Friday, July 20, 2012

China chart of the day

Indications are that China's investment led economic growth is faltering. The precipitous boom in fixed asset investments, which touched 50%, is clearly unsustainable. The property prices are clearly on a massive bubble. This graphic from FT is illustrative

Domestic consumption is the only way out. Simultaneously, given the critical role played by land prices in sustaining investments, the government will have to manage the consequences of deflating property bubble on both the balance sheets of banks and the investment appetites of public sector entities and local governments.

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