In the face of global recession, the Chinese economy has remained stronger than many expected. A major source of this apparent strength has come from China’s reallocation of resources from export-intensive manufacturing to domestic construction. In fact, by some estimates, 60 percent of China’s 2010 GDP was driven by fixed investment spending, with 14 percent of 2009 GDP attributable just to construction. Unfortunately, it’s clear that today’s construction boom is unsustainable. So, what lies ahead? We’ll examine this question and its implications for the global economy.
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