
How China Fooled the World [video] - denzil_correa
http://www.bbc.co.uk/programmes/b03w7gxt
======
bobjordan
An American ex-pat in China here. I came to China during the economic crash in
2009 and have seen it all progress the last 5 years.

Yes there are random empty apartment buildings and a few absurdities like -->
[http://en.wikipedia.org/wiki/New_South_China_Mall](http://en.wikipedia.org/wiki/New_South_China_Mall).

However, overall the infrastructure they have built has put this country in a
position to achieve dominant superpower status over the next century.

For example, within 5 more years the entire of Guangdong Province will be
connected by high speed rail and subway - meaning 100 million people and
businesses will be connected by public transit with no more than a 2 hour
ride. There is already a critical mass of manufacturing capability here, and
with that added layer of network infrastructure, even if labor costs rise 100%
YOY to match USA and Germany in a decade, Guangdong China will still be the
worlds factory.

Furthermore, the internal consumption machine of 1.3B people is undeniably
ramping up now. They are spending money, the largest middle class on the
planet is clearly taking shape, and lives are measurably improving all around
me.

There may be a few bumps in the road but there will be no collapse.

~~~
riggins
_overall the infrastructure they have built has put this country in a position
to achieve dominant superpower status_

the claim that infrastructure spending leads to economic prosperity/dominance
sounds pretty extraordinary to me.

~~~
ekianjo
> the claim that infrastructure spending leads to economic
> prosperity/dominance sounds pretty extraordinary to me.

Isn't it what the US has been claiming all the time? With the FDR New Deal
theory ?

~~~
AJ007
This is what Japan has been doing since their dominance in the 1980's fizzled
out. In both the US/FDR case and Japan's, I believe the infrastructure
spending was seen as a way to re-ignite growth while also creating something
long lasting.

There certainly is some truth to the long lasting piece. A country with poor
infrastructure will have a very difficult time growing. What is controversial
is building things either few people use or are far more expensive than they
should be. On the flip side, infrastructure has to be serviced to remain
viable. In addition to using money that is "borrowed" one way or the other,
the maintenance cost is created as well. Easy to get carried away.

~~~
ekianjo
Oh, I'm not saying that I embrace the theory (I actually am against such
policies - most of the times they are used to get people re-elected), but I
was just mentioning it's still being regarded as a valid way of creating jobs
and stimulating the Economy by numerous economists.

------
tokenadult
How many of the people commenting here read the Chinese-language press? (I
mean, publications in the Chinese language from either inside or outside the
region where the Communist Party of China exercises prior restraint on
publication.) The one thing I've learned from studying the language, history,
and culture of China since 1975 is that almost everyone who doesn't know the
language is full of crazy ideas about China, even if they live there.

~~~
LiweiZ
Native Chinese here. I guess the best way is to apply those better tools for
thinking to the Chinese context. To be honest, I don't think there is much
information in Chinese politics and economy worth reading. The tools we use
are outdated. The information(meta data) we can get is actually very limited
and very distorted. The knowledge and how people perceive the world are far
behind those in developed countries. When cheap labour becomes less and less
competitive, things will go south. Domestic consumer market growth does have a
chance to save us, that was what I thought the best way out when I was
younger. But that would never happen, when you have some understanding how the
nation's stakeholders operate. This is a topic that is too big to discuss
here. I do believe, sadly, there is a long dark road ahead for most of people
in my country. I wish not but from where I can see I'm quite pessimistic on
this. Just my 2 cents.

~~~
ekianjo
> Domestic consumer market growth does have a chance to save us, that was what
> I thought the best way out when I was younger. But that would never happen,
> when you have some understanding how the nation's stakeholders operate. This
> is a topic that is too big to discuss here.

