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China won't be able to afford this; China's pretty broke already in 2016. It's approaching 300% debt ratio in combined corporate + government + individual. It

China won't be able to afford this; China's pretty broke already in 2016. It's approaching 300% debt ratio in combined corporate + government + individual. Its gross reserve is down to 3T (IMF believes China needs at least 2.5T to operate). Its net reserve (gross - debt) is down to 1.7T. It had a capital outflow of 1T again in 2016. Yuan fell the most in 2016, since 1994. Next year, Japan/US/EU is going to impose import tariff on China, and further crash China's economy.

coldtea 10y ago
Don't hold your breath for al this "crash". US/EU are tied to China with very strong threads.
- djsumdog 10y ago
  Exactly. When you owe the bank a million, the bank owns you. When you owe the bank several billion, you own the bank.
  - beachstartup 10y ago
    this is such a tired internet cliche. in reality the bank will force you into bankruptcy, seize all your assets because they're at the top of the payback list, and blacklist you from ever running a business or borrowing money again. in other words, you lose.
    - evgen 10y ago
      Except if you owe the bank a billion it is unlikely you actually have a billion in assets they can get their hands on. A bank that tried this to someone who owed them that much would soon find the auditors coming to visit and setting up shop for quite a while. The former management of this bank that went bust and was shut down by banking regulators is unlikely to have much leverage when it comes to blacklisting you...
    - coldtea 10y ago
      >in reality the bank will force you into bankruptcy, seize all your assets because they're at the top of the payback list, and blacklist you from ever running a business or borrowing money again. You'd be surprised. People have recovered from such "bankcrupcies" time and again, including the current POTUS.
    - djsumdog 10y ago
      Collection of debt must be enforced by violence. Always. In developed countries we've scaled down the violence (we black list your credit, take your house and do not loan to you again instead of breaking your legs or killing your children), but there is still some level of violence. It's not a cliche. It's reality. If you loan someone an insane amount of capital and are dependent on a return on that capital to keep your bank solvent, you are now dependent on them (e.g. "To Big to Fail") for your own business to not collapse. Interestingly enough, you can only extend credit to someone if you consider them an equal, at least at first. Removing this equality is how you can turn a person into property. Debt and guilt are the same word in many languages (such as German) and debt has a large moral social construct attached to it (which is why people are hesitant to walk away from debt, even when the value of a house exceed what they'd pay on a load). I highly recommend reading the book Debt the First 5,000 Years. It's the most comprehensive book I've read on the history of money, debt and slavery. They are all very closely related, and it will change the way you look at states, money and markets.
kingkawn 10y ago
I think they're milking the western economic structure of as much resources as they can, and will re-pivot to an alternative economic model once they have exhausted the world's willingness to fund it all.
- coldtea 10y ago
  Milking the western economic structure? China doesn't operate as some charity receiver for the west. In fact it's the opposite, the west uses china for its hard labor and manufacturing tasks, and gets back products at a cheaper rate than itself can produce. There's no "world's willingless to fund it" involved, there's that the world pays China $20 and gets back goods it packages and resells to its people (e.g. from Apple to Lacoste) as $50 and $100 goods.
  - djsumdog 10y ago
    And at great cost. It's an easy way to offset environmental devastation. Granted it's localized in China to some specific areas, but those areas are polluted to the point of destruction.
stevenj 10y ago
Do you have sources for the above? I'd like to read about all of this.
tw04 10y ago
I think the US has proven that numbers on a spreadsheet mean literally nothing if you've got a strong enough military and control enough of the economic power of the globe. What are we going to do if they decide they're done being the US's manufacturing state? Like, if they literally halted all shipments to the US overnight. It would take us YEARS to rebuild in the US, and in the meantime people would be screaming bloody murder over here (I'm sure Walmart and Target would be thrilled to have bare shelves). It would collapse our economy as well.
- witty_username 10y ago
  But it would collapse China's economy too if it were done overnight.
  - coldtea 10y ago
    The US is 4% of the world. With other countries developing rich consuming middle classes, that might not be that certain, especially in the future.
    - davidmr 10y ago
      4% by population of course, which is what you meant, but I think 40% of the world by wealth. While I understand what you mean by saying there are new middle classes being created from the other 96%, it seems like, absent another even more catastrophic economic screwup than we put ourselves through 8 years ago, American domination of the world market isn't going anywhere any time soon.
      - coldtea 10y ago
        Well, let's hope it does. Other people need to get rich too.
      - eva1984 10y ago
        In terms of GDP, US is about 20-25% of the globe. It is pretty significant, but I won't go too far to say it has domination.
melling 10y ago
People have been saying China is going to crash for a couple of years now. I suppose if you say it every year, you'll eventually be right. All economies have downturns. However, they already have 12,000 miles (20,000 km) of hsr that carries over 1 billion passengers a year. Most of this was built in a little over a decade. So, it's not a stretch for them to continue at this pace. According to the WSJ, they've spent $120 billion in 2015 and 2016 on hsr. That means that spending is about the same until 2020. http://blogs.wsj.com/chinarealtime/2016/07/20/chinas-busiest-high-speed-rail-line-makes-a-fast-buck/ http://blogs.wsj.com/chinarealtime/2016/07/20/chinas-busiest... The 1.5 miles first stage of the 2nd Avenue Subway opens tomorrow. That took 9 years and $4 billion. My bet is that China will have 10,000 more miles of hsr before the rest of the 8.5 mile 2nd Ave Subway is finished
