Friday, August 31, 2012

Urbanization Will Drive Growth In China

Steve Roach argues that China's export based economy has experienced problems due to slowdowns in in its two largest export markets.  That is to be expected in export based economies.  He claims that China's economy will continue to be driven by the greatest urbanization movement in history.  Only 20% of China's population resided in urban areas in 1980.  Over 50% of the population lives in urban areas today and 300 million more will live in urban areas by 2030.  That is almost equal to the entire US population. The per capita consumption in cities is about twice the rate of consumption in rural areas.  Moreover, China is in a much better financial position than most western countries that are struggling to restore economic growth.  It has a large pool of savings, and its budget deficits are only 2% of GDP.

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