
China’s New Bridges: Rising High, but Buried in Debt - elsewhen
https://www.nytimes.com/2017/06/10/world/asia/china-bridges-infrastructure.html?_r=0
======
contingencies
Western media: "China is building infrastructure that doesn't make money!"

Beijing: "We are connecting economic development to border regions and
neighbouring countries for geostrategic and unification purposes, we don't
care about cost"

Personal observation: Beijing is smart. I personally lived on and near the
southwestern Chinese border for most of the last 16 years and they are
definitely kicking ass with infrastructure, including high speed trains,
renewable energy (wind/hydro/solar) and highways. They have achieved their
goal of economic integration for a lot of formerly isolated people. There were
abuses earlier but now they generally give people who are moved a pretty good
deal, eg. free rice and oil for life, free apartment plus a life long monthly
stipend per household member (source: Personal interview with someone to be
moved, Chinese New Year 2017).

Western media: "Build it and they will come!"

Beijing: "They are already here."

Personal observation: Beijing is basically right, except in some private
sector residential building projects.

Another low quality China-bashing article from the NYT.

~~~
pizzetta
It might be politically motivated in that China shows a different way to
progress but while they have lifted hundreds of millions out of utter poverty,
their recipe to success includes union-busting, child labor, long work-hours,
etc as well as their foray into "imperialism lite" in Africa. Everything the
NYT stands against. So in that light they cannot possibly hold them as
exemplars, given those things, even if ideologically the CN gov is leftist.

~~~
contingencies
Children are required to be in school, by law. Some work as well (often in
family restaurants as all over the world) or leave early and get low skilled
jobs, but outside of purely agricultural areas this is pretty rare.

In my experience work hours are the same as the US (which itself is famously
bad on holidays and worker freedom from a European or Australian perspective)
for the most part, with a six day per week maximum but better holidays than
the US. People who work hard tend to take longer holidays or contract work.

Re: 'stands for' ... not sure how valid bringing in to any discussion the
supposed moral stance of a news outlet is.

------
SeeDave
I'm honestly not sure what to think about China at this point because I've
read so many news articles and reports from credible sources that paint
seemingly contradictory pictures of the health of the Chinese economy.

Perhaps Quora would be a better venue for this, but I'm having a difficult
time understanding what exactly may happen to the Chinese economy if all of
the following are simultaneously true:

1\. China has a trade surplus in its favor, on the order of ~40B/mo

2\. China has an exceptionally high savings rate, ~50%

3\. China is in an incredible amount of debt

4\. China is experiencing a massive outflow of capital by firms and
individuals

I understand that macroeconomics is a very complicated and nuanced subject,
but would greatly appreciate it if a HN reader could point me towards a
comprehensive article or is willing to share their own analysis.

[1] [http://www.marketwatch.com/story/china-trade-surplus-
widens-...](http://www.marketwatch.com/story/china-trade-surplus-widens-as-
momentum-slips-2017-05-08)

[2]
[https://www.bloomberg.com/news/articles/2015-05-01/chinese-c...](https://www.bloomberg.com/news/articles/2015-05-01/chinese-
consumers-cling-to-saving-suppressing-spending)

[3] [http://www.barrons.com/articles/why-chinas-debt-bomb-has-
not...](http://www.barrons.com/articles/why-chinas-debt-bomb-has-not-
exploded-1491885214)

[4] [http://www.telegraph.co.uk/business/2017/02/05/asias-top-
ban...](http://www.telegraph.co.uk/business/2017/02/05/asias-top-banks-warn-
chinese-capital-flight-becoming-dangerous/)

~~~
pyoung
I am no expert, but my rough understanding is that China has 'trapped' itself
in a tricky situation by relying on its export economy and on debt/investments
to stimulate growth. Ideally, a 'healthy' economy is balanced between exports,
local consumption, and debt/investment. But China has weak local consumption
due to their high saving rates and their capital outflows. This means they
have had to rely on the other two (debt, exports) to grow the economy. High
debt normally isn't an issue because a healthy economy can always 'grow out of
it' (i.e. over time inflation will make it more manageable). But because China
is export driven, if their currency rises too much, that part of their economy
will crash (because their exports get more expensive). Had they had more local
consumption, the impact would be smaller because the stronger currency would
mean increased buying power for local consumers. But because local consumption
is weak, they have to hope that growth in exports outpaces growth in debt
(which recently hasn't been the case).

The big question mark, is how actively the government will intervene if things
go south. In a normal market, too much debt results in bankruptcies. This
results in people losing money (all of those savers who have been socking
their money away in banks). But a lot of institutions in China are state
owned, so it's possible that they could prop up these institutions. No one
really knows what that would look like, or how it would impact the economy,
but the assumption is you will have a lot of zombie companies that only exist
because the government is making good on their debt obligations.

~~~
SeeDave
Thank you for sharing, especially your concerns centered around government
intervention in case things go south.