- ithinkinstereo 10y ago
  > People have been saying China is going to crash for a couple of years now. I suppose if you say it every year, you'll eventually be right. All economies have downturns. Actually people (especially those in the west) have been saying China is going to crash for a couple of _decades_ >The 1.5 miles first stage of the 2nd Avenue Subway opens tomorrow. That took 9 years and $4 billion. My bet is that China will have 10,000 more miles of hsr before the rest of the 8.5 mile 2nd Ave Subway is finished And this is exactly why it won't!
anton_tarasenko 10y ago
China's saving rate remains at 45% of GDP. Most other countries have it around 10-15%. Savings have to go somewhere, and this is why China accumulates debt. Every yuan of savings turns into one-plus yuan of debt. The current debt ratio adjusted for savings is comparable to the US's, for example. Unlike US, they put it into infrastructure because people don't spend growing income on consumption. To put it simply, the US worker gets a salary and buys a car, while the Chinese worker makes a deposit in a bank for a construction firm to borrow and build a railroad. Both cases describe transportation services, but they look very different in national accounts. As for the exchange rate, it's not that relevant for local investments since China's going to pay in yuans anyway.
- seanmcdirmid 10y ago
  That is a very old number and anyways only comes from consumers who are not consuming but saving for emergency health care, or increasingly unaffordable housing. China desperately needs for its consumers to actually consume to move away from an export oriented economy, which is especially sensitive to trade friction. So yes, you are talking about China's biggest problem (inability to consume what they produce) that even the Chinese leadership has acknowledged is a huge problem. Whether china can afford this or not is less relevant than "bang for the buck", china has already built out lots of HSR, some of it very lightly utilized (my own trip from Beijing to a city in south Hunan, the train was mostly empty most of the time). China builds mostly as a stimulus program, because if consumers aren't consuming its one of the only tools they have, but also focuses on flashy projects that they can brag about in articles like this. However, much of this infrastructure is going to be underutilized for decades, while really needed infrastructure, like adequate flooding drainage, doesn't provide enough "face" to be considered instead. So every year, we see pictures of flooded out cities...but at least you can get to them quickly on empty trains!
  - AJ007 10y ago
    Is that infrastructure going to still be standing in decades?
    - 10y ago
drawkbox 10y ago
True but it is better to go broke investing in creating and fixing internal systems and improvements than external or some war where you will be in debt for decades.
- deleted 10y ago
  [deleted]
- seanmcdirmid 10y ago
  Diminishing returns on infrastructure investment is a thing. Eventually you are just moving dirt between holes.
  - JoeAltmaier 10y ago
    Oh America at least has an immense infrastructure backlog. Roads, bridges, water systems. Especially water systems! They get neglected until they break, then its a five-alarm emergency to get the pumps going before everybody has a living room full of sewage. My relative worked at Crane Pumps for years; every order was a fix-on-failure emergency order. For pumps designs that went back 50 years - they were commonly pulling plans on paper out of drawers in storage rooms to match exactly the specs for some ancient pump in Pocatella or Poughkeepsie. When Obama had that shovel-ready infrastructure effort, they expected a big upswing in business. But nope; nothing. Probably because water systems are underground and invisible. They wanted splashey visible activity like road-building. Which IMHO accomplished exactly the opposite of what was intended - they built MORE infrastructure to support.
    - HillaryBriss 10y ago
      > ... they were commonly pulling plans on paper out of drawers in storage rooms to match exactly the specs for some ancient pump in Pocatella or Poughkeepsie. That is awesome. Thank you for the info. When a company like Crane Pumps goes out of business because cheaper imports take over its market, all that information (the paper plans from past pump designs) probably gets lost forever. Once the company folds, these small cities all over the country cannot replace their old pumps and instead have to upgrade the system to make it compatible with a new pump model. I wonder if global trade economists account for that additional cost to the customers when the old domestic supplier goes away.
pjc50 10y ago
> Next year, Japan/US/EU is going to impose import tariff on China, [citation needed]
- paganel 10y ago
  By looking at their economies I can say with certainty that Japan and the EU are nowhere close to imposing trade tariffs on anyone, they can't afford to. Maybe the US is willing to play these games hoping it would win some (geo-)political points, but at the end of the day is a lose-lose situation for all those involved.
caminante 10y ago
China won't be able to afford this; It doesn't need to. FTA: "The Chinese government will invite private investment to participate in funding intercity and regional rail lines" This is how Europe has been doing it despite heavy public debt. In this plan, China will setup public-private partnerships to raise capital. Also, the article also mentions functional privatization efforts, a new precedent for Chinese rail, which opens the door for more investor capital: "Earlier this year, China turned to a private company for first time to operate an inter-city rail service on the mainland"

