PRC Economy and Industry: News and Discussions

[svinayak]

Acharyaji,

Could you please check those links and correct them? They seem to be broken.

Remove the space in between for the those Chinese sites. We dont want to give traffic to them

[Singha]

six month old article:

http://www.chinadaily.com.cn/china/2009 ... 301942.htm

Yellow River dams verge on collapse
By Tan Yingzi (China Daily)
Updated: 2009-06-19 10:34

Several dams on branches of the Yellow River in Gansu province are near collapse only one or two years after their construction.

Improper construction procedures, disqualified workers, embezzlement of construction funds and mismanagement of local water resource departments are threatening the safety of the dams, according to China Youth Daily.

One dike more than 80-m long and 20-m high, built in 2006 in Yuanxian county on the middle and upper reaches of the Yellow River, has developed a breach about 10 meters wide in the middle.

According to nearby villagers, at least five newly-built dams are in very fragile condition, the newspaper said.

All those dikes are part of the soil and water conservation project of the Yellow River under the management of the Ministry of Water Resources. Most of the money for construction comes from the central government.

With a length of 5,464 km, the Yellow River, dubbed the "mother river" of China, suffers the most serious soil erosion in the world, especially along its middle and upper reaches. The average amount of mud and sand washed into the river every year reaches 1.6 billion tons.

Since 2003, China has poured a total of 83 billion yuan ($12 billion) into tackling soil erosion along the river and constructed more than 160,000 dams, according to Xinhua News Agency.

As flood season approaches in July, August and September, China's dam safety is coming under heavy pressure and inspections show many of them are not in good condition, Minister of Water Resources Chen Lei said last month.

China has the world's largest number of reservoirs, and 37,000 of them, or more than 40 percent of the country's total, are in potential danger. Of those, 3,642 dams are being reinforced and another 7,611 need immediate reinforcement.

From 1999 to 2008, a total of 59 dams were breached nationwide, 30 caused by torrential rain and another 20 from quality defects, he said.

[vina]

Yawn.. After the "After Gleatest Orympics Ever, Empty Shells in Beijing

And who woulda thunk that in rip roaring 10% growth China, the Govt had to bail out a bank for $120b !! Come on, even the PIG, AIG got only $180b!.

Absolutely Great Article. Posting in full.

February 5, 2010 , New York Times.
After Summer Olympics, Empty Shells in Beijing
By MICHAEL WINES
BEIJING — If you build it, he will come,” Ray Kinsella, the farmer in the 1989 film “Field of Dreams,” hears, mystically, as he walks through his cornfield. So at seemingly ruinous cost, he razes the cornfield and builds a ball field, and is rewarded with an endless stream of ticket buyers stretching to the rural Iowa horizon.

In 2008, the Chinese built a ball field — boy, what a ball field — known worldwide for its lattice-like architecture as the Bird’s Nest. Alas, after the 2008 Olympics, the ticket buyers haven’t come. Right now, the Bird’s Nest serves as a winter amusement park known as the Happy Ice and Snow Season. In April, a promoter may stage a celebrity rock concert to “establish China as a world leader for global peace and a healthier planet.” Or not.

After that, the government says it may build a shopping center there.

The accompanying photographs, shot at locales for the 2008 Beijing Olympics, succinctly depict the loneliness of where the long-distance runner once strode. In a week when the United States contemplates how long its future will be spent deep in debt, they also hint at how much its greatest creditor is pinning its own hopes of building wealth on dreams.

Two summers ago, China’s Olympic extravaganza was recognized worldwide, and especially here, as a barely disguised metaphor for this nation’s rise to worldwide importance. Eighteen months later, China is more important than its leaders could have imagined.

But Beijing’s famous Water Cube has hoofed its way from Olympic stadium to light-show concert hall to stage for a Russian performance of “Swan Lake.” Its latest incarnation is as an indoor water park.