From my understanding, capital outflows seek higher returns in foreign markets
which would eventually (in theory) be repatriated to drive eventual
consumption. If the Yuan is strengthened, would this not make foreign produced
goods cheaper to consume within the country? Would it truly be a "crash" if
goods are consumed domestically instead of shipped to foreign countries?
Considering the high savings rate, could these accelerated savings be used to
purchase productive foreign assets?

Strange times, to say the least.

~~~
shostack
My understanding from what I've read is that the capital outflows aren't just
seeking higher returns in foreign markets. Instead, they are also seeking to
protect that money from an expected economic collapse in China and lord knows
what means of trying to claw that capital back by the government.

So I'm not sure a strengthening Yuan would necessarily remove the need for
that reduction of risk.

~~~
pyoung
That is my understanding as well. These aren't your typical international
investments, the goal is to get the money out of China entirely.

Worth noting, China is also trying to limit international investments (in
addition to capital flight mentioned above) to try and encourage domestic
investments[1]. If I had to pick one sign that there might be trouble ahead,
it would be this one. It's one thing to try and clamp down on people dodging
capital controls, but it's another thing entirely to try and limit
international investments that would broaden China's economic footprint.

And one final thought. While there are some troubling signs, no major modern
economy is or has been as tightly controlled as China's. So I don't think
anyone really knows how this will play out. It's quite possible that they
thread the needle and keep everything rolling smoothly. And as others
mentioned in this thread, there are plenty of examples in history where
massive infrastructure investments caused some big financial pain/failures in
the short term, only to result in positive long term impacts. It's quite
possible that China is playing the long game here, ready to suffer some short
term pain, but looking 20-30 years down the road. As their economy matures,
infrastructure projects will get more expensive (see the US for example), so
might as well overbuild now.

[1] [https://www.theguardian.com/business/2016/dec/26/china-to-
re...](https://www.theguardian.com/business/2016/dec/26/china-to-rein-in-
foreign-investment-as-domestic-growth-stalls)

------
leoedin
A lot of the UK's railways were built on the back of a private investment
bubble in the 19th century. Many of the schemes were caught up in corruption
and many of the investors lost money.

[https://en.wikipedia.org/wiki/Railway_Mania](https://en.wikipedia.org/wiki/Railway_Mania)

Looking back though, those investments were absolutely without doubt a net
positive for the country. It's hard to even quantify the benefit having 10,000
miles of railways cut through the country has brought us over the 150 years
since. Building even a few hundred miles of railway now is extraordinarily
expensive and mired in all sorts of legal issues.

I'm sure not all of these big infrastructure projects will succeed, but I bet
they will be a net positive over the long term.

~~~
FullMtlAlcoholc
> A lot of the UK's railways were built on the back of a private investment
> bubble in the 19th century.

A lot of the internet infrastructure was built out during the bubble period of
the late 90's / early 2000's

------
holydude
I am not an economist but I suspect China's debt might not be such a big
problem....until it is. But China is too big to fail and before it hits China
hard the world will try to save what it can so it wont hit others as well. Ah
the beauty of globalization.

~~~
adventured
In an economy the size and importance of China, what happens is protracted
stagnation due to the debt, rather than a Venezuela style meltdown. China is
repeating, almost perfectly, the Japan-scenario, with a similarly predictable
outcome.

~~~
yourapostasy
> China is repeating, almost perfectly, the Japan-scenario, with a similarly
> predictable outcome.

My imperfect understanding of China is stagnation is tantamount to ouster of
the Politburo members, or at least the Standing Committee; they will go to
great lengths to avoid that outcome during their tenure. From what I've read,
the population supports the political and economic _status quo_ so long as
there is relatively discernible economic improvement decade-over-decade. If
that is true, then a 3+ decade stagnation scenario might be difficult to
sketch out, though the US middle class is going on 4+ decades of stagnation
now [1], so perhaps that same scenario is possible in China, given enough
variety of distractions from the general trend line.

China's infrastructure build-out will also lag behind the economic effects to
follow by many years. I personally think it will eventually prove prescient,
creating new markets for China's industrial output in the coming centuries,
but it won't come without its own set of challenges. If China pulls a wildcard
move like monetizing infrastructure debt, holding out promises of enormous
growth on the back of that infrastructure, then they can perhaps forestall
stagnation far longer than anyone anticipates currently.

[1] I've yet to see a credible rebuttal to the assertion of middle class
stagnation that accounts for not just health insurance, land, and education
inflation, but also terms and conditions inflation like smaller quantities for
same price, or less or lower-quality health insurance coverage for same price,
or inferior ingredients substitution for the same price, or better supply
chain logistics yet still shipping enriched flour, for example.

------
pmurT
And we in the US struggle with getting anything built for less than eye
watering sums - does anyone remember the recent bay bridge saga? Corruption,
incompetence, etc?

