John Lee is pessimistic about future Chinese economic growth.

Looks can be deceiving. Most Western commentators focus on the spectacular success of China’s export sector and the emergence of China as the world’s factory. But the greater contributor to Chinese growth is actually domestically funded fixed investment, which constituted over 50% of GDP in 2008 and over 40% of growth in that year. China is way off the charts in this regard...

China is unusual in that bank loans constitute around 80% of all investment activity in the country—a disproportionately high level. Even though state-controlled enterprises produce between one-quarter and one-third of all output in the country, they receive over 70% of the country’s capital, and the figure is rising...

The massive bias towards the state sector would be acceptable if the state-controlled enterprises could learn to innovate and adapt. Unfortunately, except for a handful of centrally managed state-controlled enterprises, this is not the case...