However, overall the infrastructure they have built has put this country in a position to achieve dominant superpower status over the next century.
For example, within 5 more years the entire of Guangdong Province will be connected by high speed rail and subway - meaning 100 million people and businesses will be connected by public transit with no more than a 2 hour ride. There is already a critical mass of manufacturing capability here, and with that added layer of network infrastructure, even if labor costs rise 100% YOY to match USA and Germany in a decade, Guangdong China will still be the worlds factory.
Furthermore, the internal consumption machine of 1.3B people is undeniably ramping up now. They are spending money, the largest middle class on the planet is clearly taking shape, and lives are measurably improving all around me.
There may be a few bumps in the road but there will be no collapse.
Ex-pat since 2007 here. Change is happening quite slowly, internal consumption is still moribund as people save to cover retirement and health expenses (social insurance isn't very strong). Even a big city like Beijing has a lot of fairly empty malls, and if you go to 2nd tier cities, you'll see new developments everywhere that are basically empty.
China does have better infrastructure than say India, and its long term outlook is good. But there are definitely challenges in this and the next few years to get through.
How many of the people commenting here read the Chinese-language press? (I mean, publications in the Chinese language from either inside or outside the region where the Communist Party of China exercises prior restraint on publication.) The one thing I've learned from studying the language, history, and culture of China since 1975 is that almost everyone who doesn't know the language is full of crazy ideas about China, even if they live there.
Native Chinese here. I guess the best way is to apply those better tools for thinking to the Chinese context. To be honest, I don't think there is much information in Chinese politics and economy worth reading. The tools we use are outdated. The information(meta data) we can get is actually very limited and very distorted. The knowledge and how people perceive the world are far behind those in developed countries. When cheap labour becomes less and less competitive, things will go south. Domestic consumer market growth does have a chance to save us, that was what I thought the best way out when I was younger. But that would never happen, when you have some understanding how the nation's stakeholders operate. This is a topic that is too big to discuss here. I do believe, sadly, there is a long dark road ahead for most of people in my country. I wish not but from where I can see I'm quite pessimistic on this. Just my 2 cents.
Could you point out or give examples of some of these crazy ideas? For the sake of us who assume we know nothing, and wouldn't know how to tell a crazy idea from an unconventional-yet-reasonable one. No sarcasm intended and I'm sure an exhaustive list is a bit much to ask, but I would be interested to read even a few examples and/or explanations.
Chinadaily often runs editorials directly translated from Chinese. They are quite bizarre and often just diatribes. My wife is a Chinese but has no respect for the press, so doesn't even bother reading those articles anymore (most young Chinese are the same).
I've been in China for 6+ years now, I have expat friends who have been here for 10+ (which is an old hand these days). We aren't incredibly divergent in our thinking. Chinese have different viewpoints, but this is primarily cultural rather than linguistic.
But if you truly want an unbiased view of China, read a Taiwanese newspaper :)
It seems as though China is undergoing a Keynesian expansion. So I'm probably wrong about that. I'm going to watch to see if I can figure out the difference between what they seem to trying to say is a problem due to massive government spending and Keynesism.
Or are they saying "too much" Keynesism is a bad thing?
Okay, these seem to be the main differences and concerns I am getting from this vid.
1. Many loans eventually come via a shadow banking system
and so are not transparent, ie, no one know how much is
loaned and regulation is poor, this could lead to a
huge credit crunch, and China's own too big to fail
2. Some large amount of housing is speculative in nature
and kept empty as an investment and hence could be
causing an enormous bubble
3. This real estate bubble brings benefits to rich but
doesn't improve the economy for the poor
4. The boom has made the local authorities very rich and
powerful (political corruption, crony capitalism, ...)
5. The sheer size of it is unprecedented in modern
financial history
6. Citizens save too much (1/3rd of earnings). So economy
is dangerously unbalanced, fueled by debt spending and
not enough by consumer spending or shopping (41:10)
7. Investment is 50% of economy, consumption 30%, so when
investment slows down, it can't be replaced with
consumption. Credit is at a level of twice the size
of the economy.
8. State owned companies are filled with inefficiencies.
"Shaking" them up would leave huge numbers of people
unemployed.
9. There is beginning to be a fear of collapse (that
could lead to collapse.)
10. Punk Rock pointing out corruption in the system
and how the rich are getting richer.
11. Hard to see further economic reform without political
reform, yet it seems that Chinese are intent on
not reforming their political system further.
Recommendations to balance economy:
1. China needs to become more like us and consume more
themselves.
