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Saturday, May 29, 2004

China's economic growth a bubble phenomenon?

This article suggests that it might be. China's staggering economic growth over the past few decades has made it a very significant factor in world economics. The old adage that when the United States sneezes the rest of the world catches a cold is starting to apply to China as well. All in all, this growth is a good thing but the speed of change in China makes it's economy potentially unstable and could have serious consequences for us here as they continue to adapt away from a command and control economy.

All we know for certain is that we really don't know. Few economists fully trust the official statistics, which they suspect suffer from omissions and periodic political tampering. With a country as big as China undergoing so much dramatic change—moving from a "command and control" economy to a market system—the chances that anyone has a complete picture of what's going on are slim or nonexistent. In a smaller country, our ignorance wouldn't matter much. But in China, it's slightly terrifying.
Eventually as the Chinese government gets out of the business of trying to control it's economy the statistics will probably get better, letting markets react quicker to potential problems. For now we will just have to ride out whatever economic winds blow from that part of the globe.


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