PRC Economy - New Reflections : April 20 2015

Agnimitra · Post by **Agnimitra** » 19 Oct 2015 22:41

The Rise Of China's Megalopolis: Jing-Jin-Ji And The Evolution Of Megacities

amit · Post by **amit** » 20 Oct 2015 05:10

panduranghari wrote:
Amit,

Actually the western economic thinking is dominated by the Labour Theory of Value. Its Marxian in origin. The theory goes that anything has a value because someone says it has a value. The problem is Marx or Adam Smith thought from the perspective of an ideal economic man who is self aware and selfish. He will do everything that is good for him, the consequences on the environment or other people do not matter.

The Marxian LTV has been categorically debunked. However the Chicago school still has its proponents like The federal reserve or Krugman. I actually agree with much Krugman writes but his foundational understanding is still LTV which makes his prescriptions a failure.

Economics is an empirical science. Its become a activist science. And that is the failure of current economic models.

Thank you for the erudition on Labour Theory of Value. Now I don't have to open a textbook to understand it. Neither will I have to think of its out of context use as gobbly goop.

However, on a more serious note the problem, as I see it, with online forums with BRF being no exception, is that there's always a tendency to go off on a tangent to the main discussion. This is usually done with rhetoric or by bringing up issues that have no bearing to the matter in hand.

The point that was/is being discussed is the current economic mess in China. It's hugely successful infrastructure plus export led growth engine is spluttering and they haven't yet figured out on how to do a course correction. Meanwhile, as Singha points out they are saddled with minor inconveniences such as a steel industry that employs more than million people and produces 700 million tons of steel a year for which they have no customers. They have a situation where millions have lost their life savings on the stock market and you have a government which is trying its best to stamp out corruption by doing what it does the best, that is by imposing more top down control. In short the government seems to have no clue how to tackle the situation.

So unless your contention is that the data points I have written above are all bakwash, then all this high sounding theory of Marxian LTV, Chicago school's neoclassical economic theory, a critical assessment of Krugman's writing and this hectoring from a pulpit that current Western economic models are a failure don't do the trick.

Either you have to say that China's economy is hail and hearty or you have to present an alternative economic model (shall we call this the Eastern model or the Hail the Han model?) to explain what's happening in China. Otherwise I for one will judge everything from the perspective of signal to noise ratio.

Singha · Post by **Singha** » 20 Oct 2015 06:25

It seems steel has a useful life of decades..can be remelted and used numerous times.
Even ships sunk decades ago can be used.

amit · Post by **amit** » 20 Oct 2015 07:32

Singha wrote:It seems steel has a useful life of decades..can be remelted and used numerous times.
Even ships sunk decades ago can be used.

Singha,

You are right but the problem is not the steel itself. It's the steel economy that China has built up. A steel factory has both upstream and downstream supply chain linked to it. And there's a limit to how much steel you can produce and stock up. Remember we are talking about a production capacity which more than twice that of all the other nine major steel producers put together! That supply chain seems to be either broken or in serious difficulty.

OT for this thread but I think India has been smart with its steel production which has reasonably kept pace with the capacity of the economy to absorb the commodity. The same has been case for South Korea, Japan etc. China, in this regard is an outlier.

This is not to say that they won't be able to work their out of the problem. It will interesting to see how they do it.

Hitesh · Post by **Hitesh** » 20 Oct 2015 08:12

Amit,

The solution to the woes is diversify into new markets but in order to find new markets, you have to think out of the box and innovate. Take a look at the US economy back in the 90s. Everybody was saying that America has become obsolete and shoddy in manufacturing. They no longer had the edge in manufacturing. They said that Japan would beat US out along with Germany and others. Now take a look at US today, it is still the world's economic powerhouse and no sign of slowing down despite the 2008 Great Recession that could have knocked US out.