My interpretation is that China did the heavy lifting of pulling the world out of the last crisis. Neither the US nor Germany had the political wherewithal to do large scale stimulus and/or structural reform. The Chinese also had the most to loose.
The cost of propping up the global economy had been highly damaging to China's weak institutions if we are lucky it will recover in 20 years. If we are unlucky there will be a partial collapse.
Not sure what you're talking about. The exact opposite is true. The US massively stimulated, including running up about $10 trillion in new federal public debt alone, which was a form of deficit stimulus. The Fed of course has been running hundreds of billions in annual stimulus.
I'd roughly estimate that the total US stimulus in all forms, from the treasury to the fed, totaled $15 to $20 trillion (some of which was repaid, eg loans to european banks, or the AIG and Fannie bailouts, or GM etc). That's two to three times the size of the entire Chinese economy.
That new federal debt paid federal salaries, contractors, welfare, social security, you name it. Those people then purchased hundreds of billions of dollars worth of Chinese goods.
"U.S. Bailout, Stimulus Pledges Total $11.6 Trillion"
The Fed kept the entire global financial system solvent during the crash. They lent huge sums to European banks.
"the central bank lent billions to foreign banks that operate in the U.S., including Germany's Deutsche Bank Securities, which got $290 billion in mortgage securities; London-based Barclay's, which received a $47.9 billion loan; France's BNP Paribas Securities, Switzerland's UBS Securities LLC and Daiwa Securities America, a subsidiary of one of Japan's largest brokerage houses."
I have lived in Shanghai for the past 3 years but I also lived here from 2001-2002. Back then, there were buildings constructed that were totally empty and it seemed ridiculous to think anyone would live in those distant undeveloped areas. Fast forward a decade and now Shanghai has 20 metro lines instead of two, with each metro station under a sprouting mini-city, complete with its own H&M, Burger King and Starbucks. It seems like the urban planners strategically placed them all perfectly close to each other, like settlements in Civ. The condos that stood empty 12 years ago are now at full capacity and people are moving even further out into the exurbs where more empty buildings await them. The energy and buzz in Shanghai is just as palpable as it was 12 years ago and although there are some ghost cities and failed projects across greater China, the megalopolises will easily compensate for them. The United States has its share of empty, abandoned cities (Detroit, anyone?) but when you visit San Francisco or Manhattan, you would not know it.
China owns part of many industries, Governments that start having issues start selling their stakes and come up with plenty of money. Like everyone I am fascinated with China building new cities where no one lives, but they are going to totally get away with it and come out the other side unharmed.
I saw an explanation somewhere for the ghost cities. The CCP realizes that construction labor there is currently very cheap, land is cheap (in terms of political capital to displace people --- wealthier citizens will make it more expensive to displace them), and materials are relatively cheap. As they develop further, all three cost inputs will only get more expensive. So the CCP is deliberately allowing the rapid development of these projects in anticipation of the massive shift from rural to urban population migrations over the next several decades. If the CCP is trying to stem catastrophic inflation when the mass migration hits a peak, then these ghost cities can in retrospect appear a prudent, long-range measure.
There are also also quirks of the Chinese property market [1] and mass media's penchant for sensationalism that might more reasonably explain the ghost city phenomena.
isn't chinas foreign debt still net negative? if so, wouldn't be the obvious strategy be to start outsourcing the debt as the US did? we possibly have a few more years and as poulson said, there are quite capable people steering the ship.
Every year , for the last 20 years, many articles say that we can be sure of the imminent Chinese economy collapse. Then every year they are proven wrong. This is just one more of these articles. The guys have no idea what they are talking about. The education effort is as huge as the infrastructure building effort, and it will bring its benefits. At some point the growing will slow down; at some point it will be 1% yearly growth; but a political collapse is very unlikely, and economic collapse is even more unlikely.
Every year, for the last 20 years, many articles say that we can be sure of an imminent housing crash. Then every year they are proven wrong. This is just one more of these articles.
... Bubbles are bubbles until they pop. A lot of infrastructure in China is under utilized, and let's not even get started on empty shopping malls and apartment buildings, even here in Beijing!
Whether the government can pull off a soft landing is up for debate, but every year with people, local governments, and companies become more leveraged, not less, I think a hard landing is more likely.
Now, if that happens, this doesn't necessarily mean that the government collapses, but many of the bandits who are making out on this have gotten their money out of the country, and a correction is more likely to negative effect those who didn't really benefit in the gorging. And if that happens, the CCP (many whose relatives have already fled abroad) is going to be facing a lot of pissed off nongming.
