New Model China would need to shift to new growth model… Since 1980, it relied on: mobilization on two mechanisms shift in control of resources to state to private There may be thus diminishing returns. a new growth model China’s capacity outstrips global demand incomes no longerr rising as rapidly foreign direct investment is slowing Expansion of credit China bank access accounts for a large percentage of global GDP; thus bad debt can accumulate and hurt. Banks is thus driving the infrastructure drive via credit. Credit growth comes up, GDP growdth comes down; bad state! Yet, almost 20% of enterprises are loosing money. Credit is going increasingly to state owned enterprises: state sector is much less efficient in resource usage than private firms. Declining Productivity total factor productivity growth is declining investment capacity far outstrips demand—requiring global demand to stay high infrastructure has low financial returns total credit extended to economy by banks over the past 30 years china has not built-up a welfare system—China redistributes less income than the US