Chinese investment boom reaches staggering levels

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Hamish McRae was on superb form speaking to the Economics Teachers conference at Cambridge yesterday. Once again the phenomenal growth of the Chinese economy is highlighted by the fact that, this year, for the first time ever, it is the incremental demand from Chinese consumers that is responsible for more of the additional aggregate demand in the world economy than the United States.

Last week the Chinese authorities also released new figures on capital investment, the data is stunning. As the BBC reports here,

‘Chinese spending on factories, roads and other fixed assets has risen by 27% this year, suggesting official efforts to restrain the economy are failing.’

Such incredible growth in capital investment has both demand and supply side effects. Much of the new investment is linked to preparations for the Beijing Olympics in 2008 and also by China’s apparently insatiable demand for energy. One new coal-fired power station is opened every three days!