In the year after the Olympics, the iconic 91,000-seat Bird’s Nest hosted a Jackie Chan concert, an Italian soccer match, an opera and a presentation of Chinese singing standards. But the local soccer team declined a deal to make it their home field, and the only tenants now are tourists who pay $7 to visit the souvenir shop.
By most accounts, the vendors hawking trinkets outside the stadium outnumber the foreigners who go there to gawk.

Outsiders may find this wasteful. After all, Atlanta’s Olympic stadium became a baseball park, and Calgary’s Saddledome a civic fixture.

Then again, the Olympics seem to bring out profligacy in even buttoned-down governments. Consider Athens, where 21 of the 22 stadiums erected for the 2004 Olympics were reported last year to be unoccupied. The $14.4 billion cost of that party is being cited by some as a source of Greece’s potentially destabilizing fiscal troubles.

If China is different — and China is — it is because fiscal worries on the diminutive scale of Athens hardly register on Beijing’s blotter. Overbuilding is not a prime concern. Indeed, some might call it an economic strategy.

This is a nation of spanking new office towers and hotels and luxury apartment complexes, many built on spec, many financed with state-subsidized loans, or on state-subsidized property, or with low-cost steel from mills built with state subsidies. Many are more empty than full.

According to Colliers International, a real estate firm, Beijing’s central business district offices will stand roughly 38 percent vacant this year. That’s 12 points higher than the figure for San Bernardino, Calif., which the advisory firm REIS says was the worst major office market in America in the last quarter of 2009.

Yet what seems awful in San Bernardino is the norm in effervescent Beijing. Real estate speculation here is rampant, many experts agree that housing and finance are riding bubbles, and everyone expects a big reckoning somewhere — a year? two? — down the line. But there was a reckoning after the Asia panic in 1999, and another reckoning in 2004, and both times the government bailed out the big state-owned banks, and the boom went on.

Indeed, the government forgave the Agricultural Bank of China $120 billion in sour loans just last October without a peep of public protest.

If you build it, the feeling is, they will come. Eventually, in a nation this large, someone will fill the convention center and the water park. And if not, well, build it anyway. Building creates jobs, and feeds prestige, and pumps up the GDP. Here in the nation that is too big to fail, as long as the bad loans don’t overwhelm the good, the waste is tolerable.

“That, to me, is the essence of the Chinese strategy,” Eswar Prasad, a Cornell University professor and a former head of the International Monetary Fund’s China division, said in a recent telephone interview. “Just keep the machine going fast enough.”

[ravar]

'India growth likely to exceed China's'
PTI Mon, Feb 8 06:33 PM

New Delhi, Feb 8 (PTI) Indian economy is expected to grow at a faster rate than neighbouring China in the near future, a top Chinese official said today.

The Chairman of China's National Council for Social Security Fund, Dai Xianglong, has also called for gradual internationalisation of Chinese and Indian currencies that would help in safeguarding financial stability in Asia.

"India attaches more importance to knowledge and technology innovation in the development of the new-and-high tech industries. We believe that India may achieve better development in the next few years. In future, the economic growth rate of India is likely to exceed China''s," he said.

He was speaking at the annual DSP Merrill Lynch India Investor Conference here.

India and China are the world's two fastest growing economies, coming out of the global financial crisis relatively unscathed.

Impacted by the meltdown, the world economy shrank in 2009 whereas the two Asian giants saw their economies growing at impressive rates.

India recorded 6.5 per cent growth, while China's GDP expanded by 8.7 per cent in 2009, according to the International Monetary Fund.

Xianglong noted that both nations "should strengthen financial exchanges and cooperation and work together to promote the reform of the international financial system and safeguard the financial stability of Asia.

