Structural change in China painfully slow

The big long-term story in China is that it is moving away from dependence on investment-led growth towards a more consumption-oriented economy. But that change is likely to be very slow


Graphic: Naveen Kumar Saini/Mint
Graphic: Naveen Kumar Saini/Mint

The big long-term story in China is that it is moving away from dependence on investment-led growth towards a more consumption-oriented economy. But that change is likely to be very slow. Data from the International Monetary Fund shows that investment in China as a percentage of gross domestic product (GDP) was as high as 43.3% in 2015 and is projected to remain above 40% even in 2017. That’s still very high compared with levels in other countries and well above the level in the late 1990s and early noughties when this ratio was in the mid-30s. The question is: If investment demand in China continues to be high, should it not mean higher commodity, especially metals prices, and could this be a reason for the bounce in commodities?

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