Growth in Japan and South Korea started to slow and eventually tumbled after investment peaked. The big question now is when China will run into the same limits and how rapidly change will take place, Hong Kong-based Lombard Street Research economist Diana Choyleva said.
“The potential for a big crisis is always there,” she said.
Even experts who strongly favor fundamental policy changes, like moving to a more market-oriented system for allocating bank loans and setting interest rates, doubt that China’s leaders are preparing to move quickly. Conversations at senior levels of the CCP appear to have focused so far on reducing the state’s role in the day-to-day management of many state-owned enterprises, rather than selling them or breaking them up.
However, a few hints have surfaced that sentiment for reining in the excessive reliance on business investment might be strengthening even among those segments of the Chinese elite — executives at China’s big state-owned enterprises — that benefit the most from the “status quo.”
Zhu Fushou (朱福壽), the chief executive of Dongfeng Motor Corp, one of China’s largest car and truck manufacturers, startled executives at an industry conference in September when he said that China might have almost all the cars it needs, at least for the near-term, and that the government should discourage further investment in the sector.
Zhu called for greater reliance on the free market to determine the winners and losers in major industries, chastising other auto executives for complaining too much about fierce competition.
Such griping “is not objective — it’s irrational, incompetent and immature,” Zhu said at the Global Automotive Forum in Chengdu, the main annual conference for top executives from Chinese automakers and the China divisions of global car companies such as General Motors and Volkswagen.
Zhu’s remarks were especially striking because of Dongfeng’s longstanding close ties to Beijing as a pillar of Chinese heavy industry ever since then-Chinese leader Mao Zedong (毛澤東) ordered its founding in 1969. Zhu’s predecessor at Dongfeng, Miao Wei (苗圩), is now the minister of industry and information technology, leading an office that has long favored government-organized oligopolies of state-owned enterprises in many industries.
The auto industry in China is operating at about 60 percent of capacity this year, typical of Chinese industries these days, according to a report this summer from the IMF.
By contrast, US auto factories and those in other industries usually operate at a much higher rate; even during the worst days of the economic crisis in 2009, capacity utilization in US industry fell no lower than 66.8 percent and then only briefly, according to US Federal Reserve data.
For many years, economists inside and outside of China have recommended a shift toward more reliance on consumption to sustain growth over the longer run. Progress has been slow, in part because the Chinese government has set a cautious pace in offering more medical insurance and pensions, forcing many Chinese to maintain high savings rates to provide their own safety net.