James Hamilton, at Econobrowser, wonders:
(1) how could Chinese oil demand have grown 17% in 2004 despite a 35% increase in the price of crude oil; (2) how could this demand growth suddenly be reduced to a 1.4% growth rate in the first half of 2005 despite real output growth continuing at 9.5%; and (3) what do these trends imply is going to happen to Chinese oil demand over the next year?
He points to subsidies built into a system of administered prices set below market clearing levels: More to the story on Chinese oil demand.
Read his short post to learn the implications for sustained 10% growth in real output.
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