By Andy Xie
The days of easy growth are gone, meaning the government must address problems linked to low household income and excess investment
China's economic management overly relies on juicing up confidence and encouraging speculation on the expectation of a brighter future. The demand from the confidence game leads to excessive demand for debt to finance holdings of speculative assets like land and commodities. Properties under construction, sold vacant properties and the inventories of commodities like steel and non-ferrous metals may exceed 100 percent of GDP at current market value. The rising inventories have exaggerated the country's economic growth in the past five years.
In 2008, the global financial crisis interrupted this asset-cum-inventory bubble. But, the government encouraged the banking system to force-feed the economy with credit, which revived inventory accumulation and the asset bubble. This episode has more than doubled China's economic difficulties.
Keep reading: The End of the Con – Caixin Online.
