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Don't Judge China on Phantom Facts
f.ex. debatten herinde om ghost towns mm
Published: Monday, 11 Jul 2011 ' 8:56 PM ET Text Size By: Shaun Rein, CNBC Contributor
Founder & Managing Director, China Market Research Group
Twitter LinkedInMore Share
There are a lot of doomsday scenarios about China's economy floating around these days and oddly, a number of them are focusing on infrastructure spending and rising local debt rather than the real threat of rampant inflation, which hit a three-year high in June at 6.4 percent.
STR ' AFP ' Getty Images
Rail attendants pose with Chinese high-speed trains.
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Famed bearish economist Nouriel Roubini said in a column for Project Syndicate that China's economy will face a sharp slowdown in 2013 because of too much wasted infrastructure spending.
Similarly, MIT professor Huang Yasheng argues that Chinese incomes are not rising fast enough to offset dwindling export growth and that urbanization has been wasteful.
However, a quick examination of Roubini's and Huang's data points show there is little merit in their conclusions because they are both using phantom facts.
Roubini argues that infrastructure spending has been excessive and redundant, creating not needed and unsustainable projects that will cause an inevitable slowdown. A recent article in Reuters quotes Roubini as saying: '"I was recently in Shanghai and I took their high-speed train to Hangzhou,' referring to the new Maglev line that has cut traveling time between the two cities from four hours to less than one. 'The brand new high-speed train is half-empty and the brand new station is three-quarters empty.
Parallel to that train line, there is also a new highway that looked three-quarters empty. Next to the train station is also the new local airport of Shanghai and you can fly to Hangzhou,' he said. 'There is no rationale for a country at that level of economic development to have not just duplication but triplication of those infrastructure projects."'
Scary stuff - if it were true. Fortunately reality is far from what is being framed by Roubini. His contention that there has been infrastructure spending in triplicate does not withstand even the most basic scrutiny. I checked with several airlines and travel agents like Ctrip [CTRP 43.77 -1.14 (-2.54%) ] and Expedia [EXPE 30.39 -0.29 (-0.95%) ], and they all confirmed that there are no direct flight between Shanghai and Hangzhou and never was.
How about that empty Shanghai-Hangzhou Maglev train? That train would certainly be empty, since like those direct flights it simply does not exist.
Plans for a Maglev train were scrapped after thoughtful planners calculated such construction would indeed be wasteful. In fact, aside from the 7-minute Maglev ride that connects Shanghai's Pudong International Airport - which handled 40.6 million passengers in 2010 and 3,227,914 metric tons of cargo, making it the world's third-busiest in terms of freight traffic- with a subway station in the city, there are no other Maglev trains in operation in the country.
Huang, on the other hand, in a July 6, 2011 blog post in the New York Times says, "Beijing and Shanghai have some of the lowest population densities among the world's big metropolises." From this Huang concludes that Shanghai's infrastructure buildup is not needed.
Shaun Rein
Founder of the
China Market
Research Group
In fact, Shanghai has the highest density of urban populations in the world at official population numbers, which does even include millions of unregistered workers in the city. It is not uncommon for Shanghai families of three or more to live in less than an area of 200 square feet per person, while the average home in America is 10 times that size.
Most workers in the restaurant and construction industries live in sub-human dormitories, where eight people or more share a room. Infrastructure spending is badly needed to relieve living congestion by allowing for cheaper land sales farther from the city center just to get basic living space for people.
Huang also underestimates the middle class's purchasing power, but he does bring up important issues. Namely, China needs to avoid falling into the middle-income trap that many developing countries do when per capita GDP hits $6,000 a year and stagnate. If it does not, China will be more like a Mexico, with huge income disparity between the rich and poor, rather than the world's leading economic superpower.
Measures to promote consumption are actively being implemented, which will lessen the risks, Huang mentions. Fourteen provinces this year increased their minimum wage by an average over 20 percent. This is on top of hikes by provinces like Sichuan, which increased the minimum wage by 44 percent in 2010.
