We believe that China's economy is beginning the transition from a maturing economy focused on consumer durables and domestic consumption, as well as large-scale investments in infrastructure, to one that is marked by high mass consumption and greater allocations to security and social welfare.
According to Zheng Liu, Senior Research Advisor in the Economic Research Department of the Federal Reserve Bank of San Francisco, declining growth rates in South Korea and Japan coincided with higher GDP per capita. We can identify a similar trajectory in the Chinese economy if we set our starting point in the 1980s.
Sustained growth rates above China's current rate of 6.9% can crowd out resources and capital from the rest of the world over time. Global imbalances due to high prices on scarce commodities are likely to be disruptive to rich and poor nations alike.
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