Michael Mussa, a former chief economist at the International Monetary Fund and seen in our illustration, and Nicholas Lardy, a leading US specialist on China’s economy, who are fellows at the Peterson Institute for International Economics, say a full-blown economic growth already under way.
Mussa was fairly effusive (he spoke of 4% GDP growth in the US the last half of this year, plus 4.2% growth next year). Better yet was John Lardy, who stated flatly, “China is leading the global economic recovery.”
Lardy, seen to the right, forecasts Chinese economic growth of 8-9% this year, and 9-10% next year and beyond. More importantly Nicholas Lardy sees China’s recovery as deep and sustainable.
He said that the growth is, of course, in part a result of the government’s infrastructure spending, but also because of a huge rise in social spending — mostly on health and social security.
Last year, many economists claimed that China’s economic growth was built to a large degree on the back of unsustainable real estate spending. But Lardy shows a plumett in such investments since July 2008; there has been a turn back up in real estate investment this year, but not near its previous heights. In addition, he says, infrastructure lending is up, and real estate lending down.
Businessweek reports Nicholas Lardy as saying all of this is despite a fall in exports that subtracted 3 full percentage points from China’s GDP growth in the first quarter of this year.