China has wasted $6.8 trillion in investment
Chinese "ghost cities" are the result of government stimulus methods and "hyperactive construction", as the Financial Times puts it. According to a report by government researchers, since 2009, $6.8tn worth of investment has been utterly wasted. A State planning agency from China claims that in 2009 and 2013 separately "ineffective" or wasted investment accounted for half the total investment in the Chinese economy.

This year is looking to be China's lowest growth since 1990, and the Chinese government is concerned about bad loans circulating through the financial system which could well cause a debt crisis. Wasted investment, supposedly, went mainly to industries like steel and the construction of cars.

According to two officials from one of the State's research teams, this is due to ultra-loose monetary policy and lack of oversight in government investment. The second explanation is certainly viable, but I'm not sure about the first. Chinese inflation currently stands at 2.3pc, which isn't at all "ultra-loose" and is, in fact, pretty good. However, the PCB's bank rate stands at 6pc, which certainly points away from tightness but doesn't indicate any excessive loose-ness. I can't find any data on ngdp growth, so I can't say for sure.

So, basically, a lot of China's gdp growth has just been wasted.

Yea. This has been known for a while.
Doesn't help that many of their officials are essentially smuggling millions out of the country.

I get the feeling they're in a bubble. Eventually that bubble will burst. The people put up with the govt since it means growth, but once that growth stops they'll have domestic problems. From there its either liberalization or crackdown.

Quote from: Kinder on November 28, 2014, 03:00:06 PM

internet magazine

The FT is quite literally the most respected newspaper on the planet.

Quote

So basically this shows that government involvement in the economy simply doesn't work and creates an artificial demand?

Not exactly, no. It shows that excessive government involvement in the economy and excessive amounts of corruption does. Usually, excessive government involvement causes stagnation and inefficiency - but the sheer scale of Chinese investment and corruption basically means their economy could come crashing down.

Define excessive, because I can say the stimulus packages passed by Bush and Obama have not improved the economy and only created an artificial demand

Define excessive, because I can say the stimulus packages passed by Bush and Obama have not improved the economy and only created an artificial demand

They didn't, they just counteracted spending restrictions in local/state governments. I don't think stimulus packages can create artificial demand during a recession, anyway, since a recession is literally defined by nominal shocks. You need some really fucked-up investment drives to get misallocation on this level.

Nonetheless, the stimulus packages were a waste.

China needs a good dose of democracy and freedom

Guess it's a good thing I didn't bother to learn Mandarin after all.

GG Commies.

This

Now I only have to learn Spanish!

Quote from: Statefarm on November 28, 2014, 03:20:48 PM

Quote from: Mr Psychologist on November 28, 2014, 03:00:27 PM

Guess it's a good thing I didn't bother to learn Mandarin after all.

GG Commies.

This

Now I only have to learn Spanish!

Ew, learn German instead

They have the 3rd strongest economy and are the number one exporters in the world. This translates them being a major part of the business world and any company that deals heavily in this field would hire you

German would be a lot more fun to learn, I really want to fluently understand at least one more language. Just not Chinese or Japanese...

I hate learning German.

Nothing against the language itself it's just mind numbingly boring.