Explain China's Growth Model?

Question

Hello,

I've read countless sources talk about China's "unsustainable" export and investment ("fixed assets") driven growth model.

Each of them talks about statistics showing its "unsustainable," but can someone explain the growth model itself?

Like I sort of understand export-driven, as in we see "made in China" stuff everywhere, implying that China is exporting a LOT of stuff. But why is this unsustainable?

And I have no idea what is meant by "investment"-driven economy, or "fixed asset investment," much less why it's unsustainable.

An explanation with examples would be most preferred.

Thanks so much!

Answer 1

I personally don't think there is such a thing of "China's Growth Model", China is so big, and the economy growth in each part of China is quite different.



There are at least 3 type of economies in China over the past 50 years in different part of China - (1) the "old economy" which was established before 1980s in east and NE China, they are real industries but poorly managed by communism model. (2) the "new economy" which established since 1980s in few provinces of southern China and SE China, it started from the cheap manufacturing and export cheap goods all over the world; (3) farming - some provinces have almost nothing but farming.



most people in the world know the 2nd since everyone know the cheap Chinese goods. in reality, the cheap goods industry brought china quick money and brought some western technologies as well, but the price is too much in term of environment and hurting the (1) industry - the entire national resources deviated to the (2) industry including investment and natural resources. So the (1) industry was serverly declining until recent 5 or 10 years. I personally believe this is a failure rather than a "model".



Now it seems both (1) and (2) industry are both growing well, so I have better confidence with the country. Of course, the (2) industry (cheap goods industry) is slowing down due to less demands and increasing cost (salary etc.), but I don't think it hurts the economy much, rather, I believe it is a good trend that move the high polluted industry out of the country.

Answer 2

Export driven is exactly what you said, I am not an expert but i am thinking more on the demand side. There's only so much demand externally and China will cap out and that sector wouldn't grow anymore.



Investment, in particular fixed assets are like the building of infrastructure, roads, railways airports etc...



Interestingly, China is still a developing country and reflecting back to other asian economies such as Japan, early on they also was largely an export oriented economy and still is one of the biggest exporters today.

Answer 3

It's an export oriented model with exchange rate manipulation, and without equality, and environmental concern. You might add corruption to each variable ,and change the word ideology in its original model to a communist party's guideline.

Answer 4

you know this growth model ? Y = G + C + I + NX.

For US --> 15 = 4+11+1.3-0.3 .......that extra 1 comes from debts.

For PRC -->15 = 2+5+8+0.2...0.2 is deficit.



See, chinese invest more than half the income !!!!!!!!!!!!!!!!!!!!!!!