A Chinese miracle - but how long can it last?

In the past week, published figures show China has surpassed the US to become the world's largest car market and has overtaken Germany to become the biggest exporter. It will imminently overtake Japan to become the world's second largest economy. As economists ponder why China's economy has surged while the West has spluttered and crashed, the Chinese government has come up with its own reasoning.

According to the New York Times, Beijing's state-run news media have hailed China's economic performance as proof of national superiority. The country's economic growth, the People's Daily boasted last week, exists because its leaders can make quick decisions and ensure they are swiftly carried out.

The Great Recession, the newspaper said, has exposed cracks in plodding Western-style capitalism.

But China's growth may not be without problems, warns the Times. With a billion peasants still looking to climb to the first rung of the economic ladder, China's economic growth for several decades ahead is all but guaranteed.

According to an increasing number of investors and economists, the Chinese boom in cheap money may have triggered an unsustainable increase in the value of stocks and property. In the past year, the Chinese leadership, committed to sustained economic growth, poured $585 billion in stimulus money into its domestic economy, then ordered state-run banks to double their lending. Thus China's 2009 boom is better viewed as a sign of an overheating economy.

Still, the paper concedes, the figures are impressive: a doubling of property values in a year, GDP per capita up 10 per cent, exports up one-third on 2008 and imports up 55 per cent. Now, Beijing is gradually hiking inter-bank lending rates, a signal that even the leadership is concerned the economy is expanding too quickly.

"No one defies economic law," says Scott Kennedy, a professor of
Chinese studies at Indiana University. "Eventually you get it, whether you want it or not." ·