7 ms·

China is still a developing nation. That means that China can invest in infrastructure (roads, trains, airports, education) which have high real return making

by chvid 8y ago

China is still a developing nation. That means that China can invest in infrastructure (roads, trains, airports, education) which have high real return making the increase in debt much less of a problem. This is also the reason why China has grown persistently 7-10% over the past two decades compared to USA which have grown 2-3% in the same period. Per person China's GDP is less than a fifth of the US hinting that this still has some way to go.

XorNot 8y ago
This is skirting around the edge of an important point: increase in absolute debt level is fine in any economy, what's potential trouble is changes in the rate of debt increase - specifically vs GDP growth - because it affects the total disposable income you have to service it. Where China has a risk is if they can't transition to a developed country's style of debt spending where GDP growth is much lower. It's also where endemic corruption becomes a big problem.
ihsw2 8y ago
Using per person GDP when discussing China is a cruel joke. Like most usages of per person GDP in any country, it glosses over regional disparities and (more importantly) economic equality measures like Gini coefficient. Taking Gini coefficient into consideration, China still has a long way to go.
- dpark 8y ago
  The point was that even based on GDP per capita, China still has a long way to go.
  - meiraleal 8y ago
    But the scale of China population is so that if they double their GDP per capita, they will have an upper and middle class population bigger than most if not all individual countries in the world (EDIT: except India).
- moorhosj 8y ago
  ==Taking Gini coefficient into consideration, China still has a long way to go.== So does the US [1]: The top 1 percent of earners in America now take home about 20 percent of the country’s pretax national income, compared with less than 12 percent in 1978, according to the research the economists published at the National Bureau of Economic Research. Over the same time in China, the top 1 percent doubled their share of income, rising from about 6 percent to 12 percent. [1] https://www.cbsnews.com/news/usa-china-income-inequality-economic-research/ https://www.cbsnews.com/news/usa-china-income-inequality-eco...
- dv_dt 8y ago
  At least China's Gini coefficient is going in the correct direction. The US's Gini has been getting worse all while we still have third-world conditions festering for far too long.
  - seanmcdirmid 8y ago
    China’s official GINI coefficient doesn’t include grey income (e.g. that official making 10k RMB/month yet driving a black Audi A9). Well, they stopped reporting it in the early part of this decade when it started getting really bad.
    - dv_dt 8y ago
      There are always reporting problems, especially tracking the wealth of the extreme rich. Estimates of hidden income and wealth are in the trillions. Gini in both China and the US are likely worse in actuality. But when you're in the middle of the process of converting your economy from rural to modern then it's much easier to swing the Gini change in the more equal direction. But because it's a different situation and harder to change in the US, doesn't mean we shouldn't be strongly aware of the implications of its worsening in the US.
      - seanmcdirmid 8y ago
        They stopped reporting their gini coefficient number altogether. There are no numbers after 2012. I lived in a Chinese first tier city for 10 years. Income inequality was much more obvious there than I ever saw in the states (even in the boonies of Mississippi). A lot of that was related to china’s caste/hukou system that basically denies social services to migrant workers. Yes, the USA has first world income inequality problems. But China has third world ones. The joke goes: the USA has so many homeless people, they are just everywhere! China has no homeless people, because the police beat them pretty harshly so they are either dead or really good at hiding.
- TallDave2 8y ago
