“Western experts and even Chinese economists parrot out this argument, which comes straight from neoclassical economics and what left Keynesian economist Joan Robinson called ‘bastardised Keynesianism’ – bastardised because Keynes himself emphasised the role of ‘aggregate demand’ which included investment and not just consumption. And yet the mainstream argues that what matters in a modern economy for growth is boosting consumption.
This argument can be shown to be nonsense. It’s productive investment that is the driver of growth in an economy and from that investment flows consumption – not vice versa.”
The annual National People’s Congress kicked off today with outgoing premier Li Keqiang announcing a 5% real GDP growth target, down from 5.5% before. The priority, said Li, was the economy, but even so defence expenditure was to rise by 7.2% in 2023. Li set a target for China’s budget deficit this year at 3% of GDP, while pledging to create 12mn new urban jobs and keep the unemployment rate at roughly 5.5%. He said China needed to “expand market access” for foreign investors, ‘prop up’ consumption and control risk in the real estate sector.
On China’s stricken real estate sector, where many companies have defaulted on their debt, Li pledged to help “high-quality, leading real estate enterprises” while continuing to “prevent unregulated expansion”. Some Western ‘experts’ were mildly positive. “I think on the whole the report is geared towards reassuring foreign investors that China is still…
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