Shanghai's government is also forcing parity in social security and health care benefits for official Shanghai residents and migrants registered to work there.
RELATED LINKS
Current DateTime: 06:00:16 11 Jul 2011
LinksList Documentid: 43707238
China May Be Winning Battle Against Inflation: Analysts
China Headed for recession in 2-3 Years: Fund Manager
'Perfect Storm' Coming for Global Economy in 2013: Roubini
Wage and social security increases are a must for the health of the economy as Huang rightly points out but they are also largely responsible for the massive inflation. The government needs to walk a careful line between improving everyday conditions and making China uncompetitive as an investment destination.
China is not immune to economic cycles. It will certainly go through ups and downs in the coming decades. But problems are more likely to stem from inflation, a weak education system, and a rocky shift to more consumption than concerns about local debt or over-infrastructure spending based on Roubini's and Huang's phantom facts.
Shaun Rein is the founder and managing director of the China Market Research Group (www.cmrconsulting.com.cn), a strategic market intelligence firm, and is based in Shanghai. He is also the author of an upcoming book on the end of cheap Chinese labor.
He does not own stock in any of the companies me
f.ex. debatten herinde om ghost towns mm
Published: Monday, 11 Jul 2011 ' 8:56 PM ET Text Size By: Shaun Rein, CNBC Contributor
Founder & Managing Director, China Market Research Group
Twitter LinkedInMore Share
There are a lot of doomsday scenarios about China's economy floating around these days and oddly, a number of them are focusing on infrastructure spending and rising local debt rather than the real threat of rampant inflation, which hit a three-year high in June at 6.4 percent.
STR ' AFP ' Getty Images
Rail attendants pose with Chinese high-speed trains.
--------------------------------------------------------------------------------
Famed bearish economist Nouriel Roubini said in a column for Project Syndicate that China's economy will face a sharp slowdown in 2013 because of too much wasted infrastructure spending.
Similarly, MIT professor Huang Yasheng argues that Chinese incomes are not rising fast enough to offset dwindling export growth and that urbanization has been wasteful.
However, a quick examination of Roubini's and Huang's data points show there is little merit in their conclusions because they are both using phantom facts.
Roubini argues that infrastructure spending has been excessive and redundant, creating not needed and unsustainable projects that will cause an inevitable slowdown. A recent article in Reuters quotes Roubini as saying: '"I was recently in Shanghai and I took their high-speed train to Hangzhou,' referring to the new Maglev line that has cut traveling time between the two cities from four hours to less than one. 'The brand new high-speed train is half-empty and the brand new station is three-quarters empty.
Parallel to that train line, there is also a new highway that looked three-quarters empty. Next to the train station is also the new local airport of Shanghai and you can fly to Hangzhou,' he said. 'There is no rationale for a country at that level of economic development to have not just duplication but triplication of those infrastructure projects."'
Scary stuff - if it were true. Fortunately reality is far from what is being framed by Roubini. His contention that there has been infrastructure spending in triplicate does not withstand even the most basic scrutiny. I checked with several airlines and travel agents like Ctrip [CTRP 43.77 -1.14 (-2.54%) ] and Expedia [EXPE 30.39 -0.29 (-0.95%) ], and they all confirmed that there are no direct flight between Shanghai and Hangzhou and never was.
How about that empty Shanghai-Hangzhou Maglev train? That train would certainly be empty, since like those direct flights it simply does not exist.
Plans for a Maglev train were scrapped after thoughtful planners calculated such construction would indeed be wasteful. In fact, aside from the 7-minute Maglev ride that connects Shanghai's Pudong International Airport - which handled 40.6 million passengers in 2010 and 3,227,914 metric tons of cargo, making it the world's third-busiest in terms of freight traffic- with a subway station in the city, there are no other Maglev trains in operation in the country.