For the past 20 years I've been hearing how China was going to take over the United States in everything. Invasion of Taiwan would happen whenever they wanted. I've never heard anyone say their economy was about to imminently collapse.
I'm surprised any one thought that China's "bailout" was doing anything more than kicking the can down the road? It is the end of the road now, and they get to deal with unserviceable debt. There are many options. All are ugly in unique ways. For who and when are the questions left undetermined.
It's a mistake to believe that either China's will continue along uninterrupted or that it will fall into severe crisis. The reality is that China has a strong economy AND also a very flawed and troubled economy (India has similar problems but in a different way).
The result will probably be that China's growth will at some point stall out before reaching developed world levels and they will probably be faced with some manner of serious problems at a level less than countrywide existential crisis.
Also, as to "predictions being proven wrong", remember that every year during the 2000s many people predicted that the housing market would implode and lead to a major economic crisis. They were "proven wrong" every year until it actually happened.
If someone say it for long enough, they're bound to be right one day. It's the same about the decline of the US.
All we can do is judge them on a case-by-case basis.
In this case, it's really hard to judge because the threat, similar to the US credit crisis, is hard to measure. China has a really sizable foreign reserve that some people think will buffer any economic crisis. However, some estimates of the shadow banking system puts it well beyond its reserves. That said, not every loan in the shadow banking system will go bad. It just means the loans were made off the books. One can reasonably assume that the lender did his work and made loans that have a decent chance of success. Also, I don't know what falls under some of the definitions of shadow banking. The Chinese have been loaning each other large sums of money for generations. This "tradition" is one of the theories put forth in the rise of overseas Chinese communities and their dominance in business in those areas. Anyways, my point is that it's not all doom and gloom. The threat is there but don't panic yet.
[+] [-] bobjordan|12 years ago|reply
Yes there are random empty apartment buildings and a few absurdities like --> http://en.wikipedia.org/wiki/New_South_China_Mall.
However, overall the infrastructure they have built has put this country in a position to achieve dominant superpower status over the next century.
For example, within 5 more years the entire of Guangdong Province will be connected by high speed rail and subway - meaning 100 million people and businesses will be connected by public transit with no more than a 2 hour ride. There is already a critical mass of manufacturing capability here, and with that added layer of network infrastructure, even if labor costs rise 100% YOY to match USA and Germany in a decade, Guangdong China will still be the worlds factory.
Furthermore, the internal consumption machine of 1.3B people is undeniably ramping up now. They are spending money, the largest middle class on the planet is clearly taking shape, and lives are measurably improving all around me.
There may be a few bumps in the road but there will be no collapse.
[+] [-] seanmcdirmid|12 years ago|reply
China does have better infrastructure than say India, and its long term outlook is good. But there are definitely challenges in this and the next few years to get through.
[+] [-] riggins|12 years ago|reply
the claim that infrastructure spending leads to economic prosperity/dominance sounds pretty extraordinary to me.
[+] [-] austinz|12 years ago|reply
- http://www.nytimes.com/2013/09/24/business/global/high-speed...
- http://www.economist.com/news/china/21592628-china-opens-boo...
- http://www.economist.com/blogs/freeexchange/2013/09/chinas-e...
[+] [-] tokenadult|12 years ago|reply
[+] [-] LiweiZ|12 years ago|reply
[+] [-] chao-|12 years ago|reply
[+] [-] seanmcdirmid|12 years ago|reply
I've been in China for 6+ years now, I have expat friends who have been here for 10+ (which is an old hand these days). We aren't incredibly divergent in our thinking. Chinese have different viewpoints, but this is primarily cultural rather than linguistic.
But if you truly want an unbiased view of China, read a Taiwanese newspaper :)
[+] [-] __pThrow|12 years ago|reply
Or are they saying "too much" Keynesism is a bad thing?
Okay, these seem to be the main differences and concerns I am getting from this vid.
Recommendations to balance economy:[+] [-] radicaldreamer|12 years ago|reply
Edit: see subsequent comments for a better quality video
[+] [-] MrHeartBroken|12 years ago|reply
[+] [-] hnjake|12 years ago|reply
[+] [-] zmanian|12 years ago|reply
The cost of propping up the global economy had been highly damaging to China's weak institutions if we are lucky it will recover in 20 years. If we are unlucky there will be a partial collapse.
