Sunday, May 10, 2009

Scary picture of the day.....

via Merrill Lynch...

The interesting aspect of this chart is that it shows spending as a % of GDP tumbling but that is really a function of China's explosive GDP growth. However, given that their GDP has exploded it is remarkable that their savings as a % of GDP has been able to nearly DOUBLE.

I remain skeptical of the long-term China growth story but data like this makes me question that skepticism. I wonder what the property taxes on waterfront property in Shanghai are like :)


Anonymous said...

You might be suffering from percentage chartitis. Only in America would one expect consumers to spend everything they earn (actually 25% more than they earn:). If you had the dollar data-set on the Chinese info, I believe it may show that they are spending much more, but because their GDP was growing so fast, they are both spending and saving. I wonder what a like graph of the US would have looked like between say 1950 through 1980.

RWiley said...

I recently spent several weeks in China. Now that does not make me an economic expert but the progress that I witnessed during my several thousand mile tour of the country was like nothing I have seen anywhere else in the world.

i.e. for nine days, I sailed the Yanctze for hundreds of miles and all along the banks of the part that was being flooded hundreds of large ships were being built right in the fields just waiting to float away with the rising waters. The rising waters were behind a mile long power dam and series of locks which dwarf the St. Lawrence Seaway and the Panama both of which I have sailed. Bridges, highways, new cities are being built everywhere. Shanghai, Chongching and Beijing make Manhattan look like a village. China makes my county look like it is standing still.

What your chart shows can not be denied.

The Artful Blogger said...

Re: Anonymous - I think that you're right on and I tried to convey that in the post. The Chinese are spending and saving, but they are saving at a great rate than they spending and saving at a greater rate than even their GDP is growing.

I think a chart of the US would have looked vary similar through the mid-1980s. However, today, I'd guess that our charts are inversed (paltry savings and massive spending as a % of GDP).

RWiley - thanks for the first hand observations. I've heard similar things from others that have visited. I have the opinion that to date China's economy has been like a child living off US consumer spending. The big question is whether they can grow up and become an independent economy with their own consumers/investor class, etc.

I don't know the answer, but it's probably the question that should keep us up at night.