China is investing a little too much. With the risk of being in the midst of a decisive correction of the economy if the investment cycle were to slow down. It is the opinion of the analysts of Standard & Poor's that in a report called “The investment Overhang: High For China; Intermediate For Australia, Canada, France, And Most BRICS” (Excess investment: high for China; medium for Australia, Canada, France and most of the BRICS) identifies excess investment as the main indicator for identifying a possible correction of the economy.
In detail, S&P wonders which countries are investing too much compared to the returns obtained. To do this, he compared the investment-to-GDP ratio with real GDP growth. After analyzing 32 economies, including the 20 largest, S&P has identified four categories according to risk: high, medium, low and minimum. And China tops the list, with infrastructure investments accounting for more than 40% of the Gdp, in the face of decreasing or low returns on investments (much of the spending was done in an inefficient way because it was made possible by the post-financial crisis stimulus binge). And if investors, driven by declining returns, decided to invest less, the repercussion would be felt on the economy, with a correction of the economy all the more extensive the greater the excess and the longer the period. In other words, China's reliance on investment spending to drive growth is unsustainable.
For S&P, however, the Chinese government is able to manipulate investment levels depending on the needs of the economy. "They will be able to influence what happens through banks and companies controlled by the state," said Terry Chan, the S&P analyst who authored the study, who specified that he expects 2013% growth in the country in 8. "We are not saying that there will be an economic crisis - Chan specified - we are saying that the investment cycle could turn and that there could be an economic correction".
Among the countries with medium risk there are instead Brazil, Australia, Indonesia and South Africa, but also India and Canada. On the other hand, low risk for the United States, Taiwan and Germany, countries where investments have always remained at low and sustainable levels.