[+] [-] radicaldreamer|12 years ago|reply
[+] [-] adventured|12 years ago|reply
I'd roughly estimate that the total US stimulus in all forms, from the treasury to the fed, totaled $15 to $20 trillion (some of which was repaid, eg loans to european banks, or the AIG and Fannie bailouts, or GM etc). That's two to three times the size of the entire Chinese economy.
That new federal debt paid federal salaries, contractors, welfare, social security, you name it. Those people then purchased hundreds of billions of dollars worth of Chinese goods.
"U.S. Bailout, Stimulus Pledges Total $11.6 Trillion"
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aZchK...
The Fed kept the entire global financial system solvent during the crash. They lent huge sums to European banks.
"the central bank lent billions to foreign banks that operate in the U.S., including Germany's Deutsche Bank Securities, which got $290 billion in mortgage securities; London-based Barclay's, which received a $47.9 billion loan; France's BNP Paribas Securities, Switzerland's UBS Securities LLC and Daiwa Securities America, a subsidiary of one of Japan's largest brokerage houses."
http://www.foxnews.com/politics/2010/12/02/federal-reserve-l...
[+] [-] bwangsta|12 years ago|reply
[+] [-] contingencies|12 years ago|reply
[+] [-] seanmcdirmid|12 years ago|reply
[+] [-] zhte415|12 years ago|reply
[+] [-] mytoaster|12 years ago|reply
http://www.zerohedge.com/news/2013-11-26/chart-day-how-five-...
[+] [-] gscott|12 years ago|reply
[+] [-] yourapostasy|12 years ago|reply
There are also also quirks of the Chinese property market [1] and mass media's penchant for sensationalism that might more reasonably explain the ghost city phenomena.
[1] http://blogs.wsj.com/chinarealtime/2013/09/24/chinas-ghost-c...
[+] [-] emersonrsantos|12 years ago|reply
[+] [-] unknown|12 years ago|reply
[deleted]
[+] [-] yawniek|12 years ago|reply
[+] [-] airjd|12 years ago|reply
[+] [-] snorkel|12 years ago|reply
[+] [-] marukokinno|12 years ago|reply
[+] [-] seanmcdirmid|12 years ago|reply
Every year, for the last 20 years, many articles say that we can be sure of an imminent housing crash. Then every year they are proven wrong. This is just one more of these articles.
... Bubbles are bubbles until they pop. A lot of infrastructure in China is under utilized, and let's not even get started on empty shopping malls and apartment buildings, even here in Beijing!
Whether the government can pull off a soft landing is up for debate, but every year with people, local governments, and companies become more leveraged, not less, I think a hard landing is more likely.
Now, if that happens, this doesn't necessarily mean that the government collapses, but many of the bandits who are making out on this have gotten their money out of the country, and a correction is more likely to negative effect those who didn't really benefit in the gorging. And if that happens, the CCP (many whose relatives have already fled abroad) is going to be facing a lot of pissed off nongming.
[+] [-] AJ007|12 years ago|reply
I'm surprised any one thought that China's "bailout" was doing anything more than kicking the can down the road? It is the end of the road now, and they get to deal with unserviceable debt. There are many options. All are ugly in unique ways. For who and when are the questions left undetermined.
[+] [-] InclinedPlane|12 years ago|reply
The result will probably be that China's growth will at some point stall out before reaching developed world levels and they will probably be faced with some manner of serious problems at a level less than countrywide existential crisis.
Also, as to "predictions being proven wrong", remember that every year during the 2000s many people predicted that the housing market would implode and lead to a major economic crisis. They were "proven wrong" every year until it actually happened.
[+] [-] radicaldreamer|12 years ago|reply
https://twitter.com/prchovanec/status/442838642974007296
[+] [-] hangonhn|12 years ago|reply
All we can do is judge them on a case-by-case basis.
In this case, it's really hard to judge because the threat, similar to the US credit crisis, is hard to measure. China has a really sizable foreign reserve that some people think will buffer any economic crisis. However, some estimates of the shadow banking system puts it well beyond its reserves. That said, not every loan in the shadow banking system will go bad. It just means the loans were made off the books. One can reasonably assume that the lender did his work and made loans that have a decent chance of success. Also, I don't know what falls under some of the definitions of shadow banking. The Chinese have been loaning each other large sums of money for generations. This "tradition" is one of the theories put forth in the rise of overseas Chinese communities and their dominance in business in those areas. Anyways, my point is that it's not all doom and gloom. The threat is there but don't panic yet.
[+] [-] seoguru|12 years ago|reply
[deleted]