I understand you do not want to discuss it here, but can you briefly explain
why this would never happen ? This is a very interesting point.

~~~
LiweiZ
One dimension you can look into is the percentage the county's administrators
get from average people's income and their consumption. I don't know if there
is anything public in English. But I can tell you it's very very high. And the
social safe net is not reliable in the long run. That's why people need
savings in the bank.

Another key dimension is to have some knowledge about the party that rules
China. As an organization, it is quite efficient in some straightforward
tasks. However, sometimes there are tasks that require more advanced way to
organize people. Any organization has its limitation. And most organizations
have very limited capability to adapt/evolve. The way to form the organization
is the biggest obstacle. Once this is understood, everything becomes clear.

Sorry that I have not given a clear answer but some clues. The tools I
recommend are some basic understanding of concepts in organization behavior,
complex system(such as complexity theory), Austrian school economics and, of
course, some history of the party, how it operated economically from its early
days.

No need to get deep in the tools I listed, just have some ideas of how they
perceive the world. These tools are not perfect. But with them, we may have a
better view of the thing we want to know. Hope this helps.

------
__pThrow
It seems as though China is undergoing a Keynesian expansion. So I'm probably
wrong about that. I'm going to watch to see if I can figure out the difference
between what they seem to trying to say is a problem due to massive government
spending and Keynesism.

Or are they saying "too much" Keynesism is a bad thing?

Okay, these seem to be the main differences and concerns I am getting from
this vid.

    
    
      1. Many loans eventually come via a shadow banking system
         and so are not transparent, ie, no one know how much is
         loaned and regulation is poor, this could lead to a
         huge credit crunch, and China's own too big to fail  
      2. Some large amount of housing is speculative in nature
         and kept empty as an investment and hence could be
         causing an enormous bubble
      3. This real estate bubble brings benefits to rich but
         doesn't improve the economy for the poor
      4. The boom has made the local authorities very rich and
         powerful (political corruption, crony capitalism, ...)
      5. The sheer size of it is unprecedented in modern
         financial history
      6. Citizens save too much (1/3rd of earnings). So economy
         is dangerously unbalanced, fueled by debt spending and
         not enough by consumer spending or shopping (41:10)
      7. Investment is 50% of economy, consumption 30%, so when
         investment slows down, it can't be replaced with 
         consumption. Credit is at a level of twice the size
         of the economy.
      8. State owned companies are filled with inefficiencies.
         "Shaking" them up would leave huge numbers of people
         unemployed.
      9. There is beginning to be a fear of collapse (that
         could lead to collapse.)
     10. Punk Rock pointing out corruption in the system
         and how the rich are getting richer.
     11. Hard to see further economic reform without political
         reform, yet it seems that Chinese are intent on
         not reforming their political system further.
    

Recommendations to balance economy:

    
    
      1. China needs to become more like us and consume more 
         themselves.

------
radicaldreamer
Full Episode on YouTube:
[http://www.youtube.com/watch?v=YW3h4wv8_ko](http://www.youtube.com/watch?v=YW3h4wv8_ko)

Edit: see subsequent comments for a better quality video

~~~
MrHeartBroken
The aspect ratio on that link seems a bit off. This one showed up in the
suggested videos and has the correct aspect ratio.
[https://www.youtube.com/watch?v=HUSjMnmS5lI](https://www.youtube.com/watch?v=HUSjMnmS5lI)

------
zmanian
My interpretation is that China did the heavy lifting of pulling the world out
of the last crisis. Neither the US nor Germany had the political wherewithal
to do large scale stimulus and/or structural reform. The Chinese also had the
most to loose.

The cost of propping up the global economy had been highly damaging to China's
weak institutions if we are lucky it will recover in 20 years. If we are
unlucky there will be a partial collapse.

~~~
adventured
Not sure what you're talking about. The exact opposite is true. The US
_massively_ stimulated, including running up about $10 trillion in new federal
public debt alone, which was a form of deficit stimulus. The Fed of course has
been running hundreds of billions in annual stimulus.

I'd roughly estimate that the total US stimulus in all forms, from the
treasury to the fed, totaled $15 to $20 trillion (some of which was repaid, eg
loans to european banks, or the AIG and Fannie bailouts, or GM etc). That's
two to three times the size of the entire Chinese economy.

That new federal debt paid federal salaries, contractors, welfare, social
security, you name it. Those people then purchased hundreds of billions of
dollars worth of Chinese goods.

"U.S. Bailout, Stimulus Pledges Total $11.6 Trillion"

[http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aZchK...](http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aZchK__XUF84)

The Fed kept the entire global financial system solvent during the crash. They
lent huge sums to European banks.

"the central bank lent billions to foreign banks that operate in the U.S.,
including Germany's Deutsche Bank Securities, which got $290 billion in
mortgage securities; London-based Barclay's, which received a $47.9 billion
loan; France's BNP Paribas Securities, Switzerland's UBS Securities LLC and
Daiwa Securities America, a subsidiary of one of Japan's largest brokerage
houses."

[http://www.foxnews.com/politics/2010/12/02/federal-
reserve-l...](http://www.foxnews.com/politics/2010/12/02/federal-reserve-
loaning-trillions-foreign-banks-financial-crisis/)

