday, July 31st, 2006 at 7:32 pm and is filed under Emerging markets. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
