Fiscal authorities should resist the temptation to increase government expenditures continually to compensate for shortfalls of private consumption and investment. A strict economic diet of fiscal austerity has greater appeal, a kind of penance owed for the excesses of the past. But root-canal economics does not constitute, in my view, optimal economic policy.
According to the IMF World Economic Outlook, between 2002-2005, China’s contribution to world consumption growth in aluminium, copper and steel was around 50 per cent. Furthermore, China contributed in excess of 80 per cent to increased world demand for nickel and tin.