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Actually, there has been more recent discussion of the fraudulent Chinese economic numbers. One tell is the ratio of Chinese economic growth versus the increase in Chinese electrical production. For years, the growth in Chinese GDP has been twice that of increases in electrical production. In every other country on the planet, the ratio is typically close to 1:1 for a very good reason. There has to be a corresponding increase in machinery, computing, and other equipment to support the increased production.
Further, malinvestment is pretty evident in the construction projects that do not have any market reason to exist. For example, construction comprises roughly 22-25% of the Chinese economy right now, yet there is incredible oversupply in the market. You've read about ghost cities that could conceivably house upwards of a million people but sit unpopulated, right? This is the product of government-directed planning operating without even a scintilla of market awareness. Even now, some cities have excess inventory of 10 years in residential real estate, which makes the recent United States real estate bubble look like a minor bump in comparison. More telling, there is similar oversupply in commercial real estate. Yet the building continues. What happens when roughly a fourth of the Chinese economy literally has nothing to do? It is frightening to consider, given how much much in assets are tied up in what are essentially non-performing investments. Just this week, as a kind of Hail Mary pass, the Chinese have put draconian restrictions on property sales to stop the rampant speculation.
As another example, everybody loves to swoon over the Chinese high-speed rail network, but it's growing evident that the Chinese railways will not be able to service their debt over the long haul according to the World Bank.
What's more, as I noted before, the Chinese commodity of labor is what is attracting manufacturing, not Chinese technical ability. It's worth noting that around 95% of Chinese high-tech manufacturing is assembly only. In other words, the parts come into the country, are put together there, and the finished products ship back out. Even now, countries such as Indonesia and Vietnam are making inroads, taking away production from Chinese factories. Just last year, I attended a trade show where Chinese made goods had been quite visible. Suddenly, this year, the Chinese-made goods were in marked decline while most imported goods came from Indonesia.
As far as the Yuan turning into a reserve currency, I am very skeptical. For example, all this overseas investment you're witnessing is actually seeing is a frantic attempt to put the money anywhere stable before the bubble pops. Further, given the fact that the Chinese government is running budget deficits of 50%, I have doubts whether the Yuan will have any more confidence than the dollar. Finally, as I noted at the beginning of this screed, there is absolutely no indication that the Chinese government has stopped cooking their books. If no one really knows what the economic numbers truly are, it should give serious pause to anyone wanting to use the Yuan as a fallback to the dollar.
I don't know enough about this subject to know if all of this is true, but considering their history, the reports of ghost cities, the accounting scandal with Caterpillar, and everything else it seems very plausible and you make a good argument. Tried to rep you but I have to spread it around more.
Labor arbitrage with China may be ending, but they are no one-trick pony. At present rates, their national R&D will be greater than ours in about a decade. They drill and refine oil overseas. They are building the yuan into the world's next reserve currency. Their cropland is more productive, and their other natural resources are ample. They are #3 in auto production. Their service and telecom industry in decent and growing strongly.
Where did you read that Chinese cropland is more productive??? I find this very hard to believe, especially considering how efficient modern industrial scale agriculture has become in the U.S.. Look how much of the populous it takes to farm in China compared to America.
Labor arbitrage with China may be ending, but they are no one-trick pony. At present rates, their national R&D will be greater than ours in about a decade. They drill and refine oil overseas. They are building the yuan into the world's next reserve currency. Their cropland is more productive, and their other natural resources are ample. They are #3 in auto production. Their service and telecom industry in decent and growing strongly.
I read a Wall Street Journal piece over a decade ago (2001 I think) that said the same thing. It is safe to say they have grown substantially since then, so I think we should trust their figures.
I think China could gradually sell their U.S. bonds and buy gold over a decade or so without causing a sudden shock.
Great response to this post cpg35223...just a few things I want to add:
Reshoring is rapidly rising in the US due to rising Chinese labor costs, rising US productivity, and rampant disregard for intellectual property. You bring up auto manufacturing in China, but what you fail to mention is that automobiles in China are assembled mostly for the Chinese market. Most R&D occurs in the US and Europe. Low cost models for China are produced in China, but more technologically advanced mainstream and luxury models are produced elsewhere and imported. Multinationals will not make significant R&D investments in China until the government shows they respect intellectual property rights.
