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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. Eve

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?
  - seanmcdirmid 10y ago
    Good question. The right aways are important and quite persistent, but the bridges and tack will need to be maintained/rebuilt/upgraded periodically no matter how much they are used.
- soperj 10y ago
  How is very lightly used? There were 1.1 billion trips made on High Speed Rail in China in 2015.
  - seanmcdirmid 10y ago
    If you only know the top number but not the bottom one, you can't really compute utilization. Also, spring festival (Chinese new year) means much of the utilization comes "all at once", so the trains are packed for a few weeks each year, but can be much more empty the rest of the year. Anyways, it isn't as simple as laying more tracks between cities.
    - _coldfire 10y ago
      A solid overview of Chinese HSR: http://www.railjournal.com/index.php/high-speed/chinese-high-speed-an-evaluation-of-traffic.html http://www.railjournal.com/index.php/high-speed/chinese-high... >In 2013, Chinese high-speed traffic reached 214 billion passenger-km, slightly more traffic than the rest of the world's high-speed networks combined >the CRC network is already one of the most densely used in the world, with robust growth between 2009 and 2013. Overall passenger traffic grew by 5.5% per year during this period reaching 2.1 billion passengers or 1060 billion passenger-km in 2013. Railfreight grew by 6% per year to 3.6 billion tonnes, or 2633 billion tonne-km in 2013. These are large volumes compared with the size of the network (103,100km in 2013).
      - seanmcdirmid 10y ago
        http://www.rediff.com/business/report/pix-beijing-shanghai-bullet-train-worlds-most-profitable-high-speed-rail/20160720.htm http://www.rediff.com/business/report/pix-beijing-shanghai-b... > Although the railway authority has said that the Beijing- Shanghai high-speed railway was the only profitable high-speed rail in China in the past five years, some believe that other lines in densely-populated and developed regions will likely become profitable soon. Only Beijing to Shanghai is making a profit ATM (flying is still cheaper on that route, but airport delays are way too bad).
- crdoconnor 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. They're still saving and those savings keep a lid on Chinese inflation which makes projects like this affordable. >China desperately needs for its consumers to actually consume to move away from an export oriented economy, which is especially sensitive to trade friction. There's a lot of talk in the CCP about shifting China's economy to becoming more consumer driven but there isn't a lot of appetite to actually do the things which would make that happen - namely some sort of social security/nationalized health insurance system. The Chinese will thus continue to be terrified of getting old and sick and will and save accordingly, and those savings will no doubt continue to get recycled into projects like this as well as subsidizing state run SMEs with cheap loans.
  - seanmcdirmid 10y ago
    I agree with this. Savings keep a lid on inflation but also distort money supply and demand, just like the real estate bubble distorts supply and demand for housing. A lot of distortions with temporary fixes to keep things going. 2017 will be very interesting. Can't wait to see what happens in Tuesday.
- onlyrealcuzzo 10y ago
  I've always wondered about that oft cited savings rate. How is it even calculated? I worked at a startup trying to generate credit scores for a significant portion of Chinese citizens. Unless our company was completely incompetent, it was pretty ingrained in us that the majority of people in China either don't have access to banking or choose not to bank. Also, it seemed like the vast majority of Chinese citizens lived paycheque to paycheque. So how does one calculate this savings rate figure? Is it just the difference between earnings and expenditures of the entire country?
hourislate 10y ago
> Savings have to go somewhere They sure do and you only have to look at Australia, US, and Canada where it ends up. The Chinese keep most of their money in either cash or real estate. They don't trust banks.
bogomipz 10y ago
>"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." Have you been to Beijing recently? I can assure you the Chinese worker is also buying a car. China has the highest automative sales of anywhere on the planet. Here is some data: https://www.bloomberg.com/news/articles/2016-12-08/china-wraps-up-26th-straight-car-sales-record-with-month-to-go https://www.bloomberg.com/news/articles/2016-12-08/china-wra... http://www.chinadaily.com.cn/business/motoring/2016-01/26/content_23253925.htm http://www.chinadaily.com.cn/business/motoring/2016-01/26/co... http://www.accessmagazine.org/articles/fall-2012/will-chinas-vehicle-population-grow-even-faster-forecasted/ http://www.accessmagazine.org/articles/fall-2012/will-chinas...
- dmoy 10y ago
  > Have you been to Beijing recently? Yes, and if you talk to most people, they can't dream of affording a car, let alone in Beijing. It's insanely expensive, not even including the permit[1]. Maybe if you're in Beijing talking to rich people or just looking at the traffic in abject horror, it looks like everyone is buying cars. China, per capita, has like one fifth or one sixth as many cars as the US. There's like one car per 10 people. [1] and by permit I don't mean the actual cost of getting a Beijing plate through normal channels (which has like a <0.2% chance of actually working due to the lottery). I mean if you actually want to guarantee that you get a car, be prepared to grease the wheels with lots of money. Shit idk how that even works with Xi Jinpings rampage against corruption, I don't think they've gotten that low of a level yet (still going after higher-ups).
  - seanmcdirmid 10y ago
    Per capita is correct. There are really two Chinas, a richer china that consumes a lot and saves comparatively little, and a commoner class that has no choice but to keep saving. If you want to get a permit in Beijing and have money, buy a Tesla. The quota for elctric vehicles is higher than for gas, so you see a lot of rich people in Teslas these days, something unthinkable only a couple of years ago.
  - 10y ago
vadym909 10y ago
<the Chinese worker makes a deposit in a bank > From what I've heard, banks make loans to friends and politically connected to invest in projects who also siphon a lot of the money away- and when the project fails, the loans are written off. Which is why the public doesn't trust their money with the banks anymore.
- seanmcdirmid 10y ago
  Ya, lending is very biased in china, especially from the big banks. Not just to connected peoples, but to zombie SOEs.
- fennecfoxen 10y ago
  This is the sad thing about China's boom: it's paid for by the common worker, but it all ends up owned by the richest of the rich. It's a plutocrat's dream.
  - caminante 10y ago
    You'll "love" this [0]. Another top official in the Railways Ministry, Zhang Shuguang, was also sacked for corruption. Zhang was estimated to have misappropriated to his personal overseas accounts the equivalent of $2.8 billion. [0] https://en.wikipedia.org/wiki/High-speed_rail_in_China#Corruption_and_concerns https://en.wikipedia.org/wiki/High-speed_rail_in_China#Corru...
slv77 10y ago
Every RMB in someone's savings is offset by another RMB of someone else's debt. The savings rate isn't really as relevant as how productively that savings is utilized by the debtor on the other side of that balance sheet. For example I can save 50% of my income but if i lend to a 90 year old who uses it to fund an elaborate funeral my savings means little. Other metrics in China suggest that a lot of investment in China since 2008 hasn't been productive. This pattern isn't limited to China but is common in every country who has gone through rapid debt expansion including the US. Finding productive investments takes work and talent and economies have natural limits on investment opportunities that aren't purely monetary.