~~~
seanmcdirmid
> And we in the US struggle with getting anything built for less than eye
> watering sums - does anyone remember the recent bay bridge saga?

You mean the one partially built by the Chinese?

[http://www.nytimes.com/2011/06/26/business/global/26bridge.h...](http://www.nytimes.com/2011/06/26/business/global/26bridge.html)

Also, don't assume those bridges are built particularly well and will last for
a long time. The Chinese have their own fair share of corruption,
incompetence, etc...

~~~
austinz
Yeah, except for the facts that the leaky bolts that were the primary source
of consternation last year (?) weren't part of the Chinese-built part of the
bridge.

~~~
seanmcdirmid
The problem with the welds in the Chinese part of the bridge came much earlier
in the bridge building process:

[http://media.sacbee.com/static/sinclair/sinclair.jquery/bayb...](http://media.sacbee.com/static/sinclair/sinclair.jquery/baybridge/index.html)

Overall, it looks like the Chinese didn't do that bad of a job here.

------
pmoriarty
Can someone who knows more about economics than I do explain to me how China
can be in debt while itself being the largest holder of American debt at the
same time?

Don't the debts at least cancel out, or has China really borrowed more than
the US borrowed from it? Or does this all only really matter on paper, but
somehow in the real world it doesn't at all?

~~~
mevile
If you read the article it mentions that local governments borrow from
government owned banks. Perhaps that explains some of it.

~~~
pmoriarty
So is this a case of merely moving money from one pocket to another? Or are
local governments actually independent of China's allegedly totalitarian
central government?

~~~
NikolaeVarius
We do the exact same stuff.

[http://money.cnn.com/2016/05/10/news/economy/us-debt-
ownersh...](http://money.cnn.com/2016/05/10/news/economy/us-debt-
ownership/index.html)

Also as for holders of debt. Japan beats China

[http://money.cnn.com/2016/12/16/investing/china-japan-us-
deb...](http://money.cnn.com/2016/12/16/investing/china-japan-us-debt-
treasuries/index.html)

------
mschuster91
China does this for one reason: jobs, jobs, jobs. Infrastructure buildup (and
maintenance) is surprisingly labor-intensive and so China trades (mostly
internal) debt to build long-term-valuable infrastructure plus relieving job
market stress.

The current Chinese model of exporting infrastructure (financing, materials
and laborers usually come from China) is also quite interesting and fits in
the same long-term worldview: they build trains and road infrastructure across
all of Africa.

Most people think it's a waste of money, but they ignore that China is on
track to prop up Africa, so that African countries can actually buy stuff once
orders from the European and US markets fade (be it due to Trump protectionism
or simple market saturation).

All in all, the Chinese government is probably the one single government in
the world that actually looks into the future and not just to the next quarter
financials (or the next elections).

------
vxxzy
I've read that China is building massive infrastructure in Africa[1]. Are they
doing this to have other sources of export? Think about this, America may
eventually lessen consumption and as such, China will need some way to pay
back/down debts. We may see China unload and drop US treasury notes when/if
American consumption slows/halts. If China has other markets to consume their
exports, then they will be safe. Does this scenario seem realistic?

[1] [https://www.fastcompany.com/3050167/in-africa-chinese-
develo...](https://www.fastcompany.com/3050167/in-africa-chinese-developers-
are-building-a-mini-china)

~~~
swuecho
obviously.

------
randyrand
> Its cost, $300 million

For a 1.4 mile bridge 100 meters off the ground? That is a fucking steal. How
do they pull this off?

~~~
HCIdivision17
I didn't have an intuition for this, so I took a shot in the dark as a
baseline. Wolfram Alpha suggests that the Golden Gate bridge was about $350M
in modern money, and given length and height, I'd say they're pretty
comparable. They're both within probably $25M of what you'd sort of expect of
each other, with the Golden Gate being a little longer (0.3 miles) and the one
you're referencing is much lower (GG is 120m higher).

Now, I'd guess there's some debate if the Golden Gate was worth it, but I
think in the long run these sorts of things define regions and become
essential.

EDIT: Noting I already did the 1930s money conversion.

~~~
swuecho
it worth 350M in modern money does not mean you can build it today with 350M.

~~~
HCIdivision17
To be sure - and in fact people seem to debate the idea that the same bridge
would even be built _at all_ these days. It was apparently quite the political
undertaking.

------
TaylorGood
Substantial amounts of overbuild in villages and creating new villages i.e.
Apartment towers due to developers wanting to use credits offered by the
government.

Source: was in mainland China recently

------
taobility
each time US news talking about China's infrastructure, I am thinking about
Seattle area's ST3 project. It's basically build 62 miles light rail with $54
Billion projected budget and 25 years construction phase. How it could be so
expensive and take so long time? Isn't that a huge corruption with a legal
name?!

