China's GDP not export-driven: Carnegie report

A comprehensive report from Albert
Keidel of the Carnegie Endowment and
the World Bank. Highlights:

1. China's GDP has grown steadily at
an average of 10% from 1978.

2. The growth rate has followed cycles
of fast growth and then slow growth,
with the current cycle of fast growth
having started in 2001.

3. Fast growth has, in the past, led to
inflation and increase in money supply.
The government then used to reduce
cash flow and credit with measures like
raising deposit and lending rates, and
with price freezes. This led to inflation
going down, but also growth slowing for
2/3 years on average

4. In the current cycle, the government
already tamed inflation once in 2004 by
cutting money supply, but without reducing
growth.

5. Historically the government has
intervened when inflation was in the
high single digits. In this cycle,
they have been intervening early to
prevent cycle formation, and to
keep growth steady. The last
intervention worked. The current one
is still in progress.

6. The growth is driven by domestic
investment and consumption, not by
net exports (trade surpluses).

7. Rural areas have been hit in the
past slow growth cycles because of
pressures to plant grain (which has
lower profits) than higher-profit
crops. China emphasizes grain
self sufficiency to protect against
embargo pressure in the event of
hostilities.

China's Economic Fluctuations report