Also, China's auto market is similar to the US auto market from 1900-1950 with dozens of domestic manufacturers that are fighting to stay alive with increasing competition from overseas. Nameplates in the US like Auburn, Nash, Packard, and Hudson simply couldn't compete with the Big Three and were out of business by 1960, and the same thing is happening in China except it is global manufacturers like GM, VW, and BMW that are taking significant market share from state-run Chinese firms like BYD, Geely, and Chery. Homegrown Chinese car companies simply aren't competitive on a global scale and Chinese consumers are no longer as loyal. Eventually China will be down to one or two domestic makes.
With American productivity continuing to increase we will see more manufacturing jobs come back ashore. A study this year found that 70% of durable goods manufacturers increased sourcing from US suppliers in the last year, and 50,000 manufacturing jobs since 2010 were added through reshoring. Granted, we still have a long way to go considering what was lost in the 2000's, but it's a start.
Cracks in the Chinese economic miracle are beginning to show. You can only build so many housing developments and transportation networks that no one uses before something gives. China does not have building codes and standards like we have in the US, and where buildings here are built with a 50+ year lifespan with an emphasis on longevity and durability, most buildings in China are built to last 20-25 years; then they bulldoze and rebuild. That is neither sustainable nor efficient. They have built up a disposable economy based on unsustainable growth. Just imagine that nightmare China is going to have 40 years from now when this underused infrastructure network needs replacing.
This collapse was caused by a poorly designed foundation, not an earthquake
Cracks in the Chinese economic miracle are beginning to show. You can only build so many housing developments and transportation networks that no one uses before something gives. China does not have building codes and standards like we have in the US, and where buildings here are built with a 50+ year lifespan with an emphasis on longevity and durability, most buildings in China are built to last 20-25 years; then they bulldoze and rebuild. That is neither sustainable nor efficient. They have built up a disposable economy based on unsustainable growth. Just imagine that nightmare China is going to have 40 years from now when this underused infrastructure network needs replacing.
you, as so many others, severely underestimate the resiliency of China's domestic economy, and just how much room it has to grow. The housing developments going unused are actually in the minority, though Western media harps on them. Transportation networks are thriving. What 'nightmare' in 40 years? Rebuilding old infrastructure sustains new growth and creates jobs. It's what we should be doing here, what with 40% of the nation's bridges in disrepair. The biggest challenge facing China is nothing economic. What the country is, is an ecological basket case. If the leadership is smart, it will funnel that huge surplus to a massive clean up and greening movement. But since they are all so busy robbing the country blind, it remains to be seen if they will do the right thing.
you, as so many others, severely underestimate the resiliency of China's domestic economy, and just how much room it has to grow. The housing developments going unused are actually in the minority, though Western media harps on them. Transportation networks are thriving. What 'nightmare' in 40 years? Rebuilding old infrastructure sustains new growth and creates jobs. It's what we should be doing here, what with 40% of the nation's bridges in disrepair. The biggest challenge facing China is nothing economic. What the country is, is an ecological basket case. If the leadership is smart, it will funnel that huge surplus to a massive clean up and greening movement. But since they are all so busy robbing the country blind, it remains to be seen if they will do the right thing.
How do you know these vacant housing developments are in the minority? According to Finance Asia in 2010, there were 64 million vacant apartments / homes in China with the ability to house 200 million people. That was three years ago before China's economy began to slow; I can't imagine how many more units were added during that time. Studied in Beijing and other cities are finding 30% vacancy rates with 30-1 price-to-income ratios vs. 16-1 in Japan and 3.3-1 in the US. As all those buildings sit vacant, they must consume energy to prevent more rapid deterioration.
What about the inefficiency of the buildings? I know people that have worked in China and the same care that goes into constructing efficient, durable buildings here does not exist over there. In the US buildings consume 51% of all the energy we use; I'm sure the number is similar or greater in China. Formed concrete structures are the norm in China and are among the most inefficient and wasteful ways to construct a building due to water use and wasted material. The rest of the world has moved on to precast concrete or steel. You would think in a country with 5X the population of the US there would be more of a concern for conservation of water and natural resources.
How do you know these vacant housing developments are in the minority? According to Finance Asia in 2010, there were 64 million vacant apartments / homes in China with the ability to house 200 million people. That was three years ago before China's economy began to slow; I can't imagine how many more units were added during that time. Studied in Beijing and other cities are finding 30% vacancy rates with 30-1 price-to-income ratios vs. 16-1 in Japan and 3.3-1 in the US. As all those buildings sit vacant, they must consume energy to prevent more rapid deterioration.