Huang, on the other hand, in a July 6, 2011 blog post in the New York Times says, "Beijing and Shanghai have some of the lowest population densities among the world's big metropolises." From this Huang concludes that Shanghai's infrastructure buildup is not needed.
Shaun Rein
Founder of the
China Market
Research Group
In fact, Shanghai has the highest density of urban populations in the world at official population numbers, which does even include millions of unregistered workers in the city. It is not uncommon for Shanghai families of three or more to live in less than an area of 200 square feet per person, while the average home in America is 10 times that size.
Most workers in the restaurant and construction industries live in sub-human dormitories, where eight people or more share a room. Infrastructure spending is badly needed to relieve living congestion by allowing for cheaper land sales farther from the city center just to get basic living space for people.
Huang also underestimates the middle class's purchasing power, but he does bring up important issues. Namely, China needs to avoid falling into the middle-income trap that many developing countries do when per capita GDP hits $6,000 a year and stagnate. If it does not, China will be more like a Mexico, with huge income disparity between the rich and poor, rather than the world's leading economic superpower.
Measures to promote consumption are actively being implemented, which will lessen the risks, Huang mentions. Fourteen provinces this year increased their minimum wage by an average over 20 percent. This is on top of hikes by provinces like Sichuan, which increased the minimum wage by 44 percent in 2010.
Shanghai's government is also forcing parity in social security and health care benefits for official Shanghai residents and migrants registered to work there.
RELATED LINKS
Current DateTime: 06:00:16 11 Jul 2011
LinksList Documentid: 43707238
China May Be Winning Battle Against Inflation: Analysts
China Headed for recession in 2-3 Years: Fund Manager
'Perfect Storm' Coming for Global Economy in 2013: Roubini
Wage and social security increases are a must for the health of the economy as Huang rightly points out but they are also largely responsible for the massive inflation. The government needs to walk a careful line between improving everyday conditions and making China uncompetitive as an investment destination.
China is not immune to economic cycles. It will certainly go through ups and downs in the coming decades. But problems are more likely to stem from inflation, a weak education system, and a rocky shift to more consumption than concerns about local debt or over-infrastructure spending based on Roubini's and Huang's phantom facts.
Shaun Rein is the founder and managing director of the China Market Research Group (www.cmrconsulting.com.cn), a strategic market intelligence firm, and is based in Shanghai. He is also the author of an upcoming book on the end of cheap Chinese labor.
He does not own stock in any of the companies me
16/7 2011 09:35 le 044092 gary shilling er ikke særlig troværdig
han er pr definition pessimist og ser kun muligheden for at alt går galt
din link virker ikke mere, men jeg søgte selv på youtube og fandt indslaget, men har forudset sammenbruddet i kina i mange år og taget fejl hver gang
der er for mange af den slags pessimister, der fylder mediebilledet fordi de som regel ikke har andte at lave end at advare, medens de ikke tages alvorligt i de kredse, der tager beslutningerne og har et ansvar
og med nettet og youtube er det alt for let for alverdens mennesker at lade sig forføre af disse pessimister - fordi det ser ud til at folk elsker at være pessimister og sige at det hele ikke fungerer istedet for at være kreativt-konstruktive
han er pr definition pessimist og ser kun muligheden for at alt går galt
din link virker ikke mere, men jeg søgte selv på youtube og fandt indslaget, men har forudset sammenbruddet i kina i mange år og taget fejl hver gang
der er for mange af den slags pessimister, der fylder mediebilledet fordi de som regel ikke har andte at lave end at advare, medens de ikke tages alvorligt i de kredse, der tager beslutningerne og har et ansvar
og med nettet og youtube er det alt for let for alverdens mennesker at lade sig forføre af disse pessimister - fordi det ser ud til at folk elsker at være pessimister og sige at det hele ikke fungerer istedet for at være kreativt-konstruktive
