China's change of tack slows global growth

According to China’s official economic data, around 90% of all investment conducted within the economy over the last two years was carried out by local governments. 

In practice, we have some (considerable) doubts about the accuracy of this data but at face value at least this data suggests that around 35% of China’s total GDP growth over the last three years, and over 45% of the economy’s growth since the global financial crisis, was attributable to the actions of Chinese local governments. 

This further implies that almost US$2 trillion of the perhaps $10 trillion increase in global GDP since the GFC may be attributable to the activities of the Chinese local governments and that, in effect, the Chinese local government economy has expanded by the equivalent of the entire Italian economy over the last five years.  It would appear that China’s local governments could easily be a G20 country on their own.

Unfortunately, there are significant question marks regarding the exact character and economic efficiency of this massive state sector expansion.