What did the US do? They looked inwards and tried to find out new ways of creating markets. They turned to their greatest strengths - creation & cultivation of new intellectual property and technological innovation, not to mention some creative financial solutions that was based on rule of law (some can be argued that it is an illusion but at least an illusion that almost everybody believe in) and they managed to outlast Japan and Europe and possibly China.

What does that mean for China? They need to take a look at in addition to US, South Korea, Japan, and Germany and see how they got through their economic problems. China should find a way to wind down the steel production and start focusing on high quality steel and innovative metallurgy. CHina should focus on job retraining into very technical fields. China has a lot of issues that can be resolved if the Chinese government can put the nation's best minds together and start problem solving. That means freedom of thought and risk taking which translates into looser control of the reins of government and entertainment of different parties. Unless China can change into that kind of thinking, China will quickly become a one trick pony faster than anybody could imagine and it would be far worse than what Japan went through.

amit · Post by **amit** » 20 Oct 2015 08:35

^^^^^
Fully agree with what you wrote. I would just add that they have to figure out how to escape the middle income trap like South Korea and Taiwan did. But as you say they need creative out of the box thinking for that. I don't see any evidence of that yet.

The problem is when you over analyze like we very often do here, we lose site of the big picture. Thanks for bringing the focus back here.

Singha · Post by **Singha** » 20 Oct 2015 09:43

the current thinking is that move from manufacturing/export -> consumption/services led economy has two facets

the old brick n mortar heavy industry/commodities/mining/construction sector will see a huge downturn, and foreign players like brazil,australia will suffer who exported commodities.

various retail services players like global banks/services/food/style would move into china and be the new vehicles of profit and growth of their parent cos

however these sectors are very difficult to probe for foreign cos as china has firewalled and kept them to grow their own domestic brands and services like alibaba, sina, weibo, baidu, national champions in telecom/IT etc.

so its going to be very tough for MNCs to continue using china as a growth driver unless Beijing gives them a open and level playing field in the consumption and services sector.

Theo_Fidel · Post by **Theo_Fidel** » 20 Oct 2015 10:05

More than that China has to show that it can set the world standard on something, anything. By this stage Japan/SoKo had the worlds most efficient steel manufacturing factories. To this day these factories use 1/3 to 1/2 the coal and raw materials that china uses to produce far higher quality steel. China has shown no interest or ability to set such new world standards or to innovate new production designs.

Instead China is now dumping steel of quite shoddy quality around the world. The bay bridge in SF bay area built with China steel is already showing corrosion and it was designed to last 200 years+ ! Obviously nothing like that life is possible now...
Right now China plans to export 100 million tons of cheap steel around the world in 2016. This is more than India's entire annual production. This is the sum total of China's plan...

Singha · Post by **Singha** » 20 Oct 2015 10:41

50centers were making a big deal a while back of exporting such prestige products incl big gantry cranes, parts of bridges to massa etc.

they have a real bee in the bonnet wrt massa and want to compete fiercely to "put massa in its place"

member_20292 · Post by **member_20292** » 20 Oct 2015 11:04

Sahi hai Singhaji.

Even we should benchmark ourselves vs Massa and Cheen and Euros.

member_20292 · Post by **member_20292** » 20 Oct 2015 11:42

amit wrote:
Singha wrote:It seems steel has a useful life of decades..can be remelted and used numerous times.
Even ships sunk decades ago can be used.
Singha,

You are right but the problem is not the steel itself. It's the steel economy that China has built up. A steel factory has both upstream and downstream supply chain linked to it. And there's a limit to how much steel you can produce and stock up. Remember we are talking about a production capacity which more than twice that of all the other nine major steel producers put together! That supply chain seems to be either broken or in serious difficulty.

OT for this thread but I think India has been smart with its steel production which has reasonably kept pace with the capacity of the economy to absorb the commodity. The same has been case for South Korea, Japan etc. China, in this regard is an outlier.

This is not to say that they won't be able to work their out of the problem. It will interesting to see how they do it.

They will start to put steel in the electronics that they export.