~~~
zmanian
Quantitative Easing has been large but it drove investment mostly in emerging
markets and not in the US.

Neither fiscal or monetary stimulus is effective in a post industrial economy
like the US.

Structural reform like patents, immigration, occupational licensing, taxes etc
are where the big stimulus lies unfortunately.

~~~
adventured
You're contradicting your own statement then.

You said China did the heavy lifting regarding pull the global economy out of
the crash, then you say that Fed QE drove growth in emerging markets.

All that stimulus drives massive consumption, which bolsters global
manufacturing. And you ignored the part where the Fed kept the entire first
world solvent during the crash, that alone is more than China did.

And the US is hardly post-industrial. It's the world's largest manufacturer
(yes, larger than China).

------
bwangsta
I have lived in Shanghai for the past 3 years but I also lived here from
2001-2002. Back then, there were buildings constructed that were totally empty
and it seemed ridiculous to think anyone would live in those distant
undeveloped areas. Fast forward a decade and now Shanghai has 20 metro lines
instead of two, with each metro station under a sprouting mini-city, complete
with its own H&M, Burger King and Starbucks. It seems like the urban planners
strategically placed them all perfectly close to each other, like settlements
in Civ. The condos that stood empty 12 years ago are now at full capacity and
people are moving even further out into the exurbs where more empty buildings
await them. The energy and buzz in Shanghai is just as palpable as it was 12
years ago and although there are some ghost cities and failed projects across
greater China, the megalopolises will easily compensate for them. The United
States has its share of empty, abandoned cities (Detroit, anyone?) but when
you visit San Francisco or Manhattan, you would not know it.

------
contingencies
About time for an HN China meetup? Who wants to come visit Yunnan for some
clean air and nature? :)

~~~
seanmcdirmid
The last time I was in Kunming, the air wasn't exactly clean.

~~~
contingencies
Sure, Kunming is the provincial capital so a worst case example. The rest of
the province is pretty damn clean, and being semi-rural to outright wilderness
much cleaner in most cases than western cities. Personally I'm on the next
lake over...
[https://en.wikipedia.org/wiki/Lake_Fuxian](https://en.wikipedia.org/wiki/Lake_Fuxian)
... it's like Kunming 15 years ago. We still have horse-drawn carts, and you
can go fishing, horseriding, or paragliding with ease. We also have some of
the oldest fossils in the world, a submerged neolithic village and a not-so-
secret Chinese navy submarine testing base.

~~~
seanmcdirmid
What kind of tech work can you do in Lake Fuxian? Or are you doing remote? If
remote, then ya, there are a lot of nice places in China to hang out in,
though personally I would pick Bali or Thailand.

Kunming was ok 12 years ago. I'm getting old though.

~~~
contingencies
I work remotely for Silly-Valley and change bases frequently. This is just one
of them. Bali is too crazy-drinking or hooneymooner for my meetup tastes, and
Thailand while safe enough does still mean a new visa run for a lot of people,
which is why keeping any potential meetup in China might be nice. I too was in
Kunming from ~2001, however I am definitely not getting any older!

~~~
seanmcdirmid
China has been cracking down on visas lately also...I'm not sure I would pick
China if I could go anywhere, it is more expensive than the alternatives, and
I still feel like I'm crossing into the developed world when I fly to Thailand
or even the Philippines. And still no Chai Tea Lattes at starbucks (though
Indonesia doesn't have them either).

