China's infrastructure investments 'threaten its economic growth'

[Jlaw]

Yes China would be so much better of if we had more corrupt corporations paying of the regime with paid speeches and election donations for public deals that make billions of profits at cost of the citizens despite a low quality and unfinished project, while also evading to pay billions of taxes and all money ending up on foreign Swiss banks of a few corrupt elite families.

 

[ahojunk]

It is time for our American friend to spend trillions of dollars on their infrastructures the state of which can best be summarized by one word: trash.

I don't agree that the American infrastructure is trash because it is not.

Many other countries would love to have the infrastructure in US.

However, the infrastructure in US is decaying which badly needs maintenance and upgrades. The question is do they have the money?

Yes China would be so much better of if we had more corrupt corporations paying of the regime with paid speeches and election donations for public deals that make billions of profits at cost of the citizens despite a low quality and unfinished project, while also evading to pay billions of taxes and all money ending up on foreign Swiss banks of a few corrupt elite families.

You are having a go at sarcasm. I have to re-read it to get it.

 

[Jlaw]

I don't agree that the American infrastructure is trash because it is not.

Many other countries would love to have the infrastructure in US.

However, the infrastructure in US is decaying which badly needs maintenance and upgrades. The question is do they have the money?



You are having a go at sarcasm. I have to re-read it to get it.

That is the worse problem than actually building the infrastructure. We have the same issue in Canada. 30 years ago, people wanted government to spend more on infra. The government did not listen as they do not plan for the long term. Now our infra is failing, from roads, bypass, bridges, sewer pipes, etc. 30 years ago they say too expensive as it would cost millions. Now the same maintenance and just some new infra will cost billions.

China's leaders are wise as they are building now for the future. It may cost billions now, but 30 years from now, these same projects will cost trillions

 

[yusheng]

the article is not even about macroeconomics analysis since it did not using an important conception in economics of "multiplier effect" on huge scale infrastructure investment though such model is also an ideal model.

The multiplier effect
Every time there is an injection of new demand into the circular flow there is likely to be a multiplier effect. This is because an injection of extra income leads to more spending, which creates more income, and so on. The multiplier effect refers to the increase in final income arising from any new injection of spending.

 

[alaungphaya]

Having only glanced at the study, I can say that infrastruture is not the real issue. The real issue is debt servicing. The Americans have stumbled onto a real deal fountain of eternal money in that as long as the whole world uses their currency and believes in their currency the can borrow and print as much of it as they want and not have any problems as their debt, and a significant portion of the world's debt, is denominated in a currency they control - such is the power of fiat money. Notice the quantatitive easing programme and zero interest regime they have in America and still the dollar appreciates.

The Chinese are trying to replicate this by challenging the dollar as the world's reserve currency. That is the reason for the AIIB and the new Silk Road initiative etc. China already manufactures everything in the world so their currency will be in demand however much they print i.e. it is not held for interest bearing carry or speculative reasons but the CCP are betting that they can displace the dollar and in doing so in enough regions of the world they can follow the Americans and have essentially infinite money.

The interesting thing is to see how Chinese citizens are betting. So far they seem to be skeptical that their currency will win and that's why they are voting with their feet. The amount of Chinese buying assets overseas since the controls on capital movement were eased a few years go is astounding not to mention the Chinese companies going on global buying sprees worldwide. This is an indication that Chinese people expect their currency to depreciate.

Back to infrastructure, I would think that being a former centrally planned economy, they would conduct cost benefit analyses differently. They would factor in externalities such as prestige or future funding or divisional rivalries. Roads in England, for example, were always being repaired even when they didn't need to as if a local authority fails to spend its allocated budget in one year they would receive a smaller budget the next. Add to this the corruption factor in China where the state budget is seen as a personal piggy bank by bureaucrats and you see the bloated infrastructure plans.

Overall, it's not a problem as long as the world needs Renminbi.

 

[AViet]

[

Yes China would be so much better of if we had more corrupt corporations paying of the regime with paid speeches and election donations for public deals that make billions of profits at cost of the citizens despite a low quality and unfinished project, while also evading to pay billions of taxes and all money ending up on foreign Swiss banks of a few corrupt elite families.

You are talking about the deeply corrupt US, with decaying infrastructure, do you?