Thin sheets of steel. If they can make a version of steel as thin and light or more than aluminium, then they have a winner

panduranghari · Post by **panduranghari** » 20 Oct 2015 12:00

{Deleted}

panduranghari · Post by **panduranghari** » 20 Oct 2015 12:03

Theo_Fidel wrote:More than that China has to show that it can set the world standard on something, anything. By this stage Japan/SoKo had the worlds most efficient steel manufacturing factories. To this day these factories use 1/3 to 1/2 the coal and raw materials that china uses to produce far higher quality steel. China has shown no interest or ability to set such new world standards or to innovate new production designs.

Instead China is now dumping steel of quite shoddy quality around the world. The bay bridge in SF bay area built with China steel is already showing corrosion and it was designed to last 200 years+ ! Obviously nothing like that life is possible now...
Right now China plans to export 100 million tons of cheap steel around the world in 2016. This is more than India's entire annual production. This is the sum total of China's plan...

Apparently, not too long ago made in japan, made in taiwan was considered as a hallmark of poor quality. It ain't so any more!

amit · Post by **amit** » 20 Oct 2015 12:44

{Deleted}

amit · Post by **amit** » 20 Oct 2015 12:46

mahadevbhu wrote:They will start to put steel in the electronics that they export.

Thin sheets of steel. If they can make a version of steel as thin and light or more than aluminium, then they have a winner

If they can do that, then more power to them. They would have, as Theo said, created something unique and world class.

ashi · Post by **ashi** » 20 Oct 2015 13:11

Theo_Fidel wrote:
Instead China is now dumping steel of quite shoddy quality around the world. The bay bridge in SF bay area built with China steel is already showing corrosion and it was designed to last 200 years+ ! Obviously nothing like that life is possible now...

Those corroded rods are from Ohio, not from China. That fact that China has build more bridges with more complexities than most, if not all the rest of the countries in the world has proven what China is capable of. I remember the constant taunting of Chinese HSR in this forum few years back. Look where China is today!

The supplier of steel rods that cracked on the Bay Bridge in 2013, a construction failure that cost toll payers $45 million, never told Caltrans that nearly identical rods it made for a Washington state bridge had suffered a similar fate in 2009, The Chronicle has learned.

Less than six months after the ill-fated batch of rods arrived in California in 2008, six high-strength rods that Dyson Corp. of Ohio shipped to rebuild the Hood Canal pontoon bridge — which connects the Kitsap and Olympic peninsulas in the western part of the state — failed within days of being installed, according to a review recently made public by California bridge officials.

Bay Bridge supplier failed to reveal rods’ failure in Washington

amit · Post by **amit** » 20 Oct 2015 13:24

amit wrote:{Deleted}

Yes Suraj,

My bad. Unnecessarily got provoked.

Won't happen again, especially since we are having an interesting discussion going on.

amit · Post by **amit** » 20 Oct 2015 13:33

ashi wrote:I remember the constant taunting of Chinese HSR in this forum few years back. Look where China is today!

Fair point.

This what some folks are saying, not taunting mind you.

“China is now pushing high-speed rail into rural areas that doesn’t do much for villagers. They really need a one-lane road,” said Ralph W. Huenemann, professor emeritus at Canada’s University of Victoria who has evaluated the efficacy of projects for the World Bank and the Asian Development Bank.

From here and also linked on the previous page of this thread.