"During this process, the gradual internationalisation of Renminbi and Rupee is of special significance".

http://in.news.yahoo.com/20/20100208/37 ... ina_1.html

[Ameet]

Google warns Chinese knockoff to stop using Google logo

http://searchengineland.com/google-warn ... logo-35556

[wrdos]

China Jan car sales up 116 pct on holiday spending

Reuters - 2 hours 10 minutes ago

* January car sales surged on holiday spending

* Low comparative base yr-ago also inflates Jan growth

* Growth seen at slower but solid 10 pct for 2010

By Fang Yan and Jacqueline Wong

http://asia.news.yahoo.com/rtrs/2010020 ... 231dd.html

SHANGHAI, Feb 9 - China's passenger car sales in January jumped 115.5 percent from a year earlier, the country's official industry association said on Tuesday, as car buyers packed showrooms before the Lunar New Year.

A total of 1.32 million passenger cars were sold last month in China, the world's largest auto market, compared with 610,600 units sold a year earlier and 1.1 million units sold in December 2009, the China Association of Automobile Manufacturers said.

"Demand remains strong in January as many people want to get a new car for themselves for their loved ones before the Chinese New Year," said Zhang Xin, an analyst with Guotai Junan Securities.

[krishnan]

Why is the article dated Feb 10?

[vina]

Hmm. This is like "pent up demand" or "pre budget demand" in India. The talk is that the upcoming year, the year of the "Tiger" is considered unlucky and that there is a rush for everything big ticket, like getting married etc. Maybe buying car in the next year is considered unlucky ?. That could account for some of the rush to buy before the new year me things.

[Chinmayanand]

"After Gleatest Orympics Ever, Empty Shells in Beijing

I do not understand all this whining by the western media regarding China. China rightly deserves to celebrate its moment of glory after all the sacrifices , it's citizens have made in human rights and clean environment. China has come a long way after Japan and Europe humiliated it. Now, they can not dare it. China has the right to flex its muscles and tell Europe , America and Japan that China can't be humiliated any longer and rightly so.

China has arrived on the world fora. What, if China build empty malls and builds cars and park it somewhere. China has the right to do whatever it wants for it's China's money. These bankrupt , indebted western countries should refrain from lecturing to their creditor. What if some Chines milk powder is contaminated or Chinese toys are tainted , after all it's just a matter of quality control. when China manufactures multi-billion dollars worth of goods for the world , some products will fall below par but even the best ones like Toyotas and Raptors can crash and have quality issues.

What if China copies and infringes on copyrights, afterall China is making it cheaper and selling it to the poor who can't afford the originals with the bloated price tag. What if China manufactures bogus drugs in the name of reputed pharma companies , atleast the dying ones can have the satisfaction of having medication and then dying instead of dying without medication.

The world must give its heartiest compliments to China for what it's doing instead of whining about China.

[Singha]

UK media specializes in such articles about india/china. perhaps because their own
ship is bow down in the waves and taking on more water. perhaps they realize they
will not in the next few centuries enjoy the power and 'pahuch' they did in last 300.

its a long rocky way down but they will be in good company - much of the EU will
be sailing in convoy

so they can throw stones and heckle the departing starships INS India and CNS China but as the arab saying goes "the caravan proceeds as dogs bark"

in a few decades as UKstan becomes a somali style caliphate, I will be gone but
BRF will still be here and my sons will carry on my bloodline...."we" shall be here
to cheer. the account will be settled with interest - it is destined by the ancient
prophesies.

[harbans]

We too have the same double standards that we are accusing the West off. On one hand if a Kevin Rudd or Obama bends down to the Chinese we howl. On the other hand if media groups criticize China, we say they are whining. Fact is China's dumping cheap goods, that would'nt be cheap if it did'nt peg the Yuan or used slave labor. Fact is our trade balance would'nt be down 20 Billion USD wrt China if it did open it's market and played more fairly. Fact is the West too suffers similarly wrt China. Fact is China is now starting to play an arrogant game on the big international circuit, both with the West and as usual with India. Fact is the articles which are pointing this out, should be appreciated as they are raising an awareness amongst a Western population that has been fed China appeasement for a long long time.

[bart]

On the other hand if media groups criticize China, we say they are whining.

If you are referring to the posts on this thread I think they were dripping with sarcasm.

[harbans]

Thank you bart ji.

