Why China Can’t Adjust
China’s current economic slowdown has no shortage of causes: Europe’s financial turmoil, sputtering recovery in the US, and weak domestic investment growth, to name the most commonly cited factors. But the Chinese economy's vulnerability to these constraints is symptomatic of deeper institutional problems.
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CLAREMONT, CALIFORNIA – China’s current economic slowdown has no shortage of causes: Europe’s financial turmoil, sputtering recovery in the United States, and weak domestic investment growth, to name the most commonly cited factors. Since exports and investment account, respectively, for 30% and 40% of China’s GDP growth, its economy is particularly vulnerable to weakening external demand and accumulation of non-performing loans caused by excessive and wasteful spending on fixed assets.