China s GDP growth fell dramatically, owing to the collapse of external demand.

Second, the Chinese production mix does not correspond to domestic demand, and investment in long products has outpaced demand growth.

Many advanced economies must still address the end of the pre crisis growth pattern generated by excessive domestic demand.

That is consistent with the Five Year Plan s goal of basing GDP growth more on domestic demand and less on exports.

Meanwhile, the faltering European economy and slowing GDP growth in China and elsewhere are impeding export demand.

But wages have grown at a far slower pace than GDP.

And yet reliance on external demand remains fundamentally unchanged, even as the contribution of net exports to GDP growth has turned negative.

Moreover, any investment growth is vital for Germany, which, according to the latest OECD statistics, currently suffers from the world s lowest share of net investment in national income. Even if Germany remains the world s laggard, rising investment demand as such will contribute to GDP growth, which Ifo estimates at 1.7 in 2006.

So China is stuck in a currency creating cycle GDP growth encourages investment, which boosts demand for capital.

To be sure, demand contraction was inevitable in these countries, given that they were living far beyond their means no economy can permanently sustain a rate of demand growth exceeding that of GDP.

Wage growth, rather than borrowing and financial booms, fuelled demand growth.

Supply side policies that promote small and medium size enterprises and service industries accommodating domestic demand are also critical to ensuring more inclusive and sustainable growth.

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.

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

In fact, GDP growth may be slowing precisely because existing investment in manufacturing and infrastructure, undertaken largely by local governments and SOEs, does not match the pattern of domestic demand.

And yet, given that the non tradable sector is constrained by its reliance on domestic demand, recovery if it comes will depend on the tradable sector s growth potential.

To offset the collapse in demand from industrial countries, they had stimulated domestic demand.

Real GDP growth in 2007 was 6.0 per cent.

The growth of electricity demand will constitute a challenge for many countries in the coming decades.

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.

It also means getting the balance between domestic and external demand right, and appreciating the sensitivity of medium and long term growth to the composition (and size) of domestic aggregate demand.

But there is no reason in principle that Chinese planners cannot follow the same model in reorienting the economy to a more domestic demand led growth strategy.

Jobs could be eliminated by technology, but not by global competition and, unsustainable, debt fueled domestic demand growth helped to delay the current employment deficits.

And Germany is slowly acquiescing to a prudent relative expansion in domestic demand.

Rebalancing demand, from investment and exports to domestic consumption

That is, China s annual GDP growth rate would drop by four percentage points if its exports did not grow at all.

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.

Argentina s long term GDP growth has been disappointing.

He even has his own development strategy, dubbed Thaksinomics, a self styled approach that blends neo liberal export led growth with grassroots based domestic demand.

With nearly unlimited access to advanced country markets, China can tap into global external demand and raise its GDP growth potential, as it has done for the past two decades.

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

In 2004, the economy experienced 6.4 GDP growth and 7.1 in 2007, its fastest pace of growth in three decades.

From a position of 5.1 real GDP growth in 1972, the UK went into recession in 1974, with GDP falling by 1.1 .

China s real estate investment accounted for 10 of GDP, and slower investment growth in the sector necessarily reduces import demand, directly and indirectly.

The proximate cause of price growth since mid 2007 is the appearance of production bottlenecks as domestic demand exceeds supply in an increasing number of sectors, such as power generation, transportation, and intermediate goods industries.

Since exports and investment account, respectively, for 30 and 40 of China s GDP growth, its economy is particularly vulnerable to weakening external demand and accumulation of non performing loans caused by excessive and wasteful spending on fixed assets.

The reason, of course, is the strong increase in Chinese domestic demand.

Historically, the growth rate for electricity demand has outstripped that for other forms of energy.

But, over the same period, annual GDP growth has averaged a modest 3.5 , and productivity growth has slipped into negative territory.

Historically, inflation in China has followed GDP growth with a lag.

After many years of outperformance, GDP growth has slowed sharply.

GDP annual average growth for the period of 1995 2002 was 5.1 .

GDP growth registered more than 10 per year in 2006 and 2007.

The key to restoring China s GDP growth is, therefore, returning fixed asset investment growth to at least 25 .

The impact on growth will almost certainly be negative, even if domestic demand compensates fully for the decline in external demand.