Must confess, did'nt read it completely. But a lot of Chinese fan boys lately possibly switched off my sarcasm meter reading abilities.

[heech]

One point which the otherwise informative FT article misses is financing.

Unless all those folks who are buying high end condos as investment and keeping them empty are doing so with cash down, then what about the servicing of the loans?

First off, let me say that I agree there's absolutely a pricing bubble in housing. Anyone buying at current prices is an idiot, in my opinion.

But let me also clear up a few things, when you talk about debt financing. This is very relevant when you talk about the implications of the bubble deflating, which it will sooner or later:

- Chinese mortgages are RECOURSE loans. In other words, you can not foreclose on your property, give up the deed, and walk away from your debt.

- China does not have personal bankruptcy. In other words, your debt is with you for life.

- China has extremely tight lending standards. The amount of down payment required depends on your age, and the number of homes you already own. A couple in their 40s buying their second home would probably have to put down 50-60%+ down payment.

- Few Chinese real estate speculators are "renting out" these homes, and relying on rent to cover borrowing costs. Chinese homes are sold as empty shells, and the cost of building out the home (wiring/plumbing/interior walls) is often as high as 30-50% of the purchase price. If you're buying just to speculate, these homes are almost always left as shells. In other words, most investors have enough cash flow to cover financing costs even without rent.

So, all of these imply that if/when the bubble deflates, people will not be walking away from these investments en masse. Loans will not be defaulting, en masse. I do expect a lot of speculators to get burned, but I highly doubt there will be a collapse.

[Suraj]

Thanks for your comments heech. I read something similar about Chinese homes being sold essentially unfurnished, and anecdotal claims even suggested they didn't have as much as tiling on the floor, or electric fixtures on the wall, all of it being upto the buyers to choose and install themselves. Is that really the case ? Any data on average turnover of such empty shell homes before final occupant (i.e. the one who furnishes it), in places like Beijing or Shanghai ?

[Ameet]

China overtakes Germany as top exporter

http://www.nytimes.com/2010/02/10/busin ... xport.html

Chinese exports amounted to $1.2 trillion in 2009, while German exports totaled $1.1 trillion, or €797 billion, the German Federal Statistical Office said. Germany became the top world exporter in 2003, surpassing the United States.

[Prem]

I have a question, when they say German or Chinese export , doest this include services etc or just commodities ?

[Suraj]

Merchandise trade.

[sanjaykumar]

When you travel the Express to Paddington station, the gleaming cars are made in Germany. The latest generation CT scanners are from Siemens. The engineering benchmark is Mercedes for autos. And China exports exactly what?

[derkonig]

^^^
Milk fortified with Melamine, lead laced toys, assorted junk, thandaar bandaar...oh & SARS and of later deflation prolly....

[krishnan]

They dont export. They dump it.

[svinayak]

And China exports exactly what?

Items less than $100

[cdbatra]

What does this mean for international relations? We could express the difference in various ways, but let us simply cast a comparative eye on the question. For it to hit home, let us note that by 2040 India will be to China as Pakistan is to India. And that may be an optimistic judgment about the gap. In the January/February 2010 issue of the US journal, Foreign Policy, Nobel Prize-winning economist Robert Fogel predicts that by 2040 China will have a GDP of $123 trillion and 40 per cent of world output (the US will be next with 14 per cent!). At this point, China will be the most powerful entity on earth by far, as it has been for 18 out of the past 20 centuries of world history (chancellor of Oxford University Chris Patten's estimate). Even if this is an exaggeration, the Chinese dragon will be so big that the rest of the world will have to gulp several times before it says no to Beijing.

http://timesofindia.indiatimes.com/home ... 539962.cms

[AnimeshP]

What does this mean for international relations? We could express the difference in various ways, but let us simply cast a comparative eye on the question. For it to hit home, let us note that by 2040 India will be to China as Pakistan is to India. And that may be an optimistic judgment about the gap. In the January/February 2010 issue of the US journal, Foreign Policy, Nobel Prize-winning economist Robert Fogel predicts that by 2040 China will have a GDP of $123 trillion and 40 per cent of world output (the US will be next with 14 per cent!). At this point, China will be the most powerful entity on earth by far, as it has been for 18 out of the past 20 centuries of world history (chancellor of Oxford University Chris Patten's estimate). Even if this is an exaggeration, the Chinese dragon will be so big that the rest of the world will have to gulp several times before it says no to Beijing.

http://timesofindia.indiatimes.com/home ... 539962.cms

Here is the article by Robert Fogel:
$123,000,000,000,000 - China’s estimated economy by the year 2040. Be warned.