Singha · Post by **Singha** » 20 Oct 2015 14:29

http://www.bbc.com/news/business-34578119

Tata Steel has announced 1,200 job losses at its plants in Scunthorpe and Lanarkshire.
Nine hundred jobs will go at the firm's plant in Scunthorpe. The remaining 270 jobs will go in Scotland.
They are the latest in a series of job losses across the UK steel sector, following news that administrators have been appointed to parts of Caparo Industries' steel operations.
The industry blames cheap Chinese imports for a collapse in steel prices.
Prime Minister David Cameron has said he will raise the issue with China's president during his UK state visit.
...The collapse into administration of parts of steel processing firm Caparo on Monday followed the closure last month of the SSI steel plant at Redcar, with the loss of about 2,200 jobs.
The industry has blamed a flood of cheap steel being dumped on the global market by Chinese manufacturers.
But Roy Rickhuss, general secretary of Community, said: "We have had a succession of ministers, and now the prime minister, saying that they will 'raise' the issue of Chinese steel dumping, which we know is impacting on the UK steel industry and the global steel price.
"The prime minister needs to do more than 'raise' the issue. He needs to tell the Chinese premier what action he's going to take to stop Chinese steel damaging the future of a vital foundation industry in the UK."

nandakumar · Post by **nandakumar** » 20 Oct 2015 15:57

And Swraj Paul's Caparo group may go into 'Administration', an euphemism under UK law for bankruptcy protection, any time now. Chinese steel is melting many steel companies around the globe.

Singha · Post by **Singha** » 20 Oct 2015 16:31

just the latest example of a western consumer/lifestyle business failing to take off in china
http://www.usatoday.com/story/money/201 ... /74256806/

the ones which succeed seem to have a certain global aspirational tag - mercedes, audi, bmw, gucci, armani, apple(!)
the regular changu mangu volume brands cannot really compete with local rivals there.
also e-commerce and social media is run under govt protection/control so fbook/google/youtube/twitter are stopped at gate itself.
so some the biggest growth cos in the west are mainly locked out

https://en.wikipedia.org/wiki/Websites_ ... land_China

Yum Brands to spin off struggling China business
Aamer Madhani, USA TODAY 7:50 a.m. EDT October 20, 2015
activists investors, Yum Brands announced Tuesday that it will spin off its China business.

The announcement comes after Yum Brands CEO Greg Creed told analysts earlier this month that the company would take “immediate action” and acknowledged its promised turnaround of its KFC and Pizza Hut brands in China has failed to take hold.

The possibility of a spinoff appeared all but a done deal last week after Yum announced that it had named activist investor Keith Meister to the company's board of directors. Meister, managing partner of Corvex Management, had been among the most vocal proponents of spinning off the China business. Meister has a 5% stake in Yum.

“Over the past year, our management and Board have thoroughly evaluated a range of value-creating opportunities that capitalize on our considerable strengths,” Creed said in a statement. “Following the separation, each standalone company will be able to intensify focus on its distinct commercial priorities, allocate its own resources to meet the needs of its business, and pursue distinct capital structures and capital allocation strategies. This will provide a clear investment thesis and visibility to attract a long-term investor base suited to each business.”

Shares in Yum (YUM) were trading at $75.89 up 5.7% in pre-market trading.

The company operates about 6,900 restaurants in China. The transition is to be completed by the end of next year. The new China company is expected to have no significant debt, with substantial financial capacity to invest in its business, according to Yum.

Yum in China has been dealing with the aftermath after a TV report last year showed one of its suppliers using expired meat. Company officials, however, previously predicted a turnaround in the second half that would leave the China segment showing full-year same store sales growth in the low-single digits.

The company shocked analysts when it reported its third-quarter earnings earlier this month that fell far below analysts’ consensus estimate of 9.6% growth for the China segment.

Overall, Yum reported earnings of $1.00 per share, excluding special items, on $3.43 billion in revenue. Analysts surveyed by Thomson Reuters projected $1.07 a share on $3.68 billion in revenue for the company system wide.

It now appears that Yum’s China turnaround is being stymied by a slowing economy in China.

Theo_Fidel · Post by **Theo_Fidel** » 20 Oct 2015 17:47

ashi wrote:Those corroded rods are from Ohio, not from China. That fact that China has build more bridges with more complexities than most, if not all the rest of the countries in the world has proven what China is capable of.