I'm dreaming about moving to India, but I like my current job too much, and my
next move is probably back to the states to settle down.

------
mytoaster
It's probably a good idea to try to quantify the actual _scale_ of what is
happening.

[http://www.zerohedge.com/news/2013-11-26/chart-day-how-
five-...](http://www.zerohedge.com/news/2013-11-26/chart-day-how-five-short-
years-breakneck-liquification-china-humiliated-worlds-centr)

------
gscott
China owns part of many industries, Governments that start having issues start
selling their stakes and come up with plenty of money. Like everyone I am
fascinated with China building new cities where no one lives, but they are
going to totally get away with it and come out the other side unharmed.

~~~
yourapostasy
I saw an explanation somewhere for the ghost cities. The CCP realizes that
construction labor there is currently very cheap, land is cheap (in terms of
political capital to displace people --- wealthier citizens will make it more
expensive to displace them), and materials are relatively cheap. As they
develop further, all three cost inputs will only get more expensive. So the
CCP is deliberately allowing the rapid development of these projects in
anticipation of the massive shift from rural to urban population migrations
over the next several decades. If the CCP is trying to stem catastrophic
inflation when the mass migration hits a peak, then these ghost cities can in
retrospect appear a prudent, long-range measure.

There are also also quirks of the Chinese property market [1] and mass media's
penchant for sensationalism that might more reasonably explain the ghost city
phenomena.

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

~~~
seanmcdirmid
A lot of this opportunistic construction isn't done very well, and often its
just a form of money laundering (build this, charge a lot, do a very crappy
job, lots of pockets are padded). Many of these buildings will be torn down
before they are ever used; every few months there is a scandal where this
actually happens.

~~~
AJ007
Are there any statistics of buildings collapsing? I've seen the "tipped over
building" picture, and heard some other sketchy stories but its all anecdotal.

~~~
seanmcdirmid
If statistics exist, I'm sure they are covered under the state secrets law.

------
emersonrsantos
[http://en.wikipedia.org/wiki/Superdollar](http://en.wikipedia.org/wiki/Superdollar)

------
yawniek
isn't chinas foreign debt still net negative? if so, wouldn't be the obvious
strategy be to start outsourcing the debt as the US did? we possibly have a
few more years and as poulson said, there are quite capable people steering
the ship.

------
airjd
China is too big to collapse, but maybe four years later!

------
snorkel
Yeah, yeah, pee pee in the coke, we know already.

------
marukokinno
Every year , for the last 20 years, many articles say that we can be sure of
the imminent Chinese economy collapse. Then every year they are proven wrong.
This is just one more of these articles. The guys have no idea what they are
talking about. The education effort is as huge as the infrastructure building
effort, and it will bring its benefits. At some point the growing will slow
down; at some point it will be 1% yearly growth; but a political collapse is
very unlikely, and economic collapse is even more unlikely.

~~~
seanmcdirmid
Hey, back in 2007 someone wrote:

Every year, for the last 20 years, many articles say that we can be sure of an
imminent housing crash. Then every year they are proven wrong. This is just
one more of these articles.

... Bubbles are bubbles until they pop. A lot of infrastructure in China is
under utilized, and let's not even get started on empty shopping malls and
apartment buildings, even here in Beijing!

Whether the government can pull off a soft landing is up for debate, but every
year with people, local governments, and companies become more leveraged, not
less, I think a hard landing is more likely.

Now, if that happens, this doesn't necessarily mean that the government
collapses, but many of the bandits who are making out on this have gotten
their money out of the country, and a correction is more likely to negative
effect those who didn't really benefit in the gorging. And if that happens,
the CCP (many whose relatives have already fled abroad) is going to be facing
a lot of pissed off nongming.

~~~
marukokinno
chinese dont live on credit like americans, they live for saving. The
financial market is slightly more regulated than the american financial
market, aswell.

~~~
seanmcdirmid
Exactly. Most of the money is kept in saving accounts with interest rates that
are far below inflation. And what do you think the banks are doing with that
money?

