The Rising Influence of Rising Affluence

[hptaxis]

Why We Shouldn't Bank on Growth
http://blogs.hbr.org/cs/2012/10/why_we_shouldnt_bank_on_growth.html

Another example can be found with projections for Chinese economic growth, which I believe continue to be higher than warranted. The Chinese economy is slowing drastically, leaving huge excess capacity in its wake. Take the steel industry. China today represents approximately 50% of global steel production and consumption. Most of this steel is being used as an input into infrastructure and real estate construction. Iron ore is a key input in the steel production process, and one that China regularly imports. Why is it that iron ore capacity continues to grow today, despite strong evidence of a slowdown in demand for steel? One possible reason is that mining companies extrapolated prior Chinese growth when making multi-billion-dollar, multi-year expansion decisions. Due to the lag between a decision to expand a mine and actual increases in capacity, today's growth is based on yesterday's assumptions of Chinese growth. The forthcoming bust in iron ore may be in part due to analysts blindly extrapolating historical growth rates.