China Review News (CRN) recently published a commentary on the decline in the quality of China’s economic growth. In the year 1980, an investment of RMB 1 yuan could result in RMB 4.1 yuan worth of return in GDP. However in year 2011, an RMB 1 yuan investment brought only RMB 1.8 yuan worth of GDP return. China’s model of high government investment in economic growth results in a weakness in the promotion of quality domestic consumption. The lowered quality is reflected in the inability to match supply with the decreased international demand. Meanwhile, China’s government run financial market suffers from very low efficiency in capital utilization. The private sector has much higher productivity but cannot access sufficient credit to obtain loans. The situation is made even worse when higher inflation and asset bubbles are added to the mix. The commentator called for tax cuts, breaking up monopolies, and improving financial support to the private sector.
Source: China Review News, September 25, 2012