Wednesday, November 2, 2011

On China's Bizarre and Nutty Quest for GDP Growth

There are hotbeds of free market type capitalism in China, but there are also huge swaths of government designed infrastructure that are not used and total cities that are vacant. These government built projects are all reported as part of China's booming GDP, but they are in fact grand malinvestments, They are a combination of investments that are the result of money printing, with government planning on top of it. At the World Ideas Forum in Washington DC that I attended, Vice President Joe Biden brought up China when he discussed the state of the financial crisis and specifically stated that there were between 30 million and 50 million vacant apartments in China.

 Clearly, the Chinese have not yet learned that central planning does not work, and they have not learned that in order to move product you have to sometimes cut prices. It's hard to believe these cities would be entirely vacant if prices were allowed to fall to market levels. The below video is a report on the vacant city in Inner Mongolia, Ordo, that is showing up in Chinese GDP numbers as a positive development. These type ghost cities are all over China.




  1. I'd love to see the "G" removed from every country's GDP calculations and see what the numbers yield.

    Call it a "chart of the day".

  2. I've come to see the completely irrational drive to spend on anything by the Chinese (whether it be a new city, high speed rail, or Australian/Canadian/African mines at record prices as a sort of crackup boom.

    With the knowledge their trillions in US paper declines in value every year they're simply happy to rid themselves of it in any way possible.

    Thankfully the Chinese haven't discovered USA style military Keynesianism.

  3. The world's most beautiful hole ever dug. Can't wait to watch them fill it back in. (Will that count towards GDP, too?)

  4. To Anon at 10:17AM,

    I assume you mean you want to see real domestic product, ie NDP adjusted for depreciation of capital stock.

    Does any organisation publish figures for NDP?

  5. Yes Michael, exactly. I am not aware of any organization publishing that data.

  6. Anon,

    I agree that using NDP would give a more accurate picture of economic growth. The Fed and NBER have both published on methodology for calculating capital stock growth/decline but I can't find their up to date figures.

    If anyone can suggest where to seek these figures it'd be great.