News & Media
China takes a 'huge punt' on world economy

Last Updated:2010-05-25

Dr. Geoff Raby has told the ABC's future summit in Melbourne that the Chinese government has taken a huge punt on the world economy coming back to life and it may not pay off.  


"I have no problem - doubts about China's capacity to sustain growth in the 8 per cent plus range, which it needs to do for political stability, in the short to medium term. The question I have is the medium term, because what they've done is make a huge punt on the world economy coming back to life." 
 
Dr Raby says the huge punt has come in the form of government stimulus spending, particularly on infrastructure and housing. But the rate of household consumption in China has not increased and exports remain weak. He says unless those factors change, China could be facing over-capacity problems within three to four years. 
 
"If the world economy hasn't roared back into life and exports aren't taking the weight of sustaining aggregate demand, then I think there will be a big issue, and the issue will come to a head at about the same time as the political transition, which is due for 2012." 

 

Read the full interview on ABC: