
China’s State-Driven Growth Model Is Running Out of Gas - JumpCrisscross
https://www.wsj.com/articles/chinas-state-driven-growth-model-is-running-out-of-gas-11563372006?mod=rsswn
======
deehouie
For those who have not followed US media coverage of China, this a very
enlightening piece : The Land that Failed to Fail.

[https://www.nytimes.com/interactive/2018/11/18/world/asia/ch...](https://www.nytimes.com/interactive/2018/11/18/world/asia/china-
rules.html)

I recall the New York Times, WSJ, and particularly Bloomberg from 2011 to 2014
have run uncountable number of articles unanimously, unequivocally predicting
the collapse of the Chinese economy. I really hate to use the word "western
media bias", but if you look at the facts, it's hard to see otherwise.

~~~
tepidandroid
And The Economist. Can’t forget The Economist’s constant and sustained death
knelling over China’s economy over the years.

I just file all these away along with the other 8447372 similar articles
predicting the imminent collapse of China.

~~~
deehouie
Can you pls post some links. I'm a die-hard collector of these articles.

~~~
tepidandroid
They are mentally filed away, so I don't have them off-hand sorry :)

But it was largely due to their lack of credibility on China that I had to
unsubscribe. Open up any Economist article on China and you'll quickly see
what I mean.

------
ajflores1604
This video from last year was pretty eye opening to me. Shows uninhabited
"new" ghost cities completely crumbling. There's no underlying value to the
property bubble going on over there and the scale seems mind blowing.

[https://youtu.be/XopSDJq6w8E](https://youtu.be/XopSDJq6w8E)

~~~
jdietrich
A lot of "ghost cities" that were reported on in the Western press are now
thriving communities. Although some major property development schemes do end
up becoming white elephants (particularly in the poorer north), most "ghost
cities" aren't abandoned, they're just in the process of becoming occupied.
Properties in China are normally sold as a bare undecorated shell, which makes
new developments look derelict to western eyes. Clearly many of these projects
are of dubious quality, but that problem is by no means unique to China.

[https://blogs.wsj.com/chinarealtime/2013/09/24/chinas-
ghost-...](https://blogs.wsj.com/chinarealtime/2013/09/24/chinas-ghost-cities-
may-not-be-so-spooky/)

[https://www.theguardian.com/money/2017/apr/02/new-build-
home...](https://www.theguardian.com/money/2017/apr/02/new-build-homes-
reputation-problems-developers)

[https://www.bbc.co.uk/news/business-47826166](https://www.bbc.co.uk/news/business-47826166)

~~~
realusername
> Clearly many of these projects are of dubious quality, but that problem is
> by no means unique to China.

The cases I saw were more than dubious quality, the houses have completely
fallen apart in only 2 years, there's definitely some "get rich quick" resell
scam business going on in some places.

------
gcatalfamo
I was in China last month. Running out of gas is not exactly the analogy I
would’ve chosen to describe the most thriving economy I have ever seen.

As a side note, I have visited many companies while there and the Tencent HQ
was the most awe-inspiring building, leaving the Bay Area architecture and
building amenities looking incredibly dull.

~~~
goatinaboat
How much of China did you see? You could not gain a meaningful understanding
of even a much smaller country from visiting a single city. E.g. NYC is not
America, so Shenzen is not China.

~~~
gcatalfamo
I saw Beijing, Shanghai, Shenzhen and collaterally, Hong Kong and it was for
business. Yes there were things I saw that showed the inherent poorness of the
population but the overwhelming power of the industrial ecosystem and overall
progress of the country despite “zero privacy” was breathtaking.

I have been talking with local about the privacy thing which was super
interesting but it’s off topic here.

------
wp381640
Funny comment I saw on Twitter: you know things are really bad in China when
even their own made-up figures aren't great

------
stunt
Maybe a fun fact.

A Chinese colleague of me was telling me how much money is going out with
every wave of western media coverage on China’s future. They become worried
and they invest abroad by buying assets or sending their children.

Then I saw some articles blaming Chinese buyers causing housing market issue
in other parts of the world like Sydney, London, and Vancouver.

Remind me how everything is connected and how hard is to see the consequences
of other actions.

~~~
dageshi
I don't honestly blame them. Getting money and people out of a country is
always going to be easier in the good times than the bad.

------
vajaya
China collapse has been predicted by china expert for at least 2 decades. I
don't understand why people can still be this delusional at this moment.

~~~
pnathan
This is my strong takeaway on China economy articles- most are enormously
_wrong_ in their predictions, and not simply in a few random details;
fundamentally they have been wrong about the China system collapsing for
_years and years and years_.

I mean, sure, some day things will change substantially - change happens and
the decades of doomsays will claim they were right all along. But that's
stopped clock thinking. :-/

------
haunter
Every time I read about China I never know it's just western propaganda or not
(true vice versa ofc)

~~~
AFascistWorld
There's never a crisis until the crisis actually hits.

~~~
chillacy
Till then make ad revenue off clicks on the future crisis.

------
coliveira
China's GDP is growing at 6.3%. What was the last time the US grew at even
close to that rate?

~~~
nordsieck
> China's GDP is growing at 6.3%.