No that's not where the corrosion is, that is your faulty assumption. The problem with those rods were the installation not the fabrication. Even with the rods, elementary precautions were not taken to prevent the weather for getting it as it would have slowed the work and cost more money. And all it proves is the bid prices are cheap cheap cheap... ..which is what CALTRAN itself said when accepting the bid, even they have not defended the quality of the work... ..the design and engineering for the bay bridge was all by USA based engineers, not China anyway...

BTW I would not mention HSR just yet. Wasn't it recently China had one of the worst accidents ever on dedicated HSR. Finishing off with the officials burying the train and any unfortunate bodies. As it is quality problems have reduced its operating speed to 250 kmph remember. Run it for a few more years without killing anyone and proving its quality and come back and talk. Meanwhile get that atrocious whine of your HSR removed which lowers the image for the technology.... ..and build something that advances the technology, not just a shoddy knock off of someones else's sweat...
-------------------

Singha wrote:just the latest example of a western consumer/lifestyle business failing to take off in china

Wasn't it Chola saar who used to go on and on about how China is unsophisticated market that Yum Brands had taken by storm. And India should do the same...
------------------------------

Just last month there are more unsettling reports on this HSR. Imagine there had been a train on the track that collapsed...

http://www.scmp.com/lifestyle/technolog ... r-too-fast

It's a systemic problem, which has more serious implications than a single point of failure or human error. After the Wenzhou collision, an investigation by the railways ministry reported that 106 of the 168 flaws identified in high-speed trains across the country were caused "by design and manufacturing quality problems".

A year after the Wenzhou disaster, an accident in Hubei province pointed to another systemic issue. In March 2012, a 300-metre section of a high-speed railway collapsed in a rainstorm. There were no casualties and it attracted little media attention. Officials blamed the rain but later admitted nine kilometres of track needed to be replaced. They found that the foundation under the tracks had sunk as much as 4.22 millimetres.

High-speed railways run on "ballastless" track technology that enables very fast yet smooth rides on tracks that won't warp with heavy use. The tracks rest on slabs made of a mix of high-quality fly ash, concrete and gravel. Fly ash, a by-product of coal-fired power plants, makes the concrete much stronger and more durable. But all the coal-fired power plants in China and the rest of the world could not possibly produce enough high-quality fly ash for the thousands of kilometres of high-speed lines that have been laid annually on the mainland.

Suraj · Post by **Suraj** » 20 Oct 2015 20:10

ashi wrote:
Theo_Fidel wrote:
Instead China is now dumping steel of quite shoddy quality around the world. The bay bridge in SF bay area built with China steel is already showing corrosion and it was designed to last 200 years+ ! Obviously nothing like that life is possible now...
Those corroded rods are from Ohio, not from China.

No, your quote states that the bolts for the Washington bridge are similar, and were procured from Ohio. The Bay Bridge bolts are Chinese:
California's busiest bridge has a serious issue with rust

Another example of best practices failing are the hundreds of rusted seismic anchor bolts in the bridge tower’s foundation. A state senate investigation revealed that these bolts—made with shoddy steel—weren’t properly tested. But the bolts were part of a design approved by the state’s transportation agency, procured by a third party contractor from a manufacturer in China, and tested by a third party lab before installation.

Had they been tested, they'd never have installed those bolts.

I think there's no doubt that China is extremely efficient at putting things up. Considering the lack of reliability of Chinese equipment in US and even India, I question whether they're equally good at keeping these up.

Singha · Post by **Singha** » 20 Oct 2015 20:27

i heard the vendor financed thermal power eqpt installed in india is not doing so well *cough *cough*

http://www.financialexpress.com/article ... dia/70025/
http://www.livemint.com/Industry/hb28Pc ... ssues.html

I do hope these problems are sorted out as a lot of installed capacity is using china made equipment. you cannot throw away a malfunctioning piece and plug in something else like a cellphone battery here.

hanumadu · Post by **hanumadu** » 20 Oct 2015 20:48

Why is the world giving a free pass to Chinese steel? Why is India not imposing tariff against Chinese steel? Can you imagine the Chinese not being able to sell half of their steel production? Would be fun to watch.