  Gini implicitly assumes a flat distribution is desirable. Ask North Korea and Cuba how that works out. PPP GDP per capita is okay, but the PPP portion is rife with assumptions, some untenable. For instance, you really really don't want to live in a heavy industrial area in China, the air is like soup -- sometimes it pegs the AQI needle at 999. US hasn't ever had air that bad, even before the Clean Air Act.
Four_Star 8y ago
If the US decided to spend trillions of dollars a year building skyscrapers in Alaska it could be 'growing' at 7% a year too. http://www.businessinsider.fr/us/china-ghost-cities-satellite-images-2017-3 http://www.businessinsider.fr/us/china-ghost-cities-satellit...
- woah 8y ago
  If the US decide to spend trillions building skyscrapers its cities, then housing might be affordable
  - ythn 8y ago
    Housing in Alaska already is affordable...
    - seanmcdirmid 8y ago
      Not really. Alaska is damn expensive if you are used to lower 48 prices. That sky scraper in question was built for a small seaside village limited by land because they were stuck between a mountain and water. It was really a one off and I don’t think it contributed much to USA debt.
  - echochamberhn 8y ago
    Except that the ghost cities in China are of incredibly poor quality and falling apart a mere months after construction. Other than that, good point!
    - godzillabrennus 8y ago
      The USA has a bit more experience building high quality skyscrapers than China.
      - lancewiggs 8y ago
        How many has each country built in the last 10 years? China's industry has far far more experience building in the modern era.
zajd 8y ago
> China is still a developing nation. > That means that China can invest in infrastructure (roads, trains, airports, education) which have high real return making the increase in debt much less of a problem. What does that have to do with being a developing nation? The US could do the same.
- ChrisLomont 8y ago
  Adding infrastructure has a higher rate of return when there is less infrastructure to begin with. Adding one interstate highway system greatly increased US economic mobility. Adding a second would not have such benefit. So China, not having the infrastructure the US does, likely gets a benefit on doing projects that would be a loss in the US.
  - RobertoG 8y ago
    So, the reason because the US doesn't invest in infrastructure is because the ROI is not high enough?
    - AnthonyMouse 8y ago
      > So, the reason because the US doesn't invest in infrastructure is because the ROI is not high enough? The reason the US doesn't invest in infrastructure is because the benefits go to everyone instead of a specific party interested enough to lobby for it. The ROI is the much the same in the US as it is elsewhere, provided the investment is made where it's needed rather than on pork barrel projects. For example, the value of building a bridge is X, but that's also the value of maintaining/replacing it because if it collapses or has to be closed for safety reasons then you no longer have a bridge. Moreover, you can productively build things like new subway lines in cities that are growing because that's where the demand exists to justify the cost. The lobbying problem is where we've started to see this "public private partnership" scam show up. Then you have a specific party interested enough to lobby for it, but it's because they intend to rent seek on public infrastructure by taking the public's money and then putting up a gate and charging them a second time for admission. Because $100 is a lot, but if you pay $75 in taxes and $75 in tolls then it's less, right? And if that discourages productive use of sunk cost infrastructure and is a regressive tax on the poor, let's try not think too much about that.
Theodores 8y ago
