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I think this is a reasonable article about China. When people think about China they tent to assume that China is somewhat similar to a western country going t

by chvid 11y ago

I think this is a reasonable article about China. When people think about China they tent to assume that China is somewhat similar to a western country going thru the afterwards of some sort of overheated boom. Say the US from 2002 to 2007 and the big recession of 2008-2010. But China is not mature and developed like the west. Sure the east coast has nice modern cities which look like the cities of any Western country. But large parts of the country are still poor, rural and remote. When construction goes on here, a modern road is built where there was nothing before cutting the transport time between two cities from 5-10 hours to 1 hour. Houses are built for people to work in the city doing high-productive factory jobs where they before were doing small-time farming in the country side. This is a massive lift in real economic activity which can finance a lot of debt. Completely incomparable to the expansion of credit to low-income families to finance housing that gave the boom in the US and other western countries from 2002 to 2007. Secondly there is a now huge upper middle class who are travelling the world, sending their kids to Australia or US for study and still buying Apple products. They are not going away. And ultimately they will change China into something more driven-by-internal-demand, civic, modern ... even democratic.

thkim 11y ago
I agree - China is NOT going through the same trajectory as developed countries. China's population is multiple times greater, which creates far greater segmented market and demand. World is also going through information technology revolution -- explosive increase in productivity, extremely pace of information dissemination. It's just not the same and nobody can be sure what it's going to be like.
- TheLogothete 11y ago
  >World is also going through information technology revolution -- explosive increase in productivity I thought so too. But it doesn't seem to be the case. Growth in productivity has been in steep decline over the last 50 years. http://www.economist.com/node/21695071 http://www.economist.com/node/21695071
seanmcdirmid 11y ago
> Sure the east coast has nice modern cities which look like the cities of any Western country. Not really. I mean, there is shanghai and shenzhen, but the rest of eastern china is very much like... > But large parts of the country are still poor, rural and remote. Infrastructure has definitely gotten better, but a lot of capital has also been sunk into white elephant projects and... > Houses are built for people to work in the city doing high-productive factory jobs where they before were doing small-time farming in the country side. Those aren't the houses that are being built though, rather they are focusing on luxury apartments that migrant workers will never be able to afford. > This is a massive lift in real economic activity which can finance a lot of debt. If the debt was spent wisely, yes. But a lot of the ventures are dubious (lux apartments), farmers still can't mortgage their land or acquire urban hukou anyways, and wealth descrepency is only getting worse. > Completely incomparable to the expansion of credit to low-income families to finance housing that gave the boom in the US and other western countries from 2002 to 2007. Agreed. Those kind of people would never get a loan in China. The money has been mostly lent out to those with power and connections, a lot of that money won't be repaid because it was invested very unwisely. > Secondly there is a now huge upper middle class who are travelling the world, sending their kids to Australia or US for study and still buying Apple products. They are not going away. Uhm, ya, well, they aren't leaving the planet, but many of them are definitely leaving china. What do you think that apartment in Vancouver they bought is for?
Spooky23 11y ago
I think the tinder that fuels China "bears" is the pretty obvious capital flight from China to basically any hard asset. In the backwater city where I live, Chinese investment funds are buying mid rise, 80% vacant mid-rise office towers with cash in small cities. We've seen this movie before... Back in the 80s it was called "Japan". Everyone was making money, Japanese investors were spending billions on real estate, brands, etc. The ending didn't go so well.
- shostack 11y ago
  What was the outcome on overseas real estate from Japanese investors? Capital flight from China is impacting US real estate prices (particularly in the Bay), so I'm curious what we can learn about possible real estate scenarios over here should China implode. My current thinking is that capital outflows will increase the worse the situation gets until China cracks down in a major way, or they are tapped dry.
  - gozur88 11y ago
    The Japanese bought up US commercial real estate like crazy leading up to 1989. Then they cashed out after the bubble popped. They lost their collective shirt, too, because of the way the timing worked out.
- chvid 11y ago
  Yes. That is true. But China is no where near where Japan was in 1990. You can see that if you compare GDP pr. capita figures.
  - maaku 11y ago
    Not sure why that figure is relevant? Apples to oranges here.
- delecti 11y ago
  When the 80s ended I was 2. What happened when that ended with Japan? I'm genuinely not being sarcastic, I wouldn't have the faintest idea where to start looking for an answer to that question otherwise.
emodendroket 11y ago
> And ultimately they will change China into something more driven-by-internal-demand, civic, modern ... even democratic. I'm not so sure, although we've been hearing it for years. If anything, China's reign in Hong Kong shows that people are more or less willing to put up with autocracy as long as material conditions are good, and that's in a population accustomed to a more free society.