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?
- seanmcdirmid 10y ago
  Good question. The right aways are important and quite persistent, but the bridges and tack will need to be maintained/rebuilt/upgraded periodically no matter how much they are used.
soperj 10y ago
How is very lightly used? There were 1.1 billion trips made on High Speed Rail in China in 2015.
- seanmcdirmid 10y ago
  If you only know the top number but not the bottom one, you can't really compute utilization. Also, spring festival (Chinese new year) means much of the utilization comes "all at once", so the trains are packed for a few weeks each year, but can be much more empty the rest of the year. Anyways, it isn't as simple as laying more tracks between cities.
  - _coldfire 10y ago
    A solid overview of Chinese HSR: http://www.railjournal.com/index.php/high-speed/chinese-high-speed-an-evaluation-of-traffic.html http://www.railjournal.com/index.php/high-speed/chinese-high... >In 2013, Chinese high-speed traffic reached 214 billion passenger-km, slightly more traffic than the rest of the world's high-speed networks combined >the CRC network is already one of the most densely used in the world, with robust growth between 2009 and 2013. Overall passenger traffic grew by 5.5% per year during this period reaching 2.1 billion passengers or 1060 billion passenger-km in 2013. Railfreight grew by 6% per year to 3.6 billion tonnes, or 2633 billion tonne-km in 2013. These are large volumes compared with the size of the network (103,100km in 2013).
    - seanmcdirmid 10y ago
      http://www.rediff.com/business/report/pix-beijing-shanghai-bullet-train-worlds-most-profitable-high-speed-rail/20160720.htm http://www.rediff.com/business/report/pix-beijing-shanghai-b... > Although the railway authority has said that the Beijing- Shanghai high-speed railway was the only profitable high-speed rail in China in the past five years, some believe that other lines in densely-populated and developed regions will likely become profitable soon. Only Beijing to Shanghai is making a profit ATM (flying is still cheaper on that route, but airport delays are way too bad).
crdoconnor 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. They're still saving and those savings keep a lid on Chinese inflation which makes projects like this affordable. >China desperately needs for its consumers to actually consume to move away from an export oriented economy, which is especially sensitive to trade friction. There's a lot of talk in the CCP about shifting China's economy to becoming more consumer driven but there isn't a lot of appetite to actually do the things which would make that happen - namely some sort of social security/nationalized health insurance system. The Chinese will thus continue to be terrified of getting old and sick and will and save accordingly, and those savings will no doubt continue to get recycled into projects like this as well as subsidizing state run SMEs with cheap loans.
- seanmcdirmid 10y ago
  I agree with this. Savings keep a lid on inflation but also distort money supply and demand, just like the real estate bubble distorts supply and demand for housing. A lot of distortions with temporary fixes to keep things going. 2017 will be very interesting. Can't wait to see what happens in Tuesday.
onlyrealcuzzo 10y ago
I've always wondered about that oft cited savings rate. How is it even calculated? I worked at a startup trying to generate credit scores for a significant portion of Chinese citizens. Unless our company was completely incompetent, it was pretty ingrained in us that the majority of people in China either don't have access to banking or choose not to bank. Also, it seemed like the vast majority of Chinese citizens lived paycheque to paycheque. So how does one calculate this savings rate figure? Is it just the difference between earnings and expenditures of the entire country?

