Over the last 30 years, in terms of the GDP growth rates, China has grown at twice the rate of India.

Since 2008, banking sector credit growth in China has been among the fastest in the world, far outpacing GDP growth, and China s total debt has risen from 130 of GDP to 220 of GDP.

As of this year, 1 of GDP growth is consistent with more than 3.5 of credit growth.

Credit growth in the overall economy declined in 2009 as economic activity stalled.

China s GDP growth, which relies heavily on credit, will take a hit.

They have already been tightening the screws on credit growth for several months, with positive effects.

Even an economy with an overall budget deficit will have a declining government debt GDP ratio if the growth rate of its nominal GDP exceeds that of its debt.

Consequently, maintaining high GDP growth rates requires an ever increasing volume of credit and a continuously growing money supply.

First, in the last 10 years we have achieved a sustained growth rate of over 5 per cent of our gross domestic product (GDP).

Developing countries' exports grew faster than total world exports, which expanded by 20 per cent.

In other words, the Fed will use regulatory instruments to control credit growth, risk taking, and leverage.

To be sure, the prolonged rapid increase in Chinese aggregate demand has been fueled by an investment boom, as well as a growing trade surplus.

Despite some internal and external constraints, last year we achieved a record 6.27 per cent growth in our gross domestic product.

Consequently, credit growth remains unchecked until an unforeseen event triggers China s Lehman moment.

In the US, total private credit grew from around 70 of GDP in 1945 to well over 200 in 2008.

So far during the financial crisis and ensuing recession, the US has been incapable of kick starting credit growth, the major transmission mechanism by which monetary expansion feeds through to domestic economic activity.

While fiscal revenues are on the rise, they account for only about 6 of China s total assets and their growth rate is slowing.

This is true for the banking system, which has not de leveraged to the satisfaction of either regulators or the markets, thus limiting the scope for credit growth.

Even slowing the economy is hard lacking an efficient financial system, credit growth must be controlled directly through banks.

As a result, the rate of credit growth increased from 14 in September 2008 to 35 a year later, and property prices more than doubled in many cities.

In just 10 years, the share of state directed bank lending in China has fallen from 92 of new credit creation to less than half.

Credit Where Credit is Due

But most have suffered from the opposite syndrome excessive reliance on capital inflows, which, by spurring domestic credit and consumption, generate temporary growth.

The Fed has been trying to slow demand growth and cool the housing price bubble to avoid inflation, but carry trade speculators have been easing credit.

In the industrial countries, expansionary budgets, coupled with low interest rates and elevated asset prices, has led to consumption or credit fueled growth, particularly in Anglo Saxon countries.

This would enable the PBC to manage domestic demand by allowing interest rates to rise in order to rein in credit growth and deter reckless investment.

There is evidence that countries with high growth in services also tend to have high overall economic growth conversely, countries with high overall economic growth have high services growth.

Consumer credit began in China only in the late 1990 s, with regulations allowing banks to offer mortgage loans, which now amount to about 10 of total loans.

The growth of gross national income (GNI) in developing countries outpaced the growth in debt in 2004, improving the total debt to income ratio for all developing countries to an estimated 35.2 per cent, down from 38.6 per cent in 2003.

Inflation is increasing beyond what can be explained by rising commodity and food prices, while credit growth and some asset prices are starting to look high relative to historical standards.

By 2012, human capital s contribution to China s GDP growth fell almost to zero, with fixed capital accumulation accounting for roughly 60 of total growth.

Rural Credit

Credit

Moreover, credit growth on both sides of the Atlantic will be restrained, as many financial institutions in the US and Europe maintain a risk averse stance toward lending.

Banks and credit card companies have become much more cautious about extending credit.

The reallocation of workers to less productive service jobs has cost the British economy 0.5 points of productivity growth every year, a quarter of the total productivity gain over the period.

Delinquencies, defaults, and foreclosures are now spreading from sub prime to near prime and prime mortgages. Thus, total losses on mortgage related instruments include exotic credit derivatives such as collateralized debt obligations (CDOs) will add up to more than 400 billion.

Indeed, the Asian Development Bank estimates that European banks fund about 9 of total domestic credit in developing Asia three times the share of financing provided by banks based in the United States.

The supply of credit, in other words, resulted from the demand for credit.

To get more people to borrow more money, credit standards were lowered, fueling growth in so called subprime mortgages.

And, if the exit occurs via a rise in the interest rate on excess reserves (to sterilize the effect of a base money overhang on credit growth), the ensuing losses for central banks balance sheets could be significant.

Since 2000, global onshore wind power generation has averaged 27 annual growth, while the growth rate for solar photovoltaics has been a staggering 42 .

Credit histories cannot be shared, because a credit bureau is just getting started.

Nevertheless, annual GDP grew by 8.7 , thanks to 16.9 growth in consumption (measured by gross sale of consumer goods) and a 33.3 surge in fixed investment demand.

According to data available on the economist Emmanuel Saez s invaluable Web site, from 1993 to 2011, average real income for the bottom 99 of the population (by income) rose by 5.8 , while the top 1 experienced real income growth of 57.5 .