China's Overinvestment Quandary

China is finding out the hard way that investment is not an end in itself. The object of economic is to satisfy consumption. Investment is merely a means of getting there. High rates of investment are fine – so long as someone can afford to buy all the new housing and all the fruits of new factories and offices. Clearly in China the absurdity of investment rates of 45 percent of gross domestic product – compared with maximum sustained rates of 35 percent in Japan, Taiwan, Korea etc during their periods of maximum growth – is finally coming home to roost.

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