coldtea 10y ago

Don't hold your breath for al this "crash". US/EU are tied to China with very strong threads.

djsumdog 10y ago
Exactly. When you owe the bank a million, the bank owns you. When you owe the bank several billion, you own the bank.
- beachstartup 10y ago
  this is such a tired internet cliche. in reality the bank will force you into bankruptcy, seize all your assets because they're at the top of the payback list, and blacklist you from ever running a business or borrowing money again. in other words, you lose.
  - evgen 10y ago
    Except if you owe the bank a billion it is unlikely you actually have a billion in assets they can get their hands on. A bank that tried this to someone who owed them that much would soon find the auditors coming to visit and setting up shop for quite a while. The former management of this bank that went bust and was shut down by banking regulators is unlikely to have much leverage when it comes to blacklisting you...
  - coldtea 10y ago
    >in reality the bank will force you into bankruptcy, seize all your assets because they're at the top of the payback list, and blacklist you from ever running a business or borrowing money again. You'd be surprised. People have recovered from such "bankcrupcies" time and again, including the current POTUS.
  - djsumdog 10y ago
    Collection of debt must be enforced by violence. Always. In developed countries we've scaled down the violence (we black list your credit, take your house and do not loan to you again instead of breaking your legs or killing your children), but there is still some level of violence. It's not a cliche. It's reality. If you loan someone an insane amount of capital and are dependent on a return on that capital to keep your bank solvent, you are now dependent on them (e.g. "To Big to Fail") for your own business to not collapse. Interestingly enough, you can only extend credit to someone if you consider them an equal, at least at first. Removing this equality is how you can turn a person into property. Debt and guilt are the same word in many languages (such as German) and debt has a large moral social construct attached to it (which is why people are hesitant to walk away from debt, even when the value of a house exceed what they'd pay on a load). I highly recommend reading the book Debt the First 5,000 Years. It's the most comprehensive book I've read on the history of money, debt and slavery. They are all very closely related, and it will change the way you look at states, money and markets.

