4 ms·

> Why is it an alarm bell if China is still growing at basically the fastest rate in the world? How much is that growth due to spending loans on non-productive

> Why is it an alarm bell if China is still growing at basically the fastest rate in the world? How much is that growth due to spending loans on non-productive investments? Building ghost towns also contributes to growth.

vkou 8y ago
I speculate that most of the growth is due to the urbanization of the population. China's population isn't growing... But it's urban population is exploding[1]. Any other country that was seeing a 5% YoY adult population growth would be expected to see at least 5% YoY GDP growth. Why would China be any different? [1] And city dwellers in China sure as hell aren't living on a dollar a day. They are living nearly-first-world lifestyles.
- pas 8y ago
  The problems with Chinese real estate is twofold: - cities don't have the authority to raise revenue by introducing local taxes, but they can sell land to developers, thus fueling and endless growth (because as the city grows so does the need for more revenue) - due to the big imbalance of male-female ratio a lot of males have to compete, and since real estate is among the best forms of long term wealth store, a lot of flats are just empty but are held by men courting women (and the prices skyrocket of course due to this, which of course make the land sell-off an even more ephemerally lucrative thing; oh and usually families and friends give money so young men are able to afford these insane real estate prices, meaning the pressure is even greater to get married, stay employed, and repay the debt, etc.)
  - vkou 8y ago
    > The problems with Chinese real estate is twofold: - cities don't have the authority to raise revenue by introducing local taxes, but they can sell land to developers, thus fueling and endless growth (because as the city grows so does the need for more revenue) It works the exact same way in the US, except instead of making money from selling land (Since they don't own it), cities make money by selling subdivision rights (Which let the developer turn fallow land into houses.) Eventually, once the spigot of subdivision and upzoning cash runs out, property taxes are raised to cover any steady-state city budget shortfalls. The same thing will happen in China. The system's not that different.
    - seanmcdirmid 8y ago
      Incorrect. Localities can and do levy property taxes, which is where they get most of their ongoing funding (sometimes they levy local sales taxes as well). One-time impact/development fees usually go to building up the initial infrastructure needed to support those developments. They aren’t windfalls that can be used for running services in any ongoing way. I’m not aware of any city that can actually sell subdivision rights? Property is bought and sold privately, the only leverage a locality has is in zoning and permitting (which is automatic unless exemptions are required, then many cities try to push in affordable housing requirements). This is nowhere near the same as it works in China. Land transfer fees are the primary income of many localities after what the central government shares with them in VAT and income taxes.
      - vkou 8y ago
        Zoning and permitting are the subdivision rights that I'm talking about. The trick is to zone the city as "X houses per acre", where X is a number that is not particularly profitable to develop. Then, hand out exemptions to developers, in lieu of cash. "Pay us $500,000, and we will change the rules, to let you make $1,500,000 in extra profit. Oh, and also, build out all the infrastructure that will service the area you're developing." This is exactly how it played out in my village, and was a crystal-clear, above-board process. It was also one of the reasons that our property taxes were as low as they were.
- chibg10 8y ago
  >[1] And city dwellers in China sure as hell aren't living on a dollar a day. They are living nearly-first-world lifestyles. This depends tremendously on the city. For Shanghai this may be true-ish, but there's much greater variation between Chinese cities and e.g. US cities. Now take the lifestyle difference between NYC and Mobile, AL, but double it. Then multiply NYC lifestyle (e.g. income) by like ~0.6 (incomes are like ~0.3, but COL is a fraction of NYC excluding housing so the living standard gap is smaller than implied by incomes) to get Shanghai -- so use that as a baseline, but with the variation from the previous sentence. That's imo roughly what Chinese living standards are like (having been to Chinese cities of varying prosperity).

vkou 8y ago

I speculate that most of the growth is due to the urbanization of the population. China's population isn't growing... But it's urban population is exploding[1]. Any other country that was seeing a 5% YoY adult population growth would be expected to see at least 5% YoY GDP growth. Why would China be any different? [1] And city dwellers in China sure as hell aren't living on a dollar a day. They are living nearly-first-world lifestyles.

pas 8y ago
The problems with Chinese real estate is twofold: - cities don't have the authority to raise revenue by introducing local taxes, but they can sell land to developers, thus fueling and endless growth (because as the city grows so does the need for more revenue) - due to the big imbalance of male-female ratio a lot of males have to compete, and since real estate is among the best forms of long term wealth store, a lot of flats are just empty but are held by men courting women (and the prices skyrocket of course due to this, which of course make the land sell-off an even more ephemerally lucrative thing; oh and usually families and friends give money so young men are able to afford these insane real estate prices, meaning the pressure is even greater to get married, stay employed, and repay the debt, etc.)
- vkou 8y ago
  > The problems with Chinese real estate is twofold: - cities don't have the authority to raise revenue by introducing local taxes, but they can sell land to developers, thus fueling and endless growth (because as the city grows so does the need for more revenue) It works the exact same way in the US, except instead of making money from selling land (Since they don't own it), cities make money by selling subdivision rights (Which let the developer turn fallow land into houses.) Eventually, once the spigot of subdivision and upzoning cash runs out, property taxes are raised to cover any steady-state city budget shortfalls. The same thing will happen in China. The system's not that different.
  - seanmcdirmid 8y ago
    Incorrect. Localities can and do levy property taxes, which is where they get most of their ongoing funding (sometimes they levy local sales taxes as well). One-time impact/development fees usually go to building up the initial infrastructure needed to support those developments. They aren’t windfalls that can be used for running services in any ongoing way. I’m not aware of any city that can actually sell subdivision rights? Property is bought and sold privately, the only leverage a locality has is in zoning and permitting (which is automatic unless exemptions are required, then many cities try to push in affordable housing requirements). This is nowhere near the same as it works in China. Land transfer fees are the primary income of many localities after what the central government shares with them in VAT and income taxes.
    - vkou 8y ago
      Zoning and permitting are the subdivision rights that I'm talking about. The trick is to zone the city as "X houses per acre", where X is a number that is not particularly profitable to develop. Then, hand out exemptions to developers, in lieu of cash. "Pay us $500,000, and we will change the rules, to let you make $1,500,000 in extra profit. Oh, and also, build out all the infrastructure that will service the area you're developing." This is exactly how it played out in my village, and was a crystal-clear, above-board process. It was also one of the reasons that our property taxes were as low as they were.
chibg10 8y ago
>[1] And city dwellers in China sure as hell aren't living on a dollar a day. They are living nearly-first-world lifestyles. This depends tremendously on the city. For Shanghai this may be true-ish, but there's much greater variation between Chinese cities and e.g. US cities. Now take the lifestyle difference between NYC and Mobile, AL, but double it. Then multiply NYC lifestyle (e.g. income) by like ~0.6 (incomes are like ~0.3, but COL is a fraction of NYC excluding housing so the living standard gap is smaller than implied by incomes) to get Shanghai -- so use that as a baseline, but with the variation from the previous sentence. That's imo roughly what Chinese living standards are like (having been to Chinese cities of varying prosperity).