China’s economy isn’t landing slowly; it is circling until it runs out of gas

Despite a decline in quarter-on-quarter GDP numbers implying a soft landing for China’s red hot economy, Patrick Chovanec says that fixed investment is still running at an unsustainable 23.4%, and the effect of China taking on more debt to build housing and other infrastructure that people just aren’t buying could be parlous:

Unfortunately, the steady but moderate decline in China’s growth rate is not evidence of a “soft landing.”  A landing, as I see it, means a qualitative as well as quantitative adjustment that puts the Chinese economy on a path to sustainable — rather than hollow and inflationary — growth.  By that measure, China hasn’t come in for any kind of landing at all.  It’s still circling up there in the stratosphere, not daring to land … all the while, running out of gas.

China’s year-on-year GDP came in at 9.1 percent in the third quarter of 2011, according to the National Bureau of Statistics. It was a decline from 9.5 percent GDP, which was announced in the second quarter of this year, and 9.7 percent declared in the first quarter of 2011.