Friday, November 11, 2011

Clueless Comments on China

Reuters columnist David Rhode writes about China:
China’s gleaming skyscrapers, staggeringly impressive infrastructure and burgeoning cities are extraordinary. Over the last thirty years, 200 million Chinese have been moved out of poverty. On the day Gao spoke, western leaders were begging Chinese officials to help ease Europe’s debt crisis. China is simultaneously a repressive authoritarian state and, for now, a successful economic system.
There is no question that removing Mao's chains from the people of China has helped raise the standard of living for all in China and there are pockets of free market type-operations in China that continue to boost the standard of living for the Chinese even more, but much of the "gleaming skyscrapers, staggeringly impressive infrastructure and burgeoning cities" that Rhode mentions is a fraud. It was created by the Chinese government and includes ghost cities, 30 to 50 million in vacant apartments and infrastructure such as highways, train stations and airports that are pretty much empty.

Even worse, all this "extraordinary growth" was down by printing yuan, and thus taxing the average Chinese person through massive price inflation.

Rhode should understand the fraud, he is in China and writes this:
Yet the system here has its cracks. Last Sunday afternoon, I visited Beijing’s Ikea store in search of China’s growing upper middle class. In China, Ikea is a store and social destination. Well-educated and upwardly-mobile Chinese in their 20s and 30s cruise through the store’s enormous showrooms, having pillow-fights on beds, lounging on couches and devouring meatballs in the dining room. They are the winners of China’s economic boom.

I interviewed a banker, an accountant, an interior designer and other white-collar professionals. Four of the six people I spoke with complained about spiraling housing prices, corruption and inequality. Several griped about the Communist Party’s online blocking of Facebook, Twitter, You Tube and other websites.

A 37-year-old software developer for Ali Baba, a hugely successful company that is China’s equivalent of Amazon, was the most negative of all. Despite being enormously successful in China, he was applying for a Canadian visa and convinced that pollution and poor schools were harming his 18-month-old son.

“They teach children to tell lies,” said the man, who asked to remain anonymous. “They teach bad values.”

Interviews with a half-dozen migrant workers – the 200 million laborers from rural provinces who run China’s urban factories – prompted responses more favorable to the Party. They complained of high housing prices but said government subsidies had lowered food prices.
In other words, people are telling him at least about the price inflation. Yet, Rhode doesn't seem to understand.

This split personality economy that is half free market and half bureaucratic insanity that is building structures nobody uses, is being completely missed by Rhode. He seems to get the problems of authoritarianism on a personal level, but completely misses the planned parts of China's economy. He writes:
For now, China’s model is outperforming Western democracy in economic terms. Over the long term, I believe China’s stilted system is unlikely to produce the innovation it needs to continue its astonishing economic growth.

Emerging market nations, though, could choose to adopt the Chinese model, legitimately seeing China’s stability and growth as preferable to the West’s stagnation and dysfunction. China today is both light and dark. It is succeeding economically but failing politically.
A country with tens of millions of vacant apartments is an economic model to follow, with near empty newly constructed airports and train stations? What the hell is this guy doing? Is he mostly sitting in his Chinese hotel room reading statistics put out by the Chinese Party?


  1. No doubt...One thing "journalists" have in common, besides being lying statist infantiles, is that they are lazy.

  2. Economic forecaster Hugh Hendry recently made the following observations about China's industrialisation. These sound quite Austrian to me.

    Why China is Not 19th Century America

    While many economic observers have drawn an analogy between China's ongoing industrialization and that of America’s, Hendry sees a critical difference.

    In the US, he says, capital has always been allocated where it could achieve the highest return. In the 19th century, when America was the economic upstart on the block, it was also on the gold standard. Which is very important, according to Hendry, because it allotted entrepreneurs one – and only one – chance to succeed. It was not a time of bailouts and multiple bankruptcies!

    China is different, he believes, because it is industrializing with a fiat currency. Thus they fall into the trap of misallocating capital – building bridges to nowhere, towers for nobody, and so on. China’s goal is similar to that of 1980’s Japan in his opinion – full employment, rather than maximizing return on capital. A critical, and even fatal, difference, in his mind. "