Must-Read: Stephen Roach: China’s Macro Disconnect

Must-Read: I really wish that I thought I understood China. Strike that: I really wish that I actually understood China.

Stephen S. Roach: China’s Macro Disconnect: “China has been highly successful in its initial efforts to shift the industrial structure of its economy from manufacturing to services…

…But it has made far less progress in boosting private consumption…. After bottoming out at 36% of GDP in 2010, private consumption’s share of GDP inched up to 38% in 2014…. China has always been adept at engineering shifts in its industrial structure…. But China apparently is far less proficient in replicating the DNA of a modern consumer culture…. China’s high and rising urban saving rate in a climate of vigorous per capita income growth reflects a persistent preference for precautionary saving over discretionary consumption… a rational response to the uncertain future faced by the majority of Chinese families…. Over the past 35 years, China’s powerful growth model has yielded extraordinary progress in terms of economic growth and development. But speedy implementation of the shift from production to consumption will be vital if the country is to remain on course and avoid the middle-income trap…