Vayutuvan · Post by **Vayutuvan** » 20 Oct 2015 20:51

Mahadevbhu: even if they develop thin steel for export in electronics, it will be a small fraction of the capacity buildup already. Even if they are able to capture all the electronics market replacing Al with steel, the real usage is in steel structures, infra, and automobile industry, heavy machines.

Their factories would he very low capacity utilization and keep depreciating - may be even rust away.

NRao · Post by **NRao** » 20 Oct 2015 20:54

I remember the constant taunting of Chinese HSR in this forum few years back. Look where China is today!

Not going anywhere. It is a hollow economy. Granted Indian economy has a long ways to go too.

Even "where China is today", is based on wayward stats. Which is why the leadership is unable to provide a clear picture of teh future.

chola · Post by **chola** » 21 Oct 2015 03:28

NRao wrote:
I remember the constant taunting of Chinese HSR in this forum few years back. Look where China is today!
Not going anywhere. It is a hollow economy. Granted Indian economy has a long ways to go too.

Even "where China is today", is based on wayward stats. Which is why the leadership is unable to provide a clear picture of teh future.

The problem with hallow economies based on wayward stats is that they shouldn't be able to build anything much less overbuild with ghost towns (if Bharat could generate the same degree of credit - for things we really need if course!)

Economics is really simple. If you have no money and you want to build a house, pretending that you do have money still won't allow you to build a house.

That's because you need actual capital to buy material and labor. Pretend money won't work otherwise every third world will get first world infrastructure just by pretending.

Now you can pretend and fool an external money source but that won't last long because monied people and nations don't get to be rich by being stupid. Look at Argentina. No one lends to them anymore.

China is a creditor not a borrower and it is able to build things good or ill with its own monetary resources. This wasn't the case just two decades ago when it depended on FDI.

If there is anything we need to learn from the lizard it is its ability to create credit. Oversupply is problem you have after you've gotten past the hurdle of basic credit creation. The ability to create credit and just build (for good or ill) is what separates rich from poor.

I like to see us with the ability to finance things with the same abandon. We'll figure out whether they are sustainable later. Let's get the damn money first.

Hari Seldon · Post by **Hari Seldon** » 21 Oct 2015 04:33

^+1. However, dosage (like timing) is everything. Anything becomes poisonous otherwise. And the risks of free wheeling credit booms lie all around us - from the subprime crisis to the Greek train-wreck.

Good points and all that. Q for the dhaga-gurus. How good is access to credit and financing for SMEs Mom and Pops etc in PRC? What model do they follow?

I know for a fact that small businesses in India struggle for credit access, both early stage as well as working capital etc. MUDRA and now P2P lenders like faircent are trying to organically counter this problem from the ground up. Wonder if PRC has a similar problem and solution approach.

Singha · Post by **Singha** » 21 Oct 2015 07:05

I think PRCs massive trade surplus is the bedrock of their credit system. also high domestic savings rate.
with both of these, their "infra sector" is able to get credit under govt mandate, without much questions being asked about project viability or break-even point ..... so long as the balance of trade is +ve cash flow and savings keep flowing in, its cool.

HSR alone took in around $100b per annum for a decade. thats serious real money to both buy materials and pay people.
in parallel they also developed some local HSR models using cloned technology.....the money would have come from Govt for that.

member_29172 · Post by **member_29172** » 21 Oct 2015 07:08

^^ Pretty sure PRC officials don't need a cost benefit analysis, if it makes the common public feel good and gives CCP some brownie points, build it. If there was a financial analysis done before building HSRs in every villages, all those towns won't be bankrupting themselves building empty cities in ****** nowhere.

In the quest to be like americans, the chinese have started wasting resources like them. Too bad we don't know if these grand projects make any profits or what kind of burden it puts on the govt's (and ultimately the people's) kitty. The 50 cent drones here are only good for some uppity bs, no analysis, no intention of thinking of what or where they are headed, just "china stronk!!" end of the story.

