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I read another comment on HN about this recently. Their explanation was that it's due (at least in part) to the high savings rate of the Chinese compared to the
by grardb 10y ago
I read another comment on HN about this recently. Their explanation was that it's due (at least in part) to the high savings rate of the Chinese compared to the USA (and other countries, I guess)[1]. The idea is that when people are stashing their money into bank accounts, the banks have a lot more money to work with.
For example, Americans will use their money to buy cars. The Chinese would save their money, and the banks can use that money to fund transit projects.
I don't know how true this is, but it makes sense in my brain. I'd love to do more reading about this as well. If it's true, that makes it mildly frustrating to me, since I save a lot of my income and refuse to own a car; I don't get any extra public transit out of that, though!
[1] http://www.cnbc.com/2015/10/25/china-savings-rate-versus-the-world-in-a-chart.html http://www.cnbc.com/2015/10/25/china-savings-rate-versus-the...
- rahimnathwani 10y agoIf you are interested in this, I highly recommend 'The Great Rebalancing' by Michael Pettit. He explains the causes and implications of China's high savings rate, and the relationship with other countries' savings rates. His explanation of the causality is contrary to most of what you will have read in the popular press.
- selimthegrim 10y agoSurely you mean Michael Pettis?
- rahimnathwani 10y agoYes, sorry! Too late to edit.
- skybrian 10y agoI don't believe it's a lack of money. There's no shortage of investors looking to make money in the U.S, and we have very low interest rates. If people aren't investing, it's because they don't think they can make a profit. So I believe the real question is, why is it thought to be a money-loser? And somehow, Chinese investors seem not to care that much about profits? It's unclear how much of these is foolishness versus vision versus corruption. In any case, lots of great infrastructure gets built by companies that go bankrupt. From the point of view of someone who didn't finance it, maybe it doesn't matter whether it's a smart move or not.
- Zach_the_Lizard 10y agoThe US has laws against bribing foreign governments or officials. You can be punished in America for it, adding an extra layer of risk on top. Considering this sort of corruption is required to do business in these places, it effectively bars Americans from competing. The idea behind it is if we don't incentivize corruption, it will go away. Needless to say, it didn't work, as it takes only one person to spoil it. It's a prisoner's dilemma game where only some players get punished