China spend money on infrastructure, meanwhile in the West there is 'Quantitative Easing' with money going straight to the banks. As you state there is real return in infrastructure expenditure - roads, trains, airports, education is genuine investment. A business case can be made for putting in a new 300kmh train set that spans the country. Over in the West we don't get that, instead we have to pay untold billions to the banks because if we don't then the sky will allegedly fall in so we have to kick the can down the road. GDP is also a useless figure. If we all decide to decide that our houses are worth double what they were worth five years ago and go about buying and selling these crumbling piles of bricks then have we really increased GDP? If, on the basis of these increasing property values everyone remortgages and buys fancy German sportscars and monster SUVs then have we really increased GDP? I am sure there is plenty of hubris going on in the Chinese economy and that status anxiety drives people to buy pointless luxury goods as per what happens in America, however, GDP is not all it is cracked up to be and there is a big difference in debt used to build an economy compared to debt used to prop up the rent-seeking classes.
- icebraining 8y ago
  We have quite a few high-speed trains here in the West - you can go from Sevilla to Berlin or Napoli in them. I agree that the GDP is a flawed metric, though.
- gnarcoregrizz 8y ago
  I've heard their directed investments referred to as 'qualitative easing' https://blogs.wsj.com/chinarealtime/2014/08/11/how-chinas-trying-to-boost-its-economy-qualitative-easing/ https://blogs.wsj.com/chinarealtime/2014/08/11/how-chinas-tr.... Unfortunately in the US, like you said, it seems like a lot of the capital has gone into west coast real estate and the stock market. Why wouldn't it? It's a lot easier to make money from rents than to actually build things. I'm always awed by how much indirect ROI you can get from infrastructure, and I'm always disappointed in how bad the US is at it these days. I like to cite the hoover dam as a wildly successful infrastructure project - I visited it for the first time recently and learned that it was built for ~49M USD (639M USD in today's dollars). The indirect ROI on it is epic. It spawned Las Vegas and allowed other west coast cities to grow all along the southwest, not to mention the money it's made back in hydroelectric power and tourism. It did take a crisis (the great depression) to build it for so cheap though... The recession probably would have been a good time to do this stuff. Unfortunately, we got higher asset prices instead. As for the GDP, yeah, it's a poor measure of growth. Yay, homes are now twice as expensive and people are relatively poorer, but we've succeeded in meeting our growth target!
harias 8y ago
Chinas GDP is higher than that of the US if you take Purchasing power parity into account.[0] [0] - https://en.m.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP) https://en.m.wikipedia.org/wiki/List_of_countries_by_GDP_(PP...
- Retric 8y ago
  China has a huge population so Per person China's GDP is much lower even including PPP. Per capita GDP depends on things like natural resources and corruption levels. So China is likely to lag behind on that measure long term, still they plenty of room for improvement.
- seanmcdirmid 8y ago
  No it isn’t. Also, PPP is a dumb metric, many things in China beyond services and food are much more expensive than they are in the USA.
api 8y ago
The USA could be a developing nation too. We should be building our first settlements on the Moon and Mars right now, eliminating biological limitations like aging and various sources of heritable inequality, sending our first probes to nearby stars with a high probability of hosting living biospheres in habitable zones, wiring every address in the nation with low latency gigabit+ broadband, and upgrading our infrastructure to be fully renewable and post-carbon. That's a very incomplete list of actual first world problems. A "developed nation" should be called a "day two nation." See Jeff Bezos' excellent shareholder letters. A developed nation has a "day two mentality." No nation is developed but some are stuck. Part of the problem is that we compare ourselves to other nations and think "wow, we're awesome." We should ignore all other nations and think "what can we do now?" Unfortunately I'm not optimistic. The last election was a contest between a narcissistic reality TV star and a dull apparatchik with no vision. Our selection of such inferior representatives reflects our collective expectations about our future, or lack thereof.