Either way, we are starting to trade with china on a larger basis and their moronic quest might screw our economy up as well.

Vayutuvan · Post by **Vayutuvan** » 21 Oct 2015 09:26

IMHO, it is the Chinese labor who have born the cross of credit. Probably the CPC sacrificed 100-200 million to build out the ghost cities and HSR to nowhere. Due to their 4-2-1 population control, 200 million sacrificed work out to 50 million educated people who are not going to forget the raw deal their grandparents and parents got from the CPC. Is that number enough if a tipping point? A 10 trillion dollar question.

Theo_Fidel · Post by **Theo_Fidel** » 21 Oct 2015 10:04

No. AFAIK the #1 source of PRC cash is land sales.

Someone can correct me if I'm wrong. Government confiscates land for peanuts and sells to developers. It pockets the difference and spends some fraction on propping up these concrete blocks. everything depends on that money, from HSR to Office blocks to steel mills to coal mines... ..to give some reference land sales brought in $500 Billion last year alone, which then triggered more borrowing, this is bigger than entire GOI budget.... ...When land sales are over the entire financial system will grind to a halt....

Singha · Post by **Singha** » 21 Oct 2015 10:41

how do the developers get the real money to buy the land though? steel, cement, labour, machinery also cost real money.

eventually no matter how many internal cash flow circles are drawn, there is one external huge inflow of money to feed these internal circles(may not be so efficient circles).

and that is their huge trade surplus. so first source node of all this money would be businessmen who own the factories, with the govt also having a share in some.

this is money the world pays china in exchange for a vast range of manufactured goods. and this export surplus money is what adds hugely to the GDP every year.

other than niche products like jet and marine engines, china is the #1 to #2 manufacturer of all goods in the world now - from shoes to construction cranes and ships.

Theo_Fidel · Post by **Theo_Fidel** » 21 Oct 2015 11:07

Ultimate source of money is the savings of Chinese people. But the PRC can not directly get hold of the savings money, so resorts to land sales, promising 99 year lease, after all. While China does run a trade surplus, that money is not sufficient to fund all this. While China exports, it also imports a lot....

So why does China have so much savings, because it has 800 million workers to India's 400 million. Dependency is low low low.... Imagine everyone on BRF had one child and no parents to look after, imagine you had just one child, or no child. Zing, we too would be able to save like the Chinese....

If land sales end, PRC will find it hard to confiscate the savings of the Chinese people...

chola · Post by **chola** » 21 Oct 2015 11:10

Singha wrote:how do the developers get the real money to buy the land though? steel, cement, labour, machinery also cost real money.

eventually no matter how many internal cash flow circles are drawn, there is one external huge inflow of money to feed these internal circles(may not be so efficient circles).

Exactly. How can they sell land if wealth wasn't generated in the first place?

Economics isn't magic. We seem to make up all kinds of magical excuses to explain why the chini economy is not real. But selling land at high prices didn't create wealth. In fact, it is concrete evidence of the availability of wealth.

Third World nations sell land all the time but most stayed poor with no infrastructure.

Complaints about ghost cities and faulty HSR are asinine since these are first world problems. The US, EU and Japan also have these issues in abundance because they generate more credit than they know what to do with. But for nearly every other nation outside the developed West and Japan -- and now China -- the overwhelming problem is the ability to fund anything. For that alone, the PRC is worth studying.

Also it is the only economy of note bordering ours. We're surrounded by insects if we exclude it. So yes, we have better make a go of it.

Pointing at YUM's current issue with its growth in the PRC as a reason why Indian companies should avoid the market is simply stupid logic.

YUM had made billions in the last two decades in China. So we are saying they are better off never going into the market at all just so they can avoid having slower growth in that market now?

It is like saying you wished you never made that $10 million last year so you don't have to deal the disappointment of "only" making $9 million this year. Pure stupidity.

