There are, after all, indications that growth is, in reality, close to zero. Take the most reliable indicator of Chinese economic activity, the consumption of electricity.
Just about everyone correctly agrees that a new round of structural economic reform could restart growth.
The country’s current general secretary of the Communist Party has, for instance, been closing off the Chinese market to foreigners, recombining already large state enterprises back into formal monopolies, increasing state ownership of state enterprises, and shoveling more state subsidies to favored market participants.
One statistic summarizes the situation: in Q3, there was $460.6 billion of net capital outflow, as documented by Bloomberg. No economy—not even one the size of China’s—can survive outflows of that size. The Chinese economy has never made sense, but confidence held it together. Now, the confidence is gone.
“On conservative growth projections, China’s economy could well be bigger than the sum of all the G7 economies in real terms within the next decade,” writes Peter Drysdale, the editor of the popular East Asia Forum website.