The successful Chinese economic model is now past its sell-by date
The clouds over the Chinese economy have been growing darker by the day. Look at some of the recent evidence. Economic growth slowed sharply to 7.5% in the second quarter of 2013, and some economists argue that data on electricity consumption shows that economic growth in the world’s second largest economy is even more sluggish than what the official figures suggest. The Chinese financial system is also said to be under immense strain at the end of a massive credit boom, with the recent liquidity crunch in the local money market one among many indicators of financial stress. And Chinese public finances—and thus the ability of the government to go in for a 2009-style fiscal stimulus to boost economic activity—are perhaps far weaker than assumed, once the borrowings of local governments and all sorts of special purpose vehicles are taken into account.