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Q: I watched an interesting documentary last night. "How China Fooled The World"
Has anyone seen it? What did you think? Basically it centered on the economic boom in China since 2008 and the price to be paid in the near future.
i think this was all by design and deliberate, but only a few at the top know the truth.
so you have 300 million peasants moving to cities, migration to urbanization over the next 2 decades.
so you make people invest their money in houses and limit other investments unless your smart or very rich and have connections to get your capital out of china.
so the average fool runs up a bubble with private funds and government banks cheerleading for the government policy.
then you crash the bubble, now your have empty inventory of buildings for the future city residents but the peasants cant buy,
so the prices crash gradually over the next 2 decades and just when you think it is stable, the demographics of too many old people selling houses for healthcare kick in and bring it down for another 20 years with not enough workers or buyers.
the bright side is the government did not pay for the inventory of houses, the sucker middle class and the not so smart rich did, the question is, will they ever figure out how they got screwed, but it was a hell of a devious plan.
the irony is america crashed the property market and knew it would happen and the prices will crash over the next 2 decades with the baby boomers selling to take care of healthcare and and trips abroad for medical since we have a severe shortage of doctors that nobody bothered to fix, and the crazy thing is we are selling houses to rich chinese in california and russians in new york and many other places and they are buying into a falling market like the japanese did in the 80's and they will be suckers who lose their money also. we dont need governments redistributing wealth, rich people lose money very badly all over the world without the government shoving them into a guilty conscious.
expatlife26:
No! We NEED governments redistributing money!
Why should YOU get to keep your money you're just some lame piece of shit. You're either a hobo, a netizen or a crumb-bum.
Every business should be like the DMV!
There was already a thread on the documentary. Do a search and you will find many responses to it.
Not seen the documentary yet, but from own readings, experience and reasoning, I converge to similar conclusions.
* In 2008, Chinese gouv. took the decision to fund a *massive* stimulus : lots of very easy loans.
* Those loans went in various usages
** Building public infrastructure : railways, airports, roads, gouv. building
** Financing gouv. backed industries
** Funding for scientific research
** Loans for the private sector
* It's ok to use debt to develop new things, *IF* those new things have roughly the value of what was invested, and can produce value as well.
* The problem, a large part of the stimulus went into financing projects with doubtful value
** railways/roads/airports awfully oversized for the actual needs
** factories that produce a lot more than it needs (which drive price down)
** factories with outdated equipment, and poorly trained workers (which can't be competitive, thus, a net loss)
** blatant abuse for gouv. building, it keeps popping up in the news since a few months
** a lot of stimulus money just fueled corruption ie. "pay me and I will award you this contract for a white elephant project, yes, you the incompetent and expensive contractor".
** local gouvs and industries became used to get loan easily, with no question asked. So they felt that debt is ok, they will get a loan... Fast-forward 2014 : heavy public & corporate debt.
** those debts have been used to build an awful lot of office space and accommodations in the middle of nowhere, far from places with jobs and commodities. From various sources, there's 10 meter square of office space for every single Chinese. Or to build accommodation that few can afford.
I don't think this is by design, I would blame
* incompetence
* committee decisions where not hurting the feelings of anyone is the more important than long term consequences
* over-confidence "look how well we have done since the 80's"
I don't think China fooled anybody. Yes, Chinese gouv. is not exactly a model of transparency. However, the unpublished data could be estimated from surveying what is visible. All this rich people buying expensive real-estate abroad speaks for itself, too.
Mattbaker:
China can get away with this at the moment though, as long as they limit the amount of money that leaves the country, which they do pretty effectively for anyone that's not rich or well-connected.
The average Chinese person has to put their money in a state owned bank, which offers lower interest rates than inflation, which effectively means this money can then be leant at below cost rates to a state owned enterprise, via the same local government entities, to be spent on whatever frivolous construction or prestige projects they choose. The workers on these projects earn money from which the government takes back some in tax, put some in the same state owned banks, and spend the rest, which allows other people to earn money from which the government takes back some in tax, they put some in the same state owned banks etc. etc. until the government has recouped all the money they originally created.
Its Keynesianism in action- essentially paying people to dig up holes and then fill them, but can theoretically work as long as people aren't spending too much money outside of China.
It's better than what has been attempted in countries like the UK since 2008, where the government has printed 400 billion pounds to give straight to the banks, which has only benefited the rich, inflated the property market, and screwed the poor through inflation.
Since China still holds 3 trillion dollars of American bonds and currency, they basically have a license to print money until the dollar loses its status as the world reserve currency (when we're all screwed)
Plus their private saving rate is much healthier than anywhere in the western world.
I think there definitely could be a economic crash in China soon, but at the moment they have the strength to survive one or two, unlike the UK or Europe.
DrMonkey:
Thanks Matt, good discussion :) I'm close to an idiot when it comes to economy, so pardon my probably simplistic views. I'm honest here, not being sarcastic at all. Here's how it goes.
Keynesianism in China have some self-limiting factors. Pollution is one, digging a hole and filling it again with Chinese characteristics is very polluting. When the soil is improper to grow anything, when the water can't be used unless you spend lots of energy to purify it, and when the air is a hazard, you have to import stuffs and do all the hole digging/filling at higher costs. That's *already* a problem here right now.
Hole digging/filling at Chinese scale is quite something, especially done with mostly coal energy. I remember reading that 50% of railway traffic is to carry coal ! Soooo, coal is still relatively abundant but it;s dirty and people are shocking. Doing something about pollution means using less energy, changing the energy production infrastructure or less hole digging/filling.
Finally, like all systems, when you move or transform things like energy or money, it's never a 100% efficient conversion. You have some losses at every steps, exactly like when you transmit electricity from a battery in a wire to run an engine to move a bike. Thus, a perfect money cycle like you describe would loose some of the money with time. In China, those losses are not minor : corruption... Anything of scale needs official approval, which need lots of money to smooth out the operation. Thus, the cycle you describe here would be inefficient in China, loosing a lot quickly due to very inefficient movement and usage of money.
I am beginning to think Chairman Mao was a CIA agent.
I don't think China fooled anyone who is coming here (if they pay enough attention to their surroundings). Easiest example is those ghost apartments that no one buy, the pollution level, fake propaganda news, etc.
Since you are interested in documentary i will suggest to watch Vice season 1 episode 6 about further explanation about the chinese ghost town/apartment.
CharlieB:
Thanks for the recommendation, I have been in China now for 5 years and what a friend told me when I arrived is very much true. He told me "nothing is as it appears in China".
