This has always made me wonder, considering the fact the economy is always generating a 7-10% increase like clockwork, and considering that parts of its financial sector are clouded in mystery, coupled with the recent ghost town pictures I just saw on this link , it does make you wonder, how much of Chinas economy is really just smoke and mirrors?
It’s really hard to say without sufficient data. I’m not even sure the Chinese government data can be trusted. From an on the ground / in the trenches perspective, prices seem way too high even with the Lao tuzi tax for the chosen / lucky 100m.
Can you elaborate on the lao tuzi tax and the chosen / lucky 100m? I’m not familiar with those terms.
the tax is just my friend / project Manager’s way of saying that foreigners are getting screwed on prices. Everything is negotiable especially if purchasing in bulk. Even though my friend is fluent in mandarin they know he is not native.
The lucky 100 million is my term for those who happened to be living in the southern and Eastern provinces when china opened the market. Some are luckier than others in government favors.
There’s a lot of evidence that China is experience many bubbles small and large, due to its constant central manipulation of the economy.
For example, China’s major cities are being flooded with university graduates who cannot find work. They are being housed dormitory style throughout the cities.
China’s real-estate prices in the major cities have exploded, and have grown faster and higher than any other real estate market had before the real-estate bubble popped in the west. Spending in China driven in substantial part by real estate development. The Chinese government has mandated a lot of commercial real-estate construction, and there’s evidence that they’ve overbuilt the infrastructure. There are malls that are largely empty of stores, office buildings that are half empty, etc.
It’s hard to get a handle on this because the Chinese are somewhat opaque, and there are strong cultural forces affecting the economy. For example, graduates with degrees in finance from the outlying regions are finding there are no jobs for them in the cities, because the people in the cities won’t trust outsiders with their finances.
I happen to think there are huge structural problems in China. There’s a lot of corruption and cronyism, and in an environment like that there has to be a lot of malinvestment and distortion of the market. The Chinese government manipulates the currency, holds interest rates artificially low, and pressures people to buy homes. I don’t see how that can last.
There is some evidence that China’s official statistics have been “smoothing out” the economy’s ups and downs. But if you look at the graph, the official and “realistic” estimates both average out to the same rate of growth. So this is not the type of error/bias/bubbliness that will make Chinese economic growth disappear.
My gf’s father is asserting that there are currently 300 Million engineers in China due to families pressuring their kids to go into that field, creating an unsustainable glut. Can anyone confirm or disprove this, it seems absurdly high to me.
That can’t be right, that would be almost 1/4 of the population including retirees, homemakers and children. That is like saying the US has 75 million engineers.
One thing I’ve heard about Chinese engineering statistics is they include things like auto mechanics as engineers in their tallies. That and supposedly their schools are more academic with less lab work, so the training isn’t as good when people enter the job market. I have no idea how true that is or isn’t.
A sub section I guess could be devoted to ‘what proportion of the Chinese economy is one huge Ponzi scheme?’
Seriously, you have to think these questions, if fraud on a massive scale is able to be done in an open liberal democratic society, it raises questions of how it could be achieved with state backing in an unfree society.
I don’t know if I’d call it a Ponzi scheme, but I think the fact that there are hundreds of millions of available low-paid workers probably gives the government a lot of breathing room to make huge mistakes. There’s a lot of slack still in the Chinese economy - a lot of low-hanging fruit for finding productivity gains. This can mask the real problems for some time. But eventually they’ll surface, then we could see some kind of economic crash. It’s pretty much impossible to predict when that will happen, though. Could be next year, or a decade or two from now.
The Soviet Union was like that. In the early days, it was making great gains in productivity for two reasons - one was that it’s very easy to find productivity gains in the early stages of mechanization and automation. The second is that it got a lot of productivity out of the population through fear. During Stalin’s reign, you could actually be hauled off to a work camp or even shot for simply slacking on the job. That tends to make people work harder - for a while. But it also tends to make them cautious, unwilling to report problems, and in general terrible employees once you get past the need for raw manual labor.
When Stalin died, and the extreme versions of labor productivity halted, productivity collapsed in the country for quite a while. New incentives were tried (free dachas for plant managers, trips to state resorts for model employees, etc). That helped, but then the bigger problem was that the economy began to become more complicated, the low hanging fruit was being used up, and the next round of productivity improvements required efficient inventory management, higher education, maintenance of complex supply chains, and all the other things a modern economy had to do to keep getting richer. It was at this stage that the central planning bureaus utterly failed, and the Soviet Union’s productivity collapsed, shortages and gluts appeared, factories lacked necessary upgrades, the workers became disillusioned, alcoholism skyrocketed, etc. Eventually, the whole house of cards came down and when it did and the books we opened, we discovered that much of the Soviet Economy was a ‘paper economy’ and the real productivity of the country was abysmal.
China won’t be that bad, because it has instituted market reforms which are helping it be competitive. But the market is heavily distorted by the ruling class, the workers are oppressed in many regions, there’s a gigantic wealth difference between the cities and the rural regions, and there’s way too much central planning and interference. It can’t last forever.