tag:blogger.com,1999:blog-5235419263414453422.post287754229100601664..comments2024-02-23T01:30:06.101-08:00Comments on Early Warning: Is the Chinese Construction Industry Too Large?Stuart Stanifordhttp://www.blogger.com/profile/07182839827506265860noreply@blogger.comBlogger12125tag:blogger.com,1999:blog-5235419263414453422.post-20305404161994326582013-04-10T23:10:22.823-07:002013-04-10T23:10:22.823-07:00I read your recent post on peak oil, not clear we ...I read your recent post on peak oil, not clear we will quickly fall hard. however, even plateau may be hard for china to continue rapid growth. Exporters are exporting less, Europe and US have so far stepped aside to allow more for china, but it takes higher prices to persuade consumers to step aside. Not a problem per se for chinese, but this implies at best slow growth and maybe perpetual recession in the west... <br /><br />Pettis point is that china must soon move to internal consumption, and that this change also implies much reduced investment along with sharply reduced growth. Corruption, pollution, reduced exports, ever higher cost of oil, capital flight, plus no ability to change government to vent resentment... consider that Japan did not have anything like this combination of problems until their housing/equity bubbles popped.<br /><br />You make a good point that they may eventually need more housing, but IMO other problems will soon slash growth.Unknownhttps://www.blogger.com/profile/16834734630487217746noreply@blogger.comtag:blogger.com,1999:blog-5235419263414453422.post-74553301975856893222012-11-21T09:19:27.855-08:002012-11-21T09:19:27.855-08:00Unknown - thank you very much for that lengthy com...Unknown - thank you very much for that lengthy comment. You sound very well informed to my ears.Jameshttps://www.blogger.com/profile/16069860882299265079noreply@blogger.comtag:blogger.com,1999:blog-5235419263414453422.post-30852618516348211262012-11-21T04:38:24.358-08:002012-11-21T04:38:24.358-08:00Great post as usual. Unusually, as a planner livin...Great post as usual. Unusually, as a planner living in China I may have something to add here.<br /><br />The potential housing market is always the bedrock argument of the optimists - XX million new urban residents coming down the pike, you can't go wrong! But I think the argument of the bears is not that too much housing is being built, but that the wrong kind of housing (i.e. luxury flats) is being built and that a grotesquely large proportion of the Chinese economy, especially the banking system and local governmental revenues, depends on it continuing to get built and to rise in price beyond any possible market's ability to pay for it. So you are right that "there will be ample demand for those apartments at some point." The problem is that the road from here to there might be paved with the wreckage of developers, banks, local government finances, and everyone else who has invested in the housing market, which turns out to be practically everyone.<br /><br />Regarding the efficiency of investment in infrastructure, it's essential to remember that China has not developed evenly. The coast, especially around Shanghai and other cities, is very close to developed-world levels of per capita GDP and in many cases now has better (because all brand new) infrastructure. Whereas the west, northeast and southwest are a decade or two behind, and this makes a big difference as to the ability of new infrastructure to raise productivity and boost the economy.<br /><br />Finally, China is more concrete heavy than the US for both reasons you mention - they are at a more concrete-intensive stage of development (the high speed rail system alone uses mind-bending amounts of concrete) and Chinese residential construction is essentially all concrete, no wood or steel at all. Even in commercial structures, steel is much less common than in the US.<br /><br />Sorry for the lengthy comment. My personal view is that an actual crash brought on by some combination of housing crisis and mis-spent investment is unlikely - <br />the central government has the financial resources and discipline to do whatever is necessary to avoid a mess. But a series of expensive bailouts that end up shaving several points off of growth for a long time is very plausible, and also quite bad.Don Johnsonhttps://www.blogger.com/profile/00296039690749876678noreply@blogger.comtag:blogger.com,1999:blog-5235419263414453422.post-39395959905241004012012-11-20T18:53:47.994-08:002012-11-20T18:53:47.994-08:00Re: China and Japan.
