The writer is head of emerging markets economics at Citi
Are all Chinese economic recoveries, like Tolstoy’s happy families, alike? Many observers these days seem to think so. The recent boom in metals prices, for example, reflects a confidence in the market that this year’s acceleration in China’s growth rate will cast the same benign shadow over the global economy as earlier big recoveries have done. But that may not be the case.
The big Chinese economic recoveries of the past decade or so have been characterised by two features above all: they have been stimulus-driven and investment-led. Large amounts of support via credit markets and local government off-balance sheet financing vehicles were all typically focused on supporting activity in infrastructure and real estate. Fiscal and monetary stimulus delivered a surge in investment spending.