Earlier this year China posted robust growth of 11.9 per cent, prompting worries that the country was overheating. Recently the mood has changed, with signs of a slowdown. Manufacturing output grew at its slowest rate for 17 months in July, while predictions suggest third-quarter growth will dip below 10 per cent. Concerns are now being voiced that a faltering of the Chinese economy will imperil the global recovery.

Such short-term concerns are premature. Remember that China posted growth in 2009 of 9.1 per cent, a merely respectable achievement by Chinese standards, but impressive nonetheless in the midst of a global financial catastrophe. Most of this came from new infrastructure investment, which probably added 8 percentage points, offsetting a sharp fall in exports. Yet although China's huge stimulus package was a great success, it also stored up serious problems for the future.

Rushed investment in roads and buildings leads to waste, which will have dire long-term consequences for China's improved, but still fragile, banking system. Investment in infrastructure avoids overcapacity, but bring returns only if it goes hand-in-hand with stronger manufacturing and other growth. Where will tolls come from if there is no traffic on an eight-lane highway? How then will the bank loans be repaid?