And here is another article rebutting the claim made by Robert Fogel
A $123 Trillion China? Not Likely

[Abhijeet]

An annual growth rate of 10.8% nominal -- which would lead to $123T GDP in 2040 dollars -- sounds possible technically, say 6% real + 4.8% inflation. I think most of the commenters on the original article are thinking of it as real growth.

However, the lack of an internal market large enough to sustain that growth rate, plus the other things mentioned in the rebuttal, sound plausible enough.

[paramu]

What does this mean for international relations? We could express the difference in various ways, but let us simply cast a comparative eye on the question. For it to hit home, let us note that by 2040 India will be to China as Pakistan is to India. And that may be an optimistic judgment about the gap. In the January/February 2010 issue of the US journal, Foreign Policy, Nobel Prize-winning economist Robert Fogel predicts that by 2040 China will have a GDP of $123 trillion and 40 per cent of world output (the US will be next with 14 per cent!). At this point, China will be the most powerful entity on earth by far, as it has been for 18 out of the past 20 centuries of world history (chancellor of Oxford University Chris Patten's estimate). Even if this is an exaggeration, the Chinese dragon will be so big that the rest of the world will have to gulp several times before it says no to Beijing.

So much wisdom from a Nobel Prize winner. Looks like Nobel prize for economics is a Wall Street con-game.

[shynee]

Looming Problem of Local Debt in China-- 1.6 Trillion Dollar and Rising

[Hari Seldon]

x-post

China - The Mother of All Black Swan

Its a slideshow.

Well argued, logical, (almost) persuasive only.

Recommended read. Have a go at it folks!

Still, hard to believe the gleat CPC will ever allow PRC to flail, much less fail. Don't forget the CPC is endowed with a mandate from heaven to order back the tide itself. Since c-hyaena hasn't crashed so far, by induction, it will never crash only. Jai hu, jai hu, MaoA, MaoA.

[cdbatra]

Guys I wholeheartedly agree that china is mother of all black swan events and has impending credit bubble crisis. Still I feel there is a chance they might pull it off. In that case this 123 scenario looks plausible. The rest of the world should be prepared for that and take pre-emptive (not necessarily hostile) steps so that outcome is not so lopsided.

This is admission enough that stupid Ankilwallahs have failed miserably to put any stop to this. We have seen and shall see increasingly that prc will end up consuming precious resources at faster rates which will be really bad for other developing countries like us.

[wig]

something is seriously wrong with the internals of china.
they do not have a judiciary that is independent or anything of the kind we understand.
they do not have a free press that can give a true and real (ok, fair!) picture of just what is going on inside.
then the chinese have something like USD 2.3 trillion lying abroad. of course they also have an economy that was zooming with growth rates like 9%.
being the worlds largest creditor is however fraught with danger. as the west pumps money into their, still faltering banking system the value of the chinese USD 2.3 trillion will erode. that is not a comforting thought for a person holding debt.
but rhetorical questions remain tantalisingly apparent and with no lucid responses.

the share of consumption of chinese people in the Chinese GDP is falling. in 2008 only 35% of the GDP was for domestic consumption. why so? some random figures should be interesting:
the chinese have 7% of the world's GDP.
the figures of core sector metal consumption of the globe are
Aluminum 30%; Copper 40%; Steel 47%
i opine that all this consumption merely passes through and goes on to consumers the world over.
this does not create wealth. regretably wealth in china is not percolating to the downtrodden. almost 55 million people migrate to the eastern seacoast wherein all work opportunities exists.
most benefits are garnered by the political party appartichiks. high tech skill sets essential for the transformation of life styles is a preserve of the party workers or more appropriately a class of society that has the appropriate links.

wealth can be be generated only by education and sincere hard work.

