NoOneOfAnyImport shared this.
I’ll just post the video, which was fascinating. I’d heard of China’s real-estate bubble before, but the scope of a booming but overbuilt real-estate sector is amazing. The video really made that starkly real. It’s the result of a centralized economy.
A few observations:
1. Clearly allocation of productive workers and resources is still not so good in a communist countries. Strong conservatives gleefully point this out.
2. If more of Chinese labor was occupied in manufacture for export the competition with US workers might be even more painful for us. Hooray for communism after all? Strong conservatives might be less gleefully about this. Overall though and in the long-run better use of Chinese productive capacity would benefit produce more benefits than costs. But workers in US manufacturing would be hurt.
3. This is a kind of stimulus on steroids. Keynesianism can produce full employment of a sort. People are employed, but not in making anything there’s any voluntary demand for, except for speculation. A point that isn’t useful to any one ideology.
4. Note though that apparently private investors are buying these empty pieces of real estate. In the end apparently, this may wipe out much of the new Chinese middle class. What happens if that happens?
5. China is still remarkably poor. At least partially a failure of socialism.
More on the subject here:
China is rife with overinvestment in physical capital, infrastructure, and property. To a visitor, this is evident in sleek but empty airports and bullet trains (which will reduce the need for the 45 planned airports), highways to nowhere, thousands of colossal new central and provincial government buildings, ghost towns, and brand-new aluminum smelters kept closed to prevent global prices from plunging.
Commercial and high-end residential investment has been excessive, automobile capacity has outstripped even the recent surge in sales, and overcapacity in steel, cement, and other manufacturing sectors is increasing further. In the short run, the investment boom will fuel inflation, owing to the highly resource-intensive character of growth. But overcapacity will lead inevitably to serious deflationary pressures, starting with the manufacturing and real-estate sectors.
Eventually, most likely after 2013, China will suffer a hard landing. All historical episodes of excessive investment – including East Asia in the 1990’s – have ended with a financial crisis and/or a long period of slow growth.