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PostPosted: Wed Jan 28, 2015 6:21 pm    Post subject: China Reply with quote

PeakTrader:

Basically, the China model is a totalitarian state exploiting the masses and the environment.

The communist elites give the masses enough to keep them working and prevent a rebellion.

Sorry, China, There Is No Short Cut To Economic Greatness
Jan. 26, 2010

“This is a government that will go to great length to maintain appearances to keep its ideology going. After all, it censors what its citizens may or may not read and imprisons the ones that write anti-government articles.

China will do anything to grow its economy, as the alternatives will lead to political unrest…Since China lacks the social safety net of the developed world, unemployed people are not just inconvenienced by the loss of their jobs, they starve (this explains the high savings rate in China) and hungry people don’t complain, they riot.

The Chinese government controls the banks, thus it can make them lend, and it can force state-owned enterprises (a third of the economy) to borrow and to spend. Also, since the rule of law and human and property rights are nascent in its economic and political system, China can spend infrastructure project money very fast – if a school is in the way of a road the government wants to build, it becomes a casualty for the greater good.

China has spent a tremendous amount of money on infrastructure over last decade and there are definitely long-term benefits to having better highways, fast railroads, more hospitals, etc. But government is horrible at allocating large amounts of capital, especially at the speed it was done in China. Political decisions (driven by the goal of full employment) are often uneconomical, and corruption and cronyism result in projects that destroy value.

The inefficiencies are also evident in industrial overcapacity. According to Pivot Capital, Chinese excess capacity in cement is greater than the combined consumption by the US, Japan, and India combined. Also, Chinese idle production of steel is greater than the production capacity of Japan and South Korea combined. Similarly disturbing statistics are true for many other industrial commodities.

…late-stage-growth obesity, inefficiencies that are a byproduct of high growth rates sustained for a long period of time. Though Chinese growth in the past was high, in its late stages the quality of growth has been low.”

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China’s masses will retire very poorly, in part, because of its immigration and one-child policies.

The masses work very hard for very little.

“Infrastructure and real estate projects are where you get your biggest bang for the buck if your goal is to maintain employment, since they require a lot of unskilled labor; and this is where in the past a lot of Chinese money was spent…in 2009, new floor space constructed was up 100% and residential real estate prices surged 25%….they keep building skyscrapers even though the adjacent ones are still vacant…built the largest shopping mall in the world, the South China Mall, that is 99% vacant, years after construction….built a whole city, Ordos, in Inner Mongolia, on spec for million residents who never appeared.”

Myth of China’s Manufacturing Prowess
March 10, 2010

“People often compare China’s urbanization to Western industrialization in the 19th century. In both cases, a large population moved from the country to the city. Society advanced from agricultural to industrial via manufacturing on a massive scale.

In the United States and Europe, the manufacturing industry was created due to technology innovation. For example, railways came into existence because of the invention of the steam engine, and automobiles were created because of technology breakthroughs in automobile engines.

In China, the manufacturing industry is being created in response to global demand. Chinese manufacturers take orders from Western companies that have designed products for their home markets. They have no involvement with product development, innovation, market research, and even packaging.

James Fallows (an economist) visited many factories in China. He saw people working on the assembly lines and was convinced those tasks would only be performed by machines in the United States.

In 2008, U.S. manufacturing output was $1.8 trillion, compared to $1.4 trillion in China….the United States is producing goods with higher value, such as airplanes and medical equipment.

In addition, most jobs the United States lost to China are low-skilled jobs. By outsourcing those low-skilled jobs to China, Americans have actually become more competitive in high-skilled jobs such as management, innovation, and marketing.”

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