
Zombie Factories Stalk the Sputtering Chinese Economy - MarkMc
http://www.nytimes.com/2015/08/30/business/international/zombie-factories-stalk-the-sputtering-chinese-economy.html?hp&action=click&pgtype=Homepage&module=first-column-region&region=top-news&WT.nav=top-news
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PeterisP
One significant way where a free market economy has an advantage in efficient
resource allocation over a planned economy is not the priority allocation of
resources to successful enterprises/groups/economic niches (both styles can do
that), but a rapid, ruthless deallocation of resources from unsuccessful
enterprises, so they can then be used elsewhere. Planned economies _could_ do
that in theory, but this has always been their weak point in practice.

Bankruptcies are an important instrument for the overall health of the
economy. Yes, there is a short term hurt during the reallocation. But if many
companies are in trouble keeping afloat, then a few of them sinking will free
up resources (workers, capital, materials, land/buildings) so those resources
are cheaper for the remaining, slightly more successful companies, allowing
them to come back above water.

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conceit
How do you think is planned economy unable to direct this effect? Maybe random
faults even out arbitrary bias that would be introduced by regulation. How is
a government spending tons on military not partially a planned economy?

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PeterisP
Planned economy _might_ direct this effect, but they don't - if the system
gives leaders an option to prolong the agony, then they invariably use it, and
the system suffers from it.

For examples in planned economies, USSR had a lot of examples, and this
article is another. For examples in otherwise-freemarket-but-not-in-this-case
economies, see "too big to fail" situation with bank bailouts, and your own
example on USA military industrial complex - where failed projects get propped
up instead of allowing them to die as they should, thus in the end harming the
long-run perspective in the whole sector.

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tim333
I kind of lived through this effect with the decline of the British coal
industry which was nationalised at the time. It became uncompetitive mostly
because British coal was hard to get at compared to say open pit mining in
Australia, so money was lost on each ton dug up. But the argument against
closing it was the miners needed jobs, it was hard for them to switch to other
work, sacking them would kill the economy in mining towns and so on. It was
easier for the government to pay the losses from taxes on the general
population who didn't complain very much, than to fire a bunch of miners who
would complain very loudly. And who did of course when Thatcher eventually
fired them.

With hindsight it would have been better for the industry to decline gradually
than laying off everyone at once.

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aurelianito
Reading it reminded me of the articles in the same tone that were written
against Argentina, also asking for more misery for the people here. They were
wrong. Argentina recovered from e 2001 crisis by kicking the IMF out of the
country. The IMF uses this kind of discourse to oppress countries. I hope
China's government will be wise enough to not let the IMF bankrupt them.

~~~
adventured
Argentina didn't recover by kicking the IMF out. Their growth over that time
is almost identical to Chile and Brazil. It began at the exact same time all
economies began expanding, including Colombia, Peru, and Ecuador as well. The
expansion was a macro effect, not something Argentina did.

Worse, Argentina's GDP has hardly moved in 20 years on an inflation adjusted
basis. Their debt is soaring faster than during the 2001-02 crisis. [1] Last
year their economy had 40% to 60% inflation [2], and is in dire condition. I'd
say Argentina is doing a fine job of bankrupting itself. I'm just wondering
who they're going to blame this time. [3]

[1]
[http://www.bloomberg.com/news/articles/2015-06-01/argentina-...](http://www.bloomberg.com/news/articles/2015-06-01/argentina-
is-racking-up-debt-even-faster-than-during-its-2001-2002-crisis)

[2]
[http://www.bloomberg.com/news/articles/2015-03-07/argentina-...](http://www.bloomberg.com/news/articles/2015-03-07/argentina-
economy-can-t-take-40-percent-inflation-massa)

[3] [http://www.bloomberg.com/news/features/2015-07-17/-no-why-
ar...](http://www.bloomberg.com/news/features/2015-07-17/-no-why-argentina-
refuses-to-pay-its-debts)

~~~
ghaff
This article from The Economist a while back [1] gives what seems to be a
pretty good rundown of Argentina's rather sad economic and political history.

[1] [http://www.economist.com/news/briefing/21596582-one-
hundred-...](http://www.economist.com/news/briefing/21596582-one-hundred-
years-ago-argentina-was-future-what-went-wrong-century-decline)

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contingencies
Wow, yet _another_ anti-China article from NYT. I can't get over the volume
and frequency. Things look pretty good on the ground here!

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seanmcdirmid
Yes, if you get all your news from xinhua then it definitely looks much more
negative. But NYT is great if you want to know more than what the government
wants you to know; the government doesn't block NYT because they are wrong!

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IIAOPSW
The fact that the person above wrote in English and is on this site means they
are likely an expat/ABC. Thus your accusation that they get all their news
from xinhua is a laughable ad hominid.

~~~
seanmcdirmid
It's evening in China right now, I assume everyone in the USA is still asleep.
Why would parent not be in china, there are plenty of Chinese in China who
speak English well enough, I work with them. Of course, the poster could be in
Europe, but what does it matter?

Compare say china daily (an English version of xinhua mostly) to NYT, and
you'll see a vast difference on bias and reporting standards, where NYT is
vastly more professional than the shill Chinese press. So taken like that, why
would parent think NYT was lying unless they had something else to compare it
to; i.e. the CPC's word that the economy is fine and nothing is wrong?

There are plenty of problems in the Chinese economy...why not report them?

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IIAOPSW
Here's a quick (terse) summary of what happened up-thread:

"I'm physically in China and I find that the NYT reports on China often don't
match the reality that I see." "Shut up xinhua shill"

Comparing the quality of xinhua and NYT is completely tangential to the point
I was trying to make. I'm not saying we can't or shouldn't have a serious
discussion about China. I am saying that such a conversation is not happening
here. I expect better than this HN.

~~~
gress
How does the contigenics 'see' the lack of zombie factories? Are they flying
in a helicopter to fact-check the NYT? I think not.

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peter303
Sounds like the US oil industry. Many wells that should be shut down as
uneconomical at current oil prices are still producing. This is to service an
estimated $150 billion in loans from banks and hedge funds.

~~~
bpodgursky
Just because it's uneconomical to drill a well at a given price doesn't mean
it's not profitable at the margin to keep pumping from it, given that the
drilling is a sunk cost.

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fredgrott
So basically they need to invest in the economy they cannot plan for
consumer..

the only similar case Germany during WWII 250% or more debt over GDP but GDP
was not expanding due sole effort on military building