China's population is ag...Re: China and Japan.<br /><br />China's population is aging at a greater rate now than Japan's was in the 40's. So while from the stage-of-urbanization factor it might look like China has several decades of high construction growth to go, from a demographic standpoint, China right now is probably around where Japan was in the 80's or even 90's. So Michael Pettis is probably going to be more right than wrong. Elderly people aren't going to move en masse to urban areas as much as younger people are.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5235419263414453422.post-32361283530689344682012-11-20T18:39:54.460-08:002012-11-20T18:39:54.460-08:00I have found Chovanec's multipart blog posting...I have found Chovanec's multipart blog postings about China's housing situation, part 1 here: http://chovanec.wordpress.com/2012/07/23/whats-driving-chinas-real-estate-rally-part-1/ <br /><br />because:<br />- He is an economist<br />- He actually lives in China<br />- He promised five posts on the subject, has only posted three, and has mysteriously stalled. I wonder if he is rethinking his thesis.<br /><br />Interesting nonetheless.Jameshttps://www.blogger.com/profile/16069860882299265079noreply@blogger.comtag:blogger.com,1999:blog-5235419263414453422.post-44839573535303687242012-11-20T11:17:06.714-08:002012-11-20T11:17:06.714-08:00Stuart -
I think you're dead on in your secon...Stuart -<br /><br />I think you're dead on in your second half analysis that we're seeing a slightly skewed number on cement production due to the Chinese infrastructure build out that is accompanying the residential construction boom. I'm not sure where you could get the historical figures on international cement production, but it seems that it would make more sense to look at the production numbers per capita during periods of intense infrastructure construction (i.e. U.S. 1956 Interstate Highway Act, Spain's autopistas/autovias system from the 1960's, etc). Second, I wouldn't discount the nature of Chinese construction as being more cement heavy then other economies. Housing demand in the U.S. is heavily weighted towards single family detached homes (~60% of the market historically), meanwhile Chinese housing demand is driven by multi-unit apartment buildings where most of the urbanizing population can only afford minimal housing space (and developers have higher margins). The latter is concrete intensive while the former uses very little apart from the slab.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5235419263414453422.post-12284781713087166542012-11-20T09:24:42.364-08:002012-11-20T09:24:42.364-08:00I have to wonder what effect automation is going t...I have to wonder what effect automation is going to have on the Chinese economy.sunbeamhttps://www.blogger.com/profile/16540822135478202229noreply@blogger.comtag:blogger.com,1999:blog-5235419263414453422.post-92109724347028830232012-11-20T09:14:25.608-08:002012-11-20T09:14:25.608-08:00Alex: Weep?
Seriously, I think western climate a...Alex: Weep?<br /><br />Seriously, I think western climate activists will be most effective by focussing on making our own societies carbon neutral. We will have very limited ability to influence China and India if we aren't clearly setting a decent example (and particularly in the US, we've mostly been setting a terrible example so far). Developing countries are always going to tend to be late adopters. "Think globally but act locally" is probably very good advice here.Stuart Stanifordhttps://www.blogger.com/profile/07182839827506265860noreply@blogger.comtag:blogger.com,1999:blog-5235419263414453422.post-9558805686472957112012-11-20T08:57:50.152-08:002012-11-20T08:57:50.152-08:00Ok Stuart,
and what about this?
World Resources ...Ok Stuart,<br /><br />and what about this?<br /><br /><a href="http://www.guardian.co.uk/environment/2012/nov/20/coal-plants-world-resources-institute?intcmp=122" rel="nofollow">World Resources Institute identifies 1,200 coal plants in planning across 59 countries, with about three-quarters in China and India</a><br /><br />Any advice for climate activists?<br /><br />AlexAlexander Achttps://www.blogger.com/profile/16845172528191878930noreply@blogger.comtag:blogger.com,1999:blog-5235419263414453422.post-91654091601705576532012-11-20T08:54:43.070-08:002012-11-20T08:54:43.070-08:00One thing I started wondering about last night is ...One thing I started wondering about last night is whether the very accelerated rate of China's urbanization is going to run into a novel constraint which is the age of potential migrants. I would assume that in processes of urbanization generally, it's young people that move to the city: older peasants seem likely to lack the skills/education to take up a job in the city (and the one child policy will make it hard for their not very numerous grandkids to take up the slack and support them). Even in the very late stages of US urbanization you see this pattern where the average age of farmers is high and has been rising for decades. But a good half of China's urbanization is going to happen in only 40 years - half a lifetime. Thus I wonder if China might run out of young potential migrants some time before it runs out of rural population altogether. This wouldn't really have happened in the rather slower urbanization processes that other countries have followed.Stuart Stanifordhttps://www.blogger.com/profile/07182839827506265860noreply@blogger.comtag:blogger.com,1999:blog-5235419263414453422.post-70489588166801570872012-11-20T06:08:11.318-08:002012-11-20T06:08:11.318-08:00There is also a significant "Catch-22" d...There is also a significant "Catch-22" developing. Europe is China's largest trading partner. The increase in China's Oil imports seems to be coming directly from Europe's former allotment of the World's exported Oil. Total oil imports/consumption in Spain, Italy, Greece, Portugal et al are off and it is pretty clear where that Oil is now going. I think a reasonable argument can be made about Europe's demand falling with its Oil imports (among other things). As China continues its development of productive infrastructure its internal demand will continue to rise - at the expense of its largest customer, Europe.<br /><br />Ergo, at some point in the not to distant future either China's domestic demand will fill Europe's current role, or there will be a serious contraction in both China's manufacturing AND construction.<br /><br /> A Quaker in a Strange Landhttps://www.blogger.com/profile/15425198389944137571noreply@blogger.comtag:blogger.com,1999:blog-5235419263414453422.post-11870307211315796222012-11-20T05:00:45.414-08:002012-11-20T05:00:45.414-08:00Well done, Stuart, and well explained.
Well done, Stuart, and well explained.<br /><br />A Quaker in a Strange Landhttps://www.blogger.com/profile/15425198389944137571noreply@blogger.com