YUM still makes more than 50% of its revenue in China even with the current growth issues. Far bigger than even its US home market.

ashi · Post by **ashi** » 21 Oct 2015 12:29

Suraj wrote:
ashi wrote:
Those corroded rods are from Ohio, not from China.
No, your quote states that the bolts for the Washington bridge are similar, and were procured from Ohio. The Bay Bridge bolts are Chinese:
California's busiest bridge has a serious issue with rust
Another example of best practices failing are the hundreds of rusted seismic anchor bolts in the bridge tower’s foundation. A state senate investigation revealed that these bolts—made with shoddy steel—weren’t properly tested. But the bolts were part of a design approved by the state’s transportation agency, procured by a third party contractor from a manufacturer in China, and tested by a third party lab before installation.
Had they been tested, they'd never have installed those bolts.

I think there's no doubt that China is extremely efficient at putting things up. Considering the lack of reliability of Chinese equipment in US and even India, I question whether they're equally good at keeping these up.

The rods are from Ohio, the bolts are from China. Both have corrosion issues.

member_20292 · Post by **member_20292** » 21 Oct 2015 14:33

chola wrote:

The problem with hallow economies based on wayward stats is that they shouldn't be able to build anything much less overbuild with ghost towns (if Bharat could generate the same degree of credit - for things we really need if course!)

Economics is really simple. If you have no money and you want to build a house, pretending that you do have money still won't allow you to build a house.

That's because you need actual capital to buy material and labor. Pretend money won't work otherwise every third world will get first world infrastructure just by pretending.

Now you can pretend and fool an external money source but that won't last long because monied people and nations don't get to be rich by being stupid. Look at Argentina. No one lends to them anymore.

China is a creditor not a borrower and it is able to build things good or ill with its own monetary resources. This wasn't the case just two decades ago when it depended on FDI.

If there is anything we need to learn from the lizard it is its ability to create credit. Oversupply is problem you have after you've gotten past the hurdle of basic credit creation. The ability to create credit and just build (for good or ill) is what separates rich from poor.

I like to see us with the ability to finance things with the same abandon. We'll figure out whether they are sustainable later. Let's get the damn money first.

I'd venture to say that : good that the Chinese have credit. Now let bharat use their money to build itself up.

Give HSR contracts from Bombay to Delhi to Chinese firms and borrow the money from Chinese banks.

This money never needs to be returned. It will be at low interest rates and anyways the Chini will want to lend even more to finance their companies return and growth.

The US has done well to take credit from the Chini and has given itself higher living standards

Why cant we do that too? We are buying the smartphones anyways...lets also buy the HSR from the Chini and borrow the money from them for that as well.

member_20292 · Post by **member_20292** » 21 Oct 2015 14:37

And of course, you have the Make in India programme. World.

Take a look at our shiny new Chinese built infrastructure.

Come build in India and export using our shiny Chinese built roads and ports.

The string of pearls should be inside India , on the coast. Forget Hambantota. Lets get the Chini to build us ports and roads and lend us money to do that as well.

(we promise to return it , eventually!)

nandakumar · Post by **nandakumar** » 21 Oct 2015 14:52

FT has a report about the 6.9% GDP growth that China announced two days ago. The economy is supposed to have grown at the reported rate on the back of a robust growth in Services. But the FT story doesn't report the sectoral growth rates. But has the following quote.
Quote:
Yet for analysts sceptical of China’s official GDP data, the latest figures compound that suspicion. They doubt that services could have remained so strong given the steep declines in the stock market in the second quarter. Financial services were the biggest contributor to services growth earlier in the year.
“It is somewhat puzzling how the service sector maintained strong growth in the third quarter, given that the strong service sector growth in the first half was mainly driven by the financial sector,” wrote Zhu Haibin, chief China economist at JPMorgan. “The recent stock market correction should have led to service sector deceleration.”
Unquote.