 

[Nilgiri]

Roads in England, for example, were always being repaired even when they didn't need to as if a local authority fails to spend its allocated budget in one year they would receive a smaller budget the next.

I have seen an element of this in China when I was there. There is always a bit of renovation going on well before its required for large shopping malls etc...to pad both the employment and also use up liquidity like you mention.

Not sure how much of an overall phenomenon it is, or if a study has been done regarding it by anyone.

The real issue is debt servicing.

Spot on. The way the debt has accumulated over a short period is what concerns me. I get the infrastructure externalities side of it....but there still has to be some level of renumeration in the mid term at least to start servicing the debt generated...I mean most externalities cannot be monetized effectively.

It is this balance that the Chinese will have to get right (on a large expanded scale given how much they have gone down this path in recent years) or there will be problems for the Chinese economy down the road....along the lines faced by other East Asian countries in their development histories....but quite possibly on a scale that we have little idea of now.

Could very well be managed well though....the picture is just quite hazy given the vastness of China. With great possible problems come great possible solutions/mitigations etc...

Really enjoyed reading your post btw.

 

[AndrewJin]

the article is not even about microeconomy analysis since it did not using an important conception in economics of "multiplier effect" on huge scale infrastructure investment though such model is also an ideal model.

The multiplier effect
Every time there is an injection of new demand into the circular flow there is likely to be a multiplier effect. This is because an injection of extra income leads to more spending, which creates more income, and so on. The multiplier effect refers to the increase in final income arising from any new injection of spending.

It's a big picture, isn't it?

People outside China have very little knowledge about how to invest and plan in the long-term.

Hence, you can see some countries tend to build large number of low-quality roads which can stimulate economy in the short-term (they need to prove they are "capable" within one term to attract votes). However, in China, we tend to build high-quality control-accessed expressways which requires more time to build and cannot be finished within one term for populist leaders to show off....For example, we have been building G56 Hangzhou-Ruili expressway for more than one decade....And we have just announced world's highest bridge on this expressway will be opened late this year.

In the short run, these projects seem to be expensive, but the long-term benefits are enormous. The meritocracy-based governance in China ensures prosperity in the long run and such picture is too big for populists to gauge. Such system is what makes China unique and ever lasting as a continued civilisation for several thousand years.




Expressway network in Fujian Province
once China's poorer provinces (hence poor locals migrated to SEA 100 years ago) but now one of the richest

@Mista @powastick @CAPRICORN-88 @onebyone

Beijing-Hefei-Fuzhou High-speed Railway Corridor
Connecting Beijing in Northern China to Fujian's capital city Fuzhou in Southeast China

Fuding County, Northern Fujian
Notoriously poor in history.....
Empowered by 3700km G15 Shenyang-Haikou National Expressway and Shanghai-Shenzhen High-speed Railway

Control-accessed expressway network around Fuding
One of the most mountainous regions in Southeast China

 

[yusheng]

inevitably, the discussion now turned to "debt"

westernized trollers always talked about Chinese debt problem, in fact, it is just a pseudo-proposition.

1, if there are huge debt, who is the owner?
2, can the hehavior of the owner lead Chinese economy into a systematic risk?
3, what does the Chinese government do to keep the debt cash flow going smoothly?
4, historically, Chinese economy has met more severe debt problem, do you know? (90's Triangle Debts)

if you can not answer these questions , please don't talk about Chinese debt anymore, only show your shallow mind.

 

[AndrewJin]

inevitably, the discussion now turned to "debt"

westernized trollers always talked about Chinese debt problem, in fact, it is just a pseudo-proposition.

1, if there are huge debt, who is the owner?
2, can the hehavior of the owner lead Chinese economy into a systematic risk?
3, what does the Chinese government do to keep the debt cash flow going smoothly?
4, historically, Chinese economy has met more severe debt problem, do you know? (90's Triangle Debts)

if you can not answer these questions , please don't talk about Chinese debt anymore, only show your shallow mind.

They have no idea how to reply u.

 

[j20blackdragon]

US residential floorspace is approximately 64.6 square meters per head in 2010.

US population is approximately 318 million people.

Total residential floorspace in the US is approximately...

318,000,000 * 64.6 square meters = 20.5 billion square meters.

China builds around 1.3 billion square meters of residential floorspace per year. I calculated this using the last five years of data.

China can build the entire US in 15.7 years, assuming current rates of construction are maintained.