What about the inefficiency of the buildings? I know people that have worked in China and the same care that goes into constructing efficient, durable buildings here does not exist over there. In the US buildings consume 51% of all the energy we use; I'm sure the number is similar or greater in China. Formed concrete structures are the norm in China and are among the most inefficient and wasteful ways to construct a building due to water use and wasted material. The rest of the world has moved on to precast concrete or steel. You would think in a country with 5X the population of the US there would be more of a concern for conservation of water and natural resources.
China is growing its middle class fast. Really fast those vacant buildings wont be vacant for long. The high price to income ratios will come down as wages come up.
How do you know these vacant housing developments are in the minority? According to Finance Asia in 2010, there were 64 million vacant apartments / homes in China with the ability to house 200 million people. That was three years ago before China's economy began to slow; I can't imagine how many more units were added during that time. Studied in Beijing and other cities are finding 30% vacancy rates with 30-1 price-to-income ratios vs. 16-1 in Japan and 3.3-1 in the US. As all those buildings sit vacant, they must consume energy to prevent more rapid deterioration.
This is just idiotic. You are saying they are building too much so many homes are vacant, but the property prices are too high. It makes no sense. Of course you can claim they are making ghost cities, but in reality most construction are in the suburbs.
If you knew anything about China you would know that many of those vacant homes are very bad old homes who are going to be demolished. In reality there is not enough good homes in China. The construction is a good thing.
The reason construction is so high, is because the demand for good housing is very high, prices are high and the government is encouraging it. A drop in house prices in China will be a good thing. Construction many homes will eventually make home prices drop.
Quote:
What about the inefficiency of the buildings? I know people that have worked in China and the same care that goes into constructing efficient, durable buildings here does not exist over there.
You are comparing the building standards in the US with China who until recently was desperatly poor?! Reality is, those new homes are a million times better than the homes constructed in the 1980s. And they are sold for a lot. That is why construction is so high, and need to be so high. Those energy efficient homes you talk about cost more.
The most important thing for the Chinese government is to get people into decent standard of housing, not follow your environmentalist agenda.
Quote:
Also, China's auto market is similar to the US auto market from 1900-1950 with dozens of domestic manufacturers that are fighting to stay alive with increasing competition from overseas
Your BS have absolutly no end. First off the US auto market in the 1900-1950 had almost no competition from overseas. And the Chinese car market is expanding heavily to its own domestic market, because the cars are much cheaper and are getting better
Of course China has its problem. The biggest problem is that they don't take care of stuff, such as buildings and the enviroment. They build something new and flash, and then leave it to rot. Also corruption, and burdensome regulation can cause problems.
But China has huge potential for growth. GDP per capita in China is 9K. In the main cities the GDP per capita is 20K. Eurozone is at 35K. Just from urbanization the economy will grow.
Both of you make excellent points. That guy needs to stop getting his China news from the Epoch Times, which is the rag of the Falun Gong cult. It's all heavily distorted information.
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Originally Posted by pie_row
China is growing its middle class fast. Really fast those vacant buildings wont be vacant for long. The high price to income ratios will come down as wages come up.
Quote:
Originally Posted by Camlon
This is just idiotic. You are saying they are building too much so many homes are vacant, but the property prices are too high. It makes no sense. Of course you can claim they are making ghost cities, but in reality most construction are in the suburbs.
If you knew anything about China you would know that many of those vacant homes are very bad old homes who are going to be demolished. In reality there is not enough good homes in China. The construction is a good thing.
The reason construction is so high, is because the demand for good housing is very high, prices are high and the government is encouraging it. A drop in house prices in China will be a good thing. Construction many homes will eventually make home prices drop.
You are comparing the building standards in the US with China who until recently was desperatly poor?! Reality is, those new homes are a million times better than the homes constructed in the 1980s. And they are sold for a lot. That is why construction is so high, and need to be so high. Those energy efficient homes you talk about cost more.
The most important thing for the Chinese government is to get people into decent standard of housing, not follow your environmentalist agenda.
Your BS have absolutly no end. First off the US auto market in the 1900-1950 had almost no competition from overseas. And the Chinese car market is expanding heavily to its own domestic market, because the cars are much cheaper and are getting better
Of course China has its problem. The biggest problem is that they don't take care of stuff, such as buildings and the enviroment. They build something new and flash, and then leave it to rot. Also corruption, and burdensome regulation can cause problems.
But China has huge potential for growth. GDP per capita in China is 9K. In the main cities the GDP per capita is 20K. Eurozone is at 35K. Just from urbanization the economy will grow.
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