"In Thursday's Commentary you touched on the subject of China raising domestic consumption in order to rebalance its economy away from dependency infrastructure development.

"I consider Michael Pettis to be one of the foremost commentators on the Chinese economy, with frequent interesting entries on his blog which often diverge from conventional wisdom but prove prescient. With regards to China's attempts to increase consumption, readers may find this recent piece on "China's Non-Rebalancing" illuminating, not least because of Pettis' adherence to accounting identities to back his arguments, rather than stating opinions alone."

David Fuller's view Thanks for the article link which I have posted in the Subscriber's Area. Eoin is currently at the front end of his US lecture and TCS tour but he will see this.

We hear so many different views on China but noting your regard for Michael Pettis, I read his analysis carefully and he makes a number of interesting points.

All I will add is that while China is taking steps to rebalance its economy - by increasing salaries, opening its economy to more foreign consumer goods and also producing more of the same for its own citizens - this is a lengthy process. One of China's strengths has been its high savings rate. Consequently, there is very little consumer debt, unlike what we often see in US, UK and many other western countries although these figures have improved in the last two years as households have benefited from lower mortgages and also de-leveraged somewhat. With little welfare on offer, China's households with disposable income are likely to remain savers. Nevertheless, we know from the earnings of many western Autonomies specialising in consumer goods and services, that demand within both China and the Asian region generally has grown significantly as their economies have prospered.

While cautious about global GDP, I am more optimistic than Mr Pettis, with one caveat. Every country knows that it needs to stimulate GDP growth, and to repeat my key point, they will provided that crude oil prices do not surge. This has long been our main concern at Fullermoney.