Another stunning number from China, the land of regularly astonishing statistics. In December 2009, Chinese imports hit an all-time monthly high of $112.3 billion, a ridiculous 55.9 percent increase from a year earlier.
What are the Chinese importing? According to Xinhua News, "commodities and mechanical equipment that were necessary in construction of infrastructure projects and property," as well as raw materials for manufacturing industries. Iron ore and bulldozers, in other words -- not quite the proof of a domestic consumer boom that both China and the rest of the world are eagerly waiting for. If China intends to become the locomotive pulling the entire global economy forward, Chinese consumers, and not merely the Chinese state, will have to stoke the engines.
But at least one Chinese economist is certain that the consumer boom is already happening, and believes that the infrastructural spending currently taking place is an essential part of the process. In "Wait -- Don't Tell Me Chinese Don't Consume," Ha Jiming, chief economist for China International Capital Corp. Ltd, writes that "the urge to buy consumables from furniture to cars is catching fire in China as demographics, development and income factors converge."
Ha contends that for the past decade household consumption in China has been rising faster than registered in either Japan or South Korea at the height of their go-go booms. He argues that right now, infrastructural investment in the relatively undeveloped West is growing faster than in already affluent eastern coastal regions, creating the necessary conditions for fast growth in previously neglected rural areas. And he makes an intriguing demographic argument:
Chinese born from the 1950s to early 1970s make up the largest part of the population. Their adult children -- more than 200 million people -- are now entering their 20s and 30s. This age group has the highest rate of consumption.... This demographic characteristic will drive demand for real estate and wedding-related consumption, as well as consumption related to travel, food, beverages, clothing, automobiles and entertainment... The propensity to consume among young adults in China is considerably higher than their parents... Currently, the group with the highest propensity to save (those born before 1970) is transferring life savings to the generation with the highest propensity to consume. This inter-generational transfer of income will speed China's consumption growth over the next few years.
However, another pair of Chinese economists are warning that it's all going too fast -- that Chinese economic growth in 2010 could approach an absurd annual rate of 16 percent, if government stimulus spending continues to flow at the same speed as it did in 2009. The trade numbers for December aren't the only data supporting this position. The Financial Times notes that "bank loans in just the first week of this year" hit $88 billion, "twice the monthly average of last year when monetary policy was already extremely loose."
Such numbers fuel talk of a Chinese bubble. A growing number of China watchers are worried that all that bank lending is fueling real estate and stock market speculation. There are some good arguments pushing back against the bubble alarmists, and we would do well to remember that skeptics have been calling for China's economic expansion to go bust almost from its outset, some 25 years ago, but the numbers are undoubtedly extraordinary, especially compared to the painfully slow growth rates registered by the world's other big economies.
The Chinese government will assuredly work to slow growth down if it looks like it is going to break into double figures, either by turning off the stimulus spigot and/or by allowing the yuan to start appreciating again (a move that would have the added benefit of easing U.S.-China trade tensions, (and perhaps take the steam out of outright economic war-mongering). It will be quite interesting to see whether domestic demand picks up the slack if and when China relaxes its formidable Keynesian mercantilism.
But we really shouldn't be all that surprised if China continues to ascend. There is some precedence after all. At the end of a Foreign Policy article predicting the most extraordinary growth rates for China I've seen anywhere, Robert Vogel notes that for most of that last couple of millenia, China was the world's preeminent economic superstar.
Chris Patten, the last British governor of Hong Kong, reckons China has been the globe's top economy for 18 of the past 20 centuries.) While Europe was fumbling in the Dark Ages and fighting disastrous religious wars, China cultivated the highest standards of living in the world. Today, the notion of a rising China is, in Chinese eyes, merely a return to the status quo.