by chvid 11y ago

thkim 11y ago

I agree - China is NOT going through the same trajectory as developed countries. China's population is multiple times greater, which creates far greater segmented market and demand. World is also going through information technology revolution -- explosive increase in productivity, extremely pace of information dissemination. It's just not the same and nobody can be sure what it's going to be like.

TheLogothete 11y ago
>World is also going through information technology revolution -- explosive increase in productivity I thought so too. But it doesn't seem to be the case. Growth in productivity has been in steep decline over the last 50 years. http://www.economist.com/node/21695071 http://www.economist.com/node/21695071

seanmcdirmid 11y ago

> Sure the east coast has nice modern cities which look like the cities of any Western country. Not really. I mean, there is shanghai and shenzhen, but the rest of eastern china is very much like... > But large parts of the country are still poor, rural and remote. Infrastructure has definitely gotten better, but a lot of capital has also been sunk into white elephant projects and... > Houses are built for people to work in the city doing high-productive factory jobs where they before were doing small-time farming in the country side. Those aren't the houses that are being built though, rather they are focusing on luxury apartments that migrant workers will never be able to afford. > This is a massive lift in real economic activity which can finance a lot of debt. If the debt was spent wisely, yes. But a lot of the ventures are dubious (lux apartments), farmers still can't mortgage their land or acquire urban hukou anyways, and wealth descrepency is only getting worse. > Completely incomparable to the expansion of credit to low-income families to finance housing that gave the boom in the US and other western countries from 2002 to 2007. Agreed. Those kind of people would never get a loan in China. The money has been mostly lent out to those with power and connections, a lot of that money won't be repaid because it was invested very unwisely. > Secondly there is a now huge upper middle class who are travelling the world, sending their kids to Australia or US for study and still buying Apple products. They are not going away. Uhm, ya, well, they aren't leaving the planet, but many of them are definitely leaving china. What do you think that apartment in Vancouver they bought is for?

Spooky23 11y ago

I think the tinder that fuels China "bears" is the pretty obvious capital flight from China to basically any hard asset. In the backwater city where I live, Chinese investment funds are buying mid rise, 80% vacant mid-rise office towers with cash in small cities. We've seen this movie before... Back in the 80s it was called "Japan". Everyone was making money, Japanese investors were spending billions on real estate, brands, etc. The ending didn't go so well.

shostack 11y ago
What was the outcome on overseas real estate from Japanese investors? Capital flight from China is impacting US real estate prices (particularly in the Bay), so I'm curious what we can learn about possible real estate scenarios over here should China implode. My current thinking is that capital outflows will increase the worse the situation gets until China cracks down in a major way, or they are tapped dry.
- gozur88 11y ago
  The Japanese bought up US commercial real estate like crazy leading up to 1989. Then they cashed out after the bubble popped. They lost their collective shirt, too, because of the way the timing worked out.
chvid 11y ago
Yes. That is true. But China is no where near where Japan was in 1990. You can see that if you compare GDP pr. capita figures.
- maaku 11y ago
  Not sure why that figure is relevant? Apples to oranges here.
delecti 11y ago
When the 80s ended I was 2. What happened when that ended with Japan? I'm genuinely not being sarcastic, I wouldn't have the faintest idea where to start looking for an answer to that question otherwise.

emodendroket 11y ago

> And ultimately they will change China into something more driven-by-internal-demand, civic, modern ... even democratic. I'm not so sure, although we've been hearing it for years. If anything, China's reign in Hong Kong shows that people are more or less willing to put up with autocracy as long as material conditions are good, and that's in a population accustomed to a more free society.