[ashi]

Jim Chanos Is Wrong: There Is No China Bubble
http://www.forbes.com/2010/01/11/china- ... -rein.html

[ashi]

No, China Will Absolutely Not Collapse
http://www.forbes.com/2010/02/03/china- ... -rein.html

Here's another reason Chanos is all wrong: The official economic growth numbers are not too high at all. They're too low.
Why? Because China's underground economy is far bigger than the 10% to 20% of the total economy that most economists estimate when they do their calculations. Politically the government can't admit that

The reality is that China's economic growth is very real. After all, companies like McDonald's ( MCD - news - people ), Intel ( INTC - news - people ), Hewlett-Packard ( HPQ - news - people ) and General Motors are reporting record sales there and investing billions more. They certainly are not fudging numbers for China's leadership. My firm, the China Market Research Group, estimates that GDP has been growing at 10% to 14% a year over the last decade, rather than the 8% to 10% most economists put forward.

That's also why we believe most economists underestimate domestic consumption's role in the economy and inflate the role of exports, which account for closer to 20% of the economy than the 40% that many economists continue to use.

[Chinmayanand]

Those who believe China is not a bubble, can buy Hang Seng ETF on NSE and those who believe China is in a bubble can short the same. After sometime, people can count their p&l and report it here. All the boom and doom sayers ought to put their money where their mouth is. Allah bless China with a vibrating democracy.

[Chinmayanand]

China: Hugh Hendry warns investors' infatution is misguided

[Theo_Fidel]

My firm, the China Market Research Group, estimates that GDP has been growing at 10% to 14% a year over the last decade, rather than the 8% to 10% most economists put forward.

The shamelessness is breath taking.

No skepticism at all. Paradigm shift they say. New economy they say. Blehhh!

[Atri]

@Gurus

Leaving aside Jingogiri, given the huge size of Cheen and the population and resource base it has, how probable it is for Chinese bubble to burst? They have the luxury of inflating the balloon quite a lot and then allow the resources (material and human) to catch up and make it worth, with time if they just hold on..

[Hari Seldon]

how probable it is for Chinese bubble to burst?

How probable? Probability is almost surely 1. Because it is in the nature of bubbles to burst only. By definition, q.e.d.

Now if you're saying its not a bubble, then, however

They have the luxury of inflating the balloon quite a lot and then allow the resources (material and human) to catch up and make it worth, with time if they just hold on..

Good point. And exactly what beijingos the world over must be counting on, perhaps.

Actually, I do believe PRC may actually have a decent shot at avoiding a crash. Their bad loans/NPAs/ debt burdens etc are often trotted out as evidence for the shakiness of the chini ekhanomy. But these analyses sometimes overlook that all of cheena is owned by the CPC, period. cheeni bank lending to cheeni business is like me lending money to myself. Am I in debt, then? Really? cheena can wipe off all its debts in one stroke of a pen, perhaps. Who knows for sure, anyway?

[abhischekcc]

As I keep pointing out (and members keep ignoring ), China's economic instability cannot be measured in the same terms as other countries - they have understood that money is only a measurement standard - you can print money at any rate without regard to inflation, etc - because in that country everything is owned by the govt.

All money, all goods (even when devalued by inflation), all human resource, all mineral resource, all organs harvested from the convicts - everything - belongs to the party. Period.

They may have the worst NPAs in the world, but it won't matter the companies defaulting also belong to the CCP, and the banks left holding the sack also belong to the CCP. Money is simply being transferred from one pocket to another. The onle deficit the CCP fears is the political deficit - as long as the people don't revolt - all is well (pun intended ) in the land of milk, honey, and smog induced asthma.