by chvid 8y ago

XorNot 8y ago

This is skirting around the edge of an important point: increase in absolute debt level is fine in any economy, what's potential trouble is changes in the rate of debt increase - specifically vs GDP growth - because it affects the total disposable income you have to service it. Where China has a risk is if they can't transition to a developed country's style of debt spending where GDP growth is much lower. It's also where endemic corruption becomes a big problem.

ihsw2 8y ago

Using per person GDP when discussing China is a cruel joke. Like most usages of per person GDP in any country, it glosses over regional disparities and (more importantly) economic equality measures like Gini coefficient. Taking Gini coefficient into consideration, China still has a long way to go.

dpark 8y ago
The point was that even based on GDP per capita, China still has a long way to go.
- meiraleal 8y ago
  But the scale of China population is so that if they double their GDP per capita, they will have an upper and middle class population bigger than most if not all individual countries in the world (EDIT: except India).
moorhosj 8y ago
==Taking Gini coefficient into consideration, China still has a long way to go.== So does the US [1]: The top 1 percent of earners in America now take home about 20 percent of the country’s pretax national income, compared with less than 12 percent in 1978, according to the research the economists published at the National Bureau of Economic Research. Over the same time in China, the top 1 percent doubled their share of income, rising from about 6 percent to 12 percent. [1] https://www.cbsnews.com/news/usa-china-income-inequality-economic-research/ https://www.cbsnews.com/news/usa-china-income-inequality-eco...
dv_dt 8y ago
At least China's Gini coefficient is going in the correct direction. The US's Gini has been getting worse all while we still have third-world conditions festering for far too long.
- seanmcdirmid 8y ago
  China’s official GINI coefficient doesn’t include grey income (e.g. that official making 10k RMB/month yet driving a black Audi A9). Well, they stopped reporting it in the early part of this decade when it started getting really bad.
  - dv_dt 8y ago
    There are always reporting problems, especially tracking the wealth of the extreme rich. Estimates of hidden income and wealth are in the trillions. Gini in both China and the US are likely worse in actuality. But when you're in the middle of the process of converting your economy from rural to modern then it's much easier to swing the Gini change in the more equal direction. But because it's a different situation and harder to change in the US, doesn't mean we shouldn't be strongly aware of the implications of its worsening in the US.
    - seanmcdirmid 8y ago
      They stopped reporting their gini coefficient number altogether. There are no numbers after 2012. I lived in a Chinese first tier city for 10 years. Income inequality was much more obvious there than I ever saw in the states (even in the boonies of Mississippi). A lot of that was related to china’s caste/hukou system that basically denies social services to migrant workers. Yes, the USA has first world income inequality problems. But China has third world ones. The joke goes: the USA has so many homeless people, they are just everywhere! China has no homeless people, because the police beat them pretty harshly so they are either dead or really good at hiding.
TallDave2 8y ago
Gini implicitly assumes a flat distribution is desirable. Ask North Korea and Cuba how that works out. PPP GDP per capita is okay, but the PPP portion is rife with assumptions, some untenable. For instance, you really really don't want to live in a heavy industrial area in China, the air is like soup -- sometimes it pegs the AQI needle at 999. US hasn't ever had air that bad, even before the Clean Air Act.

Four_Star 8y ago

If the US decided to spend trillions of dollars a year building skyscrapers in Alaska it could be 'growing' at 7% a year too. http://www.businessinsider.fr/us/china-ghost-cities-satellite-images-2017-3 http://www.businessinsider.fr/us/china-ghost-cities-satellit...

woah 8y ago
If the US decide to spend trillions building skyscrapers its cities, then housing might be affordable
- ythn 8y ago
  Housing in Alaska already is affordable...
  - seanmcdirmid 8y ago
    Not really. Alaska is damn expensive if you are used to lower 48 prices. That sky scraper in question was built for a small seaside village limited by land because they were stuck between a mountain and water. It was really a one off and I don’t think it contributed much to USA debt.
- echochamberhn 8y ago
  Except that the ghost cities in China are of incredibly poor quality and falling apart a mere months after construction. Other than that, good point!
  - godzillabrennus 8y ago
    The USA has a bit more experience building high quality skyscrapers than China.
    - lancewiggs 8y ago
      How many has each country built in the last 10 years? China's industry has far far more experience building in the modern era.

zajd 8y ago

> China is still a developing nation. > That means that China can invest in infrastructure (roads, trains, airports, education) which have high real return making the increase in debt much less of a problem. What does that have to do with being a developing nation? The US could do the same.

ChrisLomont 8y ago
Adding infrastructure has a higher rate of return when there is less infrastructure to begin with. Adding one interstate highway system greatly increased US economic mobility. Adding a second would not have such benefit. So China, not having the infrastructure the US does, likely gets a benefit on doing projects that would be a loss in the US.
- RobertoG 8y ago
  So, the reason because the US doesn't invest in infrastructure is because the ROI is not high enough?
  - AnthonyMouse 8y ago
    > So, the reason because the US doesn't invest in infrastructure is because the ROI is not high enough? The reason the US doesn't invest in infrastructure is because the benefits go to everyone instead of a specific party interested enough to lobby for it. The ROI is the much the same in the US as it is elsewhere, provided the investment is made where it's needed rather than on pork barrel projects. For example, the value of building a bridge is X, but that's also the value of maintaining/replacing it because if it collapses or has to be closed for safety reasons then you no longer have a bridge. Moreover, you can productively build things like new subway lines in cities that are growing because that's where the demand exists to justify the cost. The lobbying problem is where we've started to see this "public private partnership" scam show up. Then you have a specific party interested enough to lobby for it, but it's because they intend to rent seek on public infrastructure by taking the public's money and then putting up a gate and charging them a second time for admission. Because $100 is a lot, but if you pay $75 in taxes and $75 in tolls then it's less, right? And if that discourages productive use of sunk cost infrastructure and is a regressive tax on the poor, let's try not think too much about that.