hourislate 10y ago

> Savings have to go somewhere They sure do and you only have to look at Australia, US, and Canada where it ends up. The Chinese keep most of their money in either cash or real estate. They don't trust banks.

bogomipz 10y ago

>"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." Have you been to Beijing recently? I can assure you the Chinese worker is also buying a car. China has the highest automative sales of anywhere on the planet. Here is some data: https://www.bloomberg.com/news/articles/2016-12-08/china-wraps-up-26th-straight-car-sales-record-with-month-to-go https://www.bloomberg.com/news/articles/2016-12-08/china-wra... http://www.chinadaily.com.cn/business/motoring/2016-01/26/content_23253925.htm http://www.chinadaily.com.cn/business/motoring/2016-01/26/co... http://www.accessmagazine.org/articles/fall-2012/will-chinas-vehicle-population-grow-even-faster-forecasted/ http://www.accessmagazine.org/articles/fall-2012/will-chinas...

dmoy 10y ago
> Have you been to Beijing recently? Yes, and if you talk to most people, they can't dream of affording a car, let alone in Beijing. It's insanely expensive, not even including the permit[1]. Maybe if you're in Beijing talking to rich people or just looking at the traffic in abject horror, it looks like everyone is buying cars. China, per capita, has like one fifth or one sixth as many cars as the US. There's like one car per 10 people. [1] and by permit I don't mean the actual cost of getting a Beijing plate through normal channels (which has like a <0.2% chance of actually working due to the lottery). I mean if you actually want to guarantee that you get a car, be prepared to grease the wheels with lots of money. Shit idk how that even works with Xi Jinpings rampage against corruption, I don't think they've gotten that low of a level yet (still going after higher-ups).
- seanmcdirmid 10y ago
  Per capita is correct. There are really two Chinas, a richer china that consumes a lot and saves comparatively little, and a commoner class that has no choice but to keep saving. If you want to get a permit in Beijing and have money, buy a Tesla. The quota for elctric vehicles is higher than for gas, so you see a lot of rich people in Teslas these days, something unthinkable only a couple of years ago.
- 10y ago

vadym909 10y ago

<the Chinese worker makes a deposit in a bank > From what I've heard, banks make loans to friends and politically connected to invest in projects who also siphon a lot of the money away- and when the project fails, the loans are written off. Which is why the public doesn't trust their money with the banks anymore.

seanmcdirmid 10y ago
Ya, lending is very biased in china, especially from the big banks. Not just to connected peoples, but to zombie SOEs.
fennecfoxen 10y ago
This is the sad thing about China's boom: it's paid for by the common worker, but it all ends up owned by the richest of the rich. It's a plutocrat's dream.
- caminante 10y ago
  You'll "love" this [0]. Another top official in the Railways Ministry, Zhang Shuguang, was also sacked for corruption. Zhang was estimated to have misappropriated to his personal overseas accounts the equivalent of $2.8 billion. [0] https://en.wikipedia.org/wiki/High-speed_rail_in_China#Corruption_and_concerns https://en.wikipedia.org/wiki/High-speed_rail_in_China#Corru...

slv77 10y ago

Every RMB in someone's savings is offset by another RMB of someone else's debt. The savings rate isn't really as relevant as how productively that savings is utilized by the debtor on the other side of that balance sheet. For example I can save 50% of my income but if i lend to a 90 year old who uses it to fund an elaborate funeral my savings means little. Other metrics in China suggest that a lot of investment in China since 2008 hasn't been productive. This pattern isn't limited to China but is common in every country who has gone through rapid debt expansion including the US. Finding productive investments takes work and talent and economies have natural limits on investment opportunities that aren't purely monetary.