kingkawn 10y ago

I think they're milking the western economic structure of as much resources as they can, and will re-pivot to an alternative economic model once they have exhausted the world's willingness to fund it all.

coldtea 10y ago
Milking the western economic structure? China doesn't operate as some charity receiver for the west. In fact it's the opposite, the west uses china for its hard labor and manufacturing tasks, and gets back products at a cheaper rate than itself can produce. There's no "world's willingless to fund it" involved, there's that the world pays China $20 and gets back goods it packages and resells to its people (e.g. from Apple to Lacoste) as $50 and $100 goods.
- djsumdog 10y ago
  And at great cost. It's an easy way to offset environmental devastation. Granted it's localized in China to some specific areas, but those areas are polluted to the point of destruction.

stevenj 10y ago

Do you have sources for the above? I'd like to read about all of this.

tw04 10y ago

I think the US has proven that numbers on a spreadsheet mean literally nothing if you've got a strong enough military and control enough of the economic power of the globe. What are we going to do if they decide they're done being the US's manufacturing state? Like, if they literally halted all shipments to the US overnight. It would take us YEARS to rebuild in the US, and in the meantime people would be screaming bloody murder over here (I'm sure Walmart and Target would be thrilled to have bare shelves). It would collapse our economy as well.

witty_username 10y ago
But it would collapse China's economy too if it were done overnight.
- coldtea 10y ago
  The US is 4% of the world. With other countries developing rich consuming middle classes, that might not be that certain, especially in the future.
  - davidmr 10y ago
    4% by population of course, which is what you meant, but I think 40% of the world by wealth. While I understand what you mean by saying there are new middle classes being created from the other 96%, it seems like, absent another even more catastrophic economic screwup than we put ourselves through 8 years ago, American domination of the world market isn't going anywhere any time soon.
    - coldtea 10y ago
      Well, let's hope it does. Other people need to get rich too.
    - eva1984 10y ago
      In terms of GDP, US is about 20-25% of the globe. It is pretty significant, but I won't go too far to say it has domination.

melling 10y ago

People have been saying China is going to crash for a couple of years now. I suppose if you say it every year, you'll eventually be right. All economies have downturns. However, they already have 12,000 miles (20,000 km) of hsr that carries over 1 billion passengers a year. Most of this was built in a little over a decade. So, it's not a stretch for them to continue at this pace. According to the WSJ, they've spent $120 billion in 2015 and 2016 on hsr. That means that spending is about the same until 2020. http://blogs.wsj.com/chinarealtime/2016/07/20/chinas-busiest-high-speed-rail-line-makes-a-fast-buck/ http://blogs.wsj.com/chinarealtime/2016/07/20/chinas-busiest... The 1.5 miles first stage of the 2nd Avenue Subway opens tomorrow. That took 9 years and $4 billion. My bet is that China will have 10,000 more miles of hsr before the rest of the 8.5 mile 2nd Ave Subway is finished

ithinkinstereo 10y ago
> People have been saying China is going to crash for a couple of years now. I suppose if you say it every year, you'll eventually be right. All economies have downturns. Actually people (especially those in the west) have been saying China is going to crash for a couple of _decades_ >The 1.5 miles first stage of the 2nd Avenue Subway opens tomorrow. That took 9 years and $4 billion. My bet is that China will have 10,000 more miles of hsr before the rest of the 8.5 mile 2nd Ave Subway is finished And this is exactly why it won't!