Theodores 8y ago

China spend money on infrastructure, meanwhile in the West there is 'Quantitative Easing' with money going straight to the banks. As you state there is real return in infrastructure expenditure - roads, trains, airports, education is genuine investment. A business case can be made for putting in a new 300kmh train set that spans the country. Over in the West we don't get that, instead we have to pay untold billions to the banks because if we don't then the sky will allegedly fall in so we have to kick the can down the road. GDP is also a useless figure. If we all decide to decide that our houses are worth double what they were worth five years ago and go about buying and selling these crumbling piles of bricks then have we really increased GDP? If, on the basis of these increasing property values everyone remortgages and buys fancy German sportscars and monster SUVs then have we really increased GDP? I am sure there is plenty of hubris going on in the Chinese economy and that status anxiety drives people to buy pointless luxury goods as per what happens in America, however, GDP is not all it is cracked up to be and there is a big difference in debt used to build an economy compared to debt used to prop up the rent-seeking classes.

icebraining 8y ago
We have quite a few high-speed trains here in the West - you can go from Sevilla to Berlin or Napoli in them. I agree that the GDP is a flawed metric, though.
gnarcoregrizz 8y ago
I've heard their directed investments referred to as 'qualitative easing' https://blogs.wsj.com/chinarealtime/2014/08/11/how-chinas-trying-to-boost-its-economy-qualitative-easing/ https://blogs.wsj.com/chinarealtime/2014/08/11/how-chinas-tr.... Unfortunately in the US, like you said, it seems like a lot of the capital has gone into west coast real estate and the stock market. Why wouldn't it? It's a lot easier to make money from rents than to actually build things. I'm always awed by how much indirect ROI you can get from infrastructure, and I'm always disappointed in how bad the US is at it these days. I like to cite the hoover dam as a wildly successful infrastructure project - I visited it for the first time recently and learned that it was built for ~49M USD (639M USD in today's dollars). The indirect ROI on it is epic. It spawned Las Vegas and allowed other west coast cities to grow all along the southwest, not to mention the money it's made back in hydroelectric power and tourism. It did take a crisis (the great depression) to build it for so cheap though... The recession probably would have been a good time to do this stuff. Unfortunately, we got higher asset prices instead. As for the GDP, yeah, it's a poor measure of growth. Yay, homes are now twice as expensive and people are relatively poorer, but we've succeeded in meeting our growth target!

harias 8y ago

Chinas GDP is higher than that of the US if you take Purchasing power parity into account.[0] [0] - https://en.m.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP) https://en.m.wikipedia.org/wiki/List_of_countries_by_GDP_(PP...

Retric 8y ago
China has a huge population so Per person China's GDP is much lower even including PPP. Per capita GDP depends on things like natural resources and corruption levels. So China is likely to lag behind on that measure long term, still they plenty of room for improvement.
seanmcdirmid 8y ago
No it isn’t. Also, PPP is a dumb metric, many things in China beyond services and food are much more expensive than they are in the USA.

api 8y ago

The USA could be a developing nation too. We should be building our first settlements on the Moon and Mars right now, eliminating biological limitations like aging and various sources of heritable inequality, sending our first probes to nearby stars with a high probability of hosting living biospheres in habitable zones, wiring every address in the nation with low latency gigabit+ broadband, and upgrading our infrastructure to be fully renewable and post-carbon. That's a very incomplete list of actual first world problems. A "developed nation" should be called a "day two nation." See Jeff Bezos' excellent shareholder letters. A developed nation has a "day two mentality." No nation is developed but some are stuck. Part of the problem is that we compare ourselves to other nations and think "wow, we're awesome." We should ignore all other nations and think "what can we do now?" Unfortunately I'm not optimistic. The last election was a contest between a narcissistic reality TV star and a dull apparatchik with no vision. Our selection of such inferior representatives reflects our collective expectations about our future, or lack thereof.