, the professor provided a description of China’s debt issues that Canadians can apply to their deliberations ahead of our national election.
Mr. Pettis explained that China is attempting to reorient its economy from investment-oriented to consumption-driven. The investment model was highly effective in generating gross domestic product growth in the 1980s and 1990s because China was under-invested. The under-invested stage meant that hypothetically, business owners could borrow $100, invest it, and create $110 in economic value. In these cases the aggregate debt level rises but the capacity to repay debt rises by 10 per cent.The problem now, according to Mr. Pettis, is that a saturation point has been reached where $100 investments only create $20 in value.
There are major structural differences between China’s economy and our own. Most importantly, Canada is already a modern, consumption-centric economy. Household debt levels are high, but anything resembling the gargantuan scale of China’s malinvestment is not evident. Despite these economic distinctions, I don’t think Canadians can afford to fully ignore Mr. Pettis’ warnings for China as the federal election approaches. Sizeable budget deficits are expected no matter who wins on October 21, and the Liberals new spending initiatives are estimated to cost almost $30-billion annually according to
globeinvestor Why does every pic taken at the TSX feature this guy? The public demands an explanation!
globeinvestor And vote this prick out