A hidden tripwire in Chinese growth

As China's infrastructure investment returns decline and production growth outpaces local and overseas consumption, Beijing increasingly faces a problem of wealth destruction.

The case of China, and every other case of an investment-driven growth miracle, suggests that the model cannot be sustained indefinitely because there are at least two constraints. The first has to do with the constraint on debt-financed investment and the second with the constraint on the external account, and one or both constraints have always eventually derailed the growth model.

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