The strategists at CLSA Asia-Pacific Markets had pretty nice charts more than a week ago on what drives China with a following explanation:
INVESTMENT remains the most important driver of China.s GDP growth, in part because the Communist Party decided that it could afford to undertake a massive build-out of public infrastructure, which is intended to boost productivity and reduce income inequality . . . and encourage citizens to like the Party. During the first nine months of this year, investment accounted for 58.8% of GDP growth, or 6.3ppts of 10.6% YoY growth. In 2009, investment, boosted by a huge stimulus program, accounted for 95.2% of GDP growth, or 8.7ppts of 9.1% YoY growth. During the period 2006-08, prior to the stimulus, investment accounted for 43-48% of growth.Click on charts to enlarge, courtesy of CLSA Asia-Pacific Markets.
FINAL CONSUMPTION accounted for 34.4% of GDP growth in the first three quarters of this year, or 3.6ppts of 10.6% YoY growth. This is the smallest consumption share of growth since 1994, despite 18% nominal retail sales growth this year, because investment continued to rise strongly off of a large base. Last year, final consumption (of which, about 27% is government consumption) accounted for 45.4% of GDP growth, or 4.1ppts of 9.1% YoY growth. Prior to the stimulus, the consumption share of growth had risen from 39% in 2007 to 45% in 2009.
NET EXPORTS are the least important driver of China.s economy, contributing 6.8% of growth so far this year, or 0.7ppts of 10.6% YoY GDP growth. Last year, the collapse in global demand left net exports delivering a huge negative drag on growth, with a -40.6% contribution, or -3.7ppts of 9.1% YoY GDP growth. From 2001, when China joined the WTO, through 2008, the average annual net export contribution to GDP growth was 10.3%. This year and in 2011, we forecast a zero contribution to full year growth.
While net exports are playing a minor role for the growth now, export industries employ very substantial part of workforce ...