"China cannot build its economy for ever on a savings rate of 40 per cent of GDP, or exports growing at such a rate that by 2020 they will constitute half of the world's merchandise exports. The model is cracking because it must."
- Will Hutton
My question here is "why?". Not, of course, why Will Hutton believes these trends cannot continue forever - because they cannot (although they might go on for quite a long time), but why does he think that the slowing of growth in exports and the loosening of savings necessarily spells the end of Chinese growth? Exports make up a third of the Chinese economy, but domestic consumption is not growing so much more slowly than the rest. Savings act as a safety-net in absence of a proper welfare state, so until a welfare state is properly constituted they will remain high, and once this happens taxation is likely to step in to absorb the money which would otherwise be saved. All of this seems good reason to believe that Chinese GDP growth will slow from its 10% yearly average, not that the west will draw ahead of "a China facing political turmoil and increasing economic difficulties".




