China’s economy: In three parts

CHINA’S economy, worth over $9 trillion in 2013, divides opinion. Often it divides it neatly in two: optimists contend with pessimists, apologists with alarmists, bulls with bears. Figures released this month encouraged both camps. China’s economy grew by 7.7% in 2013, a little faster than once feared. But a widely watched index of manufacturing, published by HSBC, a bank, fell for the fourth month in a row.This binary split in opinion is too crude. To understand China’s economy today, it is more helpful to think in threes. Start, for example, with three forms of growth: in supply, demand and credit. Over the long run, China’s economic might depends on the size of its workforce and its productivity. This combination determines how much stuff China can supply without overstretching itself. Numbers released this week confirm that the supply-side limits on growth are gradually tightening.The country’s urban workforce, which produces most of its output, is growing more slowly. The age group from which this workforce springs is now shrinking outright. The population of working age shrank by 2.44m in 2013, having already fallen by several million the year before.This…

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