12/15 Those who argue that China's real consumption is in fact "normal", and that this shows that China doesn't have a rebalancing problem, miss the point. China's consumption is only "normal" if China's GDP has been overstated by unrecognized overinvestment.
13/15 If you don't want to call this "underconsumption", that's fine, but then you have to call it "overinvestment". In either case it leads to excess capacity, whether that excess capacity shows up in investment in property, infrastructure or manufacturing (or all three).
14/15 More importantly, what the Chinese economy must do, whether you call it underconsumption or overinvestment, is the same. If it cannot get consumption growth to rise, it must reduce the growth in production, i.e. GDP, until the two are in balance.
15/15 Obviously no one wants to do the latter, and doing the former has proven difficult. But the problem will persist until Beijing either gets consumption to soar, lowers the GDP growth target, or decides to rein in runaway debt. carnegieendowment.org/posts/2025/0...
📌