It's not clear to me the extent one can trust the official numbers from China.

~~~
RidingPegasus
Would you like to provide some evidence to the contrary for that or just a
general "It's probably not true"?

You could say the same about Western government debt that's creatively
accounted, unemployment rates which avoid underemployment/participation and
inflation which desperately needs to remain low to keep bond rates from
bankrupting public balance sheets.

~~~
metildaa
China has been cooking the books on their GDP for years:
[https://geopoliticalfutures.com/china-admits-its-
statistics-...](https://geopoliticalfutures.com/china-admits-its-statistics-
are-wrong/)

~~~
RidingPegasus
I'm talking about this figure. Asking for evidence to the contrary that it's
not 6.3%. If so what do you think it is? 3%? 2%? Perhaps 6.1%?

[https://www.bloomberg.com/news/articles/2019-01-25/china-
s-l...](https://www.bloomberg.com/news/articles/2019-01-25/china-s-latest-
official-gdp-report-is-accurate-no-really)

~~~
Fjolsvith
Newer research says it could be half the 6.3%.

[https://www.brookings.edu/wp-
content/uploads/2019/03/bpea_20...](https://www.brookings.edu/wp-
content/uploads/2019/03/bpea_2019_conference-1.pdf?mod=article_inline)

[https://www.scmp.com/economy/china-
economy/article/2189245/c...](https://www.scmp.com/economy/china-
economy/article/2189245/chinas-gdp-growth-could-be-half-reported-number-says-
us)

~~~
RidingPegasus
Thanks, which page or figure on the Brookings pdf should I be looking at?

~~~
Fjolsvith
Try page 1:

"China’s national accounts are based on data collected by local governments.
However, since local governments are rewarded for meeting growth and
investment targets, they have an incentive to skew local statistics. China’s
National Bureau of Statistics (NBS) adjusts the data provided by local
governments to calculate GDP at the national level. The adjustments made by
the NBS average 5% of GDP since the mid-2000s. On the production side, the
discrepancy between local and aggregate GDP is entirely driven by the gap
between local and national estimates of industrial output. On the expenditure
side, the gap is in investment. Local statistics increasingly misrepresent the
true numbers after 2008, but there was no corresponding change in the
adjustment made by the NBS. Using publicly available data, we provide revised
estimates of local and national GDP by re-estimating output of industrial,
construction, wholesale and retail firms using data on value-added taxes. We
also use several local economic indicators that are less likely to be
manipulated by local governments to estimate local and aggregate GDP. The
estimates also suggest that the adjustments by the NBS were insufficient after
2008. Relative to the official numbers, we estimate that GDP growth from
2008-2016 is 1.7 percentage points lower and the investment and savings rate
in 2016 is 7 percentage points lower."

------
Animats
China seems to have found a workable system. It's not Marxist. It's not
entirely capitalist. It's not democratic. But it has done pretty well.

Arguably, China has a more effective system of capital investment than the US
does. The financial sector in the US is sort of a self perpetuating money
machine, only vaguely connected to actually making stuff. (The biggest use of
corporate debt is stock buybacks, for example.) That's not the case in China.

The US doesn't have an explicit industrial policy because the political system
is too gridlocked to run one. China does. So does Japan, although less so than
in the days of MITI. (The US does have an industrial policy, expressed through
the tax code: services good, manufacturing bad. Borrowing good, dividends bad.
Those are probably backwards.)

------
Leary
Can someone tell me how the WSJ arrived at $13,888.96 for China's GDP per
capita in 2018? Did they just make it up?

~~~
khuey
It's probably a roundish estimate multiplied by an exact exchange rate to USD.

I wonder if they still teach significant figures in schools.

EDIT: It also seems high unless they're using some sort of purchasing power
adjustment.

------
hashberry
China is a fascinating experiment of modern state capitalism. But it is also
reliant on globalism, and a recession crisis will be felt globally.

~~~
crimsonalucard
The globe is reliant on globalism, china is not unique in this case.

------
TaylorAlexander
The Wall Street Journal declares state Communism a failure.

------
chewz
> Based on household surveys, the poverty rate in China in 1981 was 63% of the
> population. This rate declined to 10% in 2004, indicating that about 500
> million people have climbed out of poverty during this period. [1]

> As of June 2016, the IMF warned the United States that its high poverty rate
> needs to be tackled urgently by raising the minimum wage and offering paid
> maternity leave to women to encourage them to enter the labor force.[21] In
> December 2017, the United Nations special rapporteur on extreme poverty and
> human rights, Philip Alston, undertook a two-week investigation on the
> effects of systemic poverty in the United States, and sharply condemned
> "private wealth and public squalor", declaring the state of Alabama to have
> the "worst poverty in the developed world".[22] Alston's report was issued
> in May 2018 and highlights that 40 million people live in poverty and over
> five million live "in ‘Third World’ conditions."[23]

[1]
[https://en.wikipedia.org/wiki/Poverty_in_China#Poverty_reduc...](https://en.wikipedia.org/wiki/Poverty_in_China#Poverty_reduction)

[2]
[https://en.wikipedia.org/wiki/Poverty_in_the_United_States](https://en.wikipedia.org/wiki/Poverty_in_the_United_States)

