Archives: China Real Time Report

The trend these days is to focus on inequality and on the gini coefficient, which measures inequality, and then to mercilessly criticize China for its inequality. I have a problem with that.  I do not think that fair.

Please allow me to digress for a moment.

I am sometimes criticized for being to harsh on China. This criticism usually comes from Westerners and when I get it, I usually respond with something fast and somewhat flippant like, “my job is just to call it as I see it and that’s what I do.”  Chinese citizens usually say something like, “you really see China as it really is.  Is there anything you like about China.”  To which I respond by saying something like the following:  “I love China.  I love its food.  I love its people.  I love its energy.  I love its optimism.  China should be very proud of all that it has accomplished.  In particular, what it has done in the way of literacy, healthcare and poverty is nothing short of astounding.”

Now let’s talk about gini coefficients and poverty.  Suppose you live in a Chinese village and you are not getting enough to eat and you cannot afford a television and then all of a sudden you become wealthy enough to afford both. Will you a) be happier or will you b) complain about some guy in Beijing who drives a Rolls Royce?  Well, you may still complain about the guy with the Rolls, but I also think you will be happier as well and you should be.  China has done an amazing job with the food and the television part, which is what really matters, and less well with the Rolls Royce part, which is — for the most part — less important.

Today’s Wall Street Journal Real Time Report has a post entitled, Here’s How Much Poverty Has Declined in China and, guess what, it’s a helluva lot.  But why talk about it when a graph can do a much better job at showing it:

“The sharpest decline came in China, where the extreme poverty rate fell to 12% in 2010 from 84% in 1981.”

I think that is incredibly impressive.

What do you think?

 

 

I have always thought China’s ghost cities were overrated in terms of their economic importance/significance.  The anti-China crowd loves to point at them as proof of China’s inefficiencies and evidence of an eventual and certain economic downfall.  Yes, they do evidence inefficiencies, but so what?  Go to even the most well functioning economy and you will see pockets of inefficiencies and abandonment.  I went to Toledo Ohio during economic boom times (was it 2006) and was shocked at its downtown, which felt at least half vacant.  Would it have been fair for me to use that as proof of America’s downfall?  Of course not.

Isolated instances of inefficiencies do not an economy make.  Yes, ghost cities make for good symbols, but unless you can quantify their numbers and their impacts, I just don’t care.

I now have even more reason for not caring.  The Wall Street Journal’s always excellent Real Time Report just came out with a story, entitled, Analyst: I Ain’t Afraid of No ‘Ghost Cities.’  The Real Time story is on an article [no link given nor found] by “economist and veteran China-watcher Jonathan Anderson” entitled “Hurray for China’s Ghost Cities.”  In that article, Anderson writes on how China’s investing in “’ghost cities’” to underpin growth, China saved itself from even more unwise overinvestment in areas that could have done lasting damage to the economy, such as manufacturing.”:

Even though China has been investing almost 50% of GDP for the past few years, Mr. Anderson doesn’t see much evidence that it’s resulted in widespread industrial overcapacity. He notes that industrial profits have been picking up along with sales, suggesting that manufacturers still have plenty of pricing power. And, in contrast to the situation a decade ago when the last credit bubble burst, China isn’t saddled with a massive glut of industrial commodities that it’s trying to dump on the rest of the world. Steel exports, for example, have increased only modestly this time around.

Mr. Anderson defines “ghost cities” as a relatively narrow slice of investment, conducted mainly by local governments, in urban infrastructure and certain types of construction, notably subsidized “social housing” units rather than commercial housing. They’ve certainly been a black hole, he says, but a hole that has emptied largely into the equally dark vaults of China’s state-owned banks, where bad debts can remain buried for a long time.

“Lesson learned: If you’re going to waste capital best to waste it completely, where it will do the least damage to everyone else,” writes Mr. Anderson.

Makes sense to me.

Is China heading for economic failure or success.  Me, I have no clue, but I am pretty confident that looking at ghost cities for the answer is looking at the wrong tea leaves.

What do you think?

Just discovered a really cool economics site over at the Wall Street Journal’s China Real Time Report. The site is called China Econtracker and it describes itself as “a vital resource for keeping track of developments in the world’s second largest economy.”  It is, and I recommend it for anyone who wants to keep track of what is happening with China’s economy.

What do you think of it?

I am a lawyer, not a policy wonk. This means I prefer dealing with the laws as written or at least as they exist, rather than how they might be. I also am not an HR Manager.  This means I find the whole social insurance for foreigners issue in China a colossal bore. Now I know that it really matters to foreign companies doing business there (I am constantly getting emails asking me about it), but it is in such a state of ever-changing flux (yes, I know that is at least somewhat redundant) that it is already driving me crazy.

If you want to know what is going on with social insurance for foreigners, I recommend you read Professor Stanley Lubman’s post on China Real Time Report, entitled, “Chinese Social Insurance: Will Foreigners Be Able to Opt Out?” It does a great job in explaining the current situation surrounding China’s plans to require foreigners contribute to China’s social insurance.