anton_tarasenko 10y ago

China's saving rate remains at 45% of GDP. Most other countries have it around 10-15%. Savings have to go somewhere, and this is why China accumulates debt. Every yuan of savings turns into one-plus yuan of debt. The current debt ratio adjusted for savings is comparable to the US's, for example. Unlike US, they put it into infrastructure because people don't spend growing income on consumption. To put it simply, the US worker gets a salary and buys a car, while the Chinese worker makes a deposit in a bank for a construction firm to borrow and build a railroad. Both cases describe transportation services, but they look very different in national accounts. As for the exchange rate, it's not that relevant for local investments since China's going to pay in yuans anyway.

seanmcdirmid 10y ago
That is a very old number and anyways only comes from consumers who are not consuming but saving for emergency health care, or increasingly unaffordable housing. China desperately needs for its consumers to actually consume to move away from an export oriented economy, which is especially sensitive to trade friction. So yes, you are talking about China's biggest problem (inability to consume what they produce) that even the Chinese leadership has acknowledged is a huge problem. Whether china can afford this or not is less relevant than "bang for the buck", china has already built out lots of HSR, some of it very lightly utilized (my own trip from Beijing to a city in south Hunan, the train was mostly empty most of the time). China builds mostly as a stimulus program, because if consumers aren't consuming its one of the only tools they have, but also focuses on flashy projects that they can brag about in articles like this. However, much of this infrastructure is going to be underutilized for decades, while really needed infrastructure, like adequate flooding drainage, doesn't provide enough "face" to be considered instead. So every year, we see pictures of flooded out cities...but at least you can get to them quickly on empty trains!
- AJ007 10y ago
  Is that infrastructure going to still be standing in decades?
  - 10y ago

drawkbox 10y ago

True but it is better to go broke investing in creating and fixing internal systems and improvements than external or some war where you will be in debt for decades.

deleted 10y ago
[deleted]
seanmcdirmid 10y ago
Diminishing returns on infrastructure investment is a thing. Eventually you are just moving dirt between holes.
- JoeAltmaier 10y ago
  Oh America at least has an immense infrastructure backlog. Roads, bridges, water systems. Especially water systems! They get neglected until they break, then its a five-alarm emergency to get the pumps going before everybody has a living room full of sewage. My relative worked at Crane Pumps for years; every order was a fix-on-failure emergency order. For pumps designs that went back 50 years - they were commonly pulling plans on paper out of drawers in storage rooms to match exactly the specs for some ancient pump in Pocatella or Poughkeepsie. When Obama had that shovel-ready infrastructure effort, they expected a big upswing in business. But nope; nothing. Probably because water systems are underground and invisible. They wanted splashey visible activity like road-building. Which IMHO accomplished exactly the opposite of what was intended - they built MORE infrastructure to support.
  - HillaryBriss 10y ago
    > ... they were commonly pulling plans on paper out of drawers in storage rooms to match exactly the specs for some ancient pump in Pocatella or Poughkeepsie. That is awesome. Thank you for the info. When a company like Crane Pumps goes out of business because cheaper imports take over its market, all that information (the paper plans from past pump designs) probably gets lost forever. Once the company folds, these small cities all over the country cannot replace their old pumps and instead have to upgrade the system to make it compatible with a new pump model. I wonder if global trade economists account for that additional cost to the customers when the old domestic supplier goes away.

pjc50 10y ago

> Next year, Japan/US/EU is going to impose import tariff on China, [citation needed]

paganel 10y ago
By looking at their economies I can say with certainty that Japan and the EU are nowhere close to imposing trade tariffs on anyone, they can't afford to. Maybe the US is willing to play these games hoping it would win some (geo-)political points, but at the end of the day is a lose-lose situation for all those involved.

caminante 10y ago

China won't be able to afford this; It doesn't need to. FTA: "The Chinese government will invite private investment to participate in funding intercity and regional rail lines" This is how Europe has been doing it despite heavy public debt. In this plan, China will setup public-private partnerships to raise capital. Also, the article also mentions functional privatization efforts, a new precedent for Chinese rail, which opens the door for more investor capital: "Earlier this year, China turned to a private company for first time to operate an inter-city rail service on the mainland"