The only thing, repeat, the only thing that matters to the CCP is employing the masses so that they do not revolt. And for that they need to keep gathering resources in the world. (Why do you think in Cop15, they rejected the notion of using per capita limits on CO2 emission? They would be the biggest beneficiary, right? Wrong, they want to exploit and pollute the world more than their fair share.)

[Theo_Fidel]

They may have the worst NPAs in the world, but it won't matter the companies defaulting also belong to the CCP, and the banks left holding the sack also belong to the CCP. Money is simply being transferred from one pocket to another. The onle deficit the CCP fears is the political deficit - as long as the people don't revolt - all is well (pun intended ) in the land of milk, honey, and smog induced asthma.

The only thing, repeat, the only thing that matters to the CCP is employing the masses so that they do not revolt. And for that they need to keep gathering resources in the world. (Why do you think in Cop15, they rejected the notion of using per capita limits on CO2 emission? They would be the biggest beneficiary, right? Wrong, they want to exploit and pollute the world more than their fair share.)

This is correct. Already china is the number one source of pollution in the world.

But there are some lessons of economics. No economy can be built on the principle of wealth destruction indefinitely.

Right now just the coal being produced and consumed in China is worth about $500 Billion or about 13% of their GDP. The steel they produce and consume is worth another $250 Billion. This is every single year.

This has to be the single most expensive and wasteful economic system ever produced on the planet.

Last month the high speed rail line from Guangzhou to Wuhan was dedicated. This line cost ~$20 Billion to build and costs ~ $1 Billion to maintain every year. Just its power bill is $300 million per year. It is estimated to transport 2-3 Million people per year at a ticket price of $72 a pop. This gives a total revenue of $200 million a year. This is the model for all their 1000's of KM's of high speed lines.

I repeat the Chinese people underestimate the power of their bureaucrats to destroy money.

China is not a bubble in the traditional sense it is a giant ponzi scheme. It depends on the continued stashing of ever more money away in banks to fund past foolishness. This year the banks spent/misspent $1.5 Trillion so next year the people have to save $2 Trillion to make up the balance. At some point a run on the banks will occur. A quick calculation shows that just over the last decade the Chinese savings rates has meant a total investment of $8 Trillion. This is now essentially the sole engine for Chinese growth. Not domestic consumption, not exports or even manufacturing.

http://www.imf.org/external/pubs/ft/weo ... box2_1.pdf

Per this paper the Household savings rate is now ~ 15%. This is a shockingly low number for Asia. Most of the savings is from Enterprises and the Government which probably means the that the government is providing its money as grants. This has to be the weirdest economy ever.

The best comparison is with the Soviet economy. People may not remember this but the Soviet Union once had a GDP 2/3's that of the USA. Even in the mid 80's the Soviets had a GDP of ~3 Trillion dollars to the USA's ~5 Trillion dollars. The Soviet Union was still growing even then, till Perestroika hit.

Because none of the Soviet economic pieces were commercially organized, when the system broke down, it broke down completely and irrecoverably.

If the Chinese system should ever break down, all these pieces are economically nonviable and will be worth nothing. Including that High Speed Rail system in Wuhan.

Contrast this with the systems in the USA that are recovering from a 30% collapse in commercially activity quite nicely. 95% of the USA and probably 80% of India is commercially viable.

I suspect less than 50% of China is commercially viable at this point. The end point will probably occur when that number reaches 20% or so. Then just like the Soviets all that investment will be worthless. This is not something a society can grow into.

Who is going to pay the maintenance, power, water, insurance, taxes, Repairs,etc if these investments were to be commercially operated.

The story of a commercially nonviable investment, Flaglers Railway, should act as a cautionary tale.

[Neshant]

Contrast this with the systems in the USA that are recovering from a 30% collapse in commercially activity quite nicely

the stock market's rise looks awfully suspicious and I would not be surprised if the federal reserve is rigging it.

nobody can identify what new industry will be creating white collar jobs.

govt spending tons of money by piling up debt does not equal recovery.