from Follow the Money

No investment drought in China

December 2, 2005

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China

Stunning fact of the day.  In dollar terms, Chinese fixed asset investment exceeds US fixed asset investment.  So says Stephen Roach:

Despite its relatively small share in the global economy -- only about 5% of world GDP (at market exchange rates) -- China now spends more on fixed investment than any country in the world.  In dollar terms, China's fixed asset investment was running at an annual rate of close to $1,100 billion in the first three quarters of 2005 (at market exchange rates) -- in excess of annualized 2005 investment totals in the US ($987 billion), Japan ($733 billion), and the Euro-zone ($651 billion).  If China's investment boom remains unchecked and its currency continues to appreciate, its dominance in shaping the global investment cycle will only grow.  This underscores the distinct possibility of Chinese-led gluts in worldwide capacity -- not just a problem for China but increasingly a deflationary risk for the global economy.  In short, China's investment-led growth boom is now in the danger zone.

There is much to discuss other than China - the latest US data, Greenspan's speech, and why global liquidity measures based on the Fed's custodial data are likely to send false signals because they are not picking up the world's petrodollars.   But I won't get to it all today!


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