I’m not an economist (call me a layman), but from what I know about China’s economy, it thrives on the small profits made in producing finished goods from imported raw material; a model where the value addition is a very tiny percentage of the overall transaction.
Now, the Chinese model is of hundreds and thousands of factories making small profits, and these profits, on aggregation, becomes a significant portion of the economy. This model is extremely dependent on exports.
From the pictures supplied in the article, I can see that government spending and investment form large chunks of the economy. But, aren’t these amounts directly going towards establishing those factories that I mentioned? Can salaries be paid with money set for investment, in as sustainable a manner, as the profits from those companies?
If you know better, please tell me why this picture is wrong. Thanks!
When you have a large population of poor people and a half-decent legal system/law and order, you can achieve massive relative growth easily and quickly, especially when you leverage technology (computers/internet/etc.)
Trade is nice - trade is great. It gives their generals and politburro US currency to send their kids to school at Harvard and buy condos in Manhattan, along with some leverage over the US gov't by buying bonds and proping up the currency. In this way, trade for them is a big deal. But in terms of their own economic growth, the star of the show is their domestic market. Why do you think even Google is bending over backwards to get a foothold?