William Pesek has it right about state-capitalist, investment over-intensive China.
First, Chinese GDP and other metrics are simply dodgy:
Even in the best of times, China’s data can be about as accurate as tossing a dart at a chart on the wall. It’s a structurally imbalanced economy distorted by top-down policies and considerable “gray activities” that are hard to measure, not least of which is the sprawling shadow-banking sector on which the central bank has been clamping down….
On top of the many moving parts, statistical margins of error and incentives for fudging and manipulating data, consider how stage-managed Chinese data are becoming. Finance Minister Lou Jiwei told reporters in Washington last week that he expected growth to slow to 7 percent this year, below the official target of 7.5 percent. State-run media quickly whitewashed the record, updating stories to show that he had, in fact, said 7.5 percent.
Second, the excessive (that is, unproductive) debt-backed investments of China’s state-regulated form of capitalism are now a huge liability:
What markets should be focusing on is the herculean task Premier Li Keqiang faces in improving the quality of growth and weaning China off its addictions to exports and overinvestment. Investors should be concerned by the bad-debt crisis festering out in the provinces, and the risks of social instability as growth wanes.
“Analysts, it seems to me, are assuming that China can start with a clean state and grow at a slower but healthier rate once it corrects its mistakes,” Michael Pettis, a finance professor at Peking University, wrote in a July 10 report. “All that piled up debt is simply ignored.”