China Experts Pettis, Prasad Debate Future GDP Growth

China experts Michael Pettis and Eswar Prasad recently debated via Bloomberg Briefs whether China could maintain 6 – 7% GDP for the rest of the decade, despite the inefficient, credit-driven investment model that has sustained high growth in recent years.

“When a country’s growth has been driven by wasteful investment, GDP growth exceeds real economic wealth creation, productivity is overstated, and debt rises faster than debt servicing capacity,” writes Pettis. He argues that every time the Chinese government has moved to rein in easy credit, growth has suffered until the government back down. If they’re...