Quote:
Originally Posted by rickroll
it's a terrible example of poor planning for that reason, the outlier of all outliers
Please know my first girlfriend was born in Beijing and I had a black and white picture of her as a young child holding up Mao's red book, wearing a Mao outfit.
It does not bring me any joy to point out the situation in China. I try to be impartial when making all my statements. It is something that I try to look at because
I need to see how this will affect the global movement of money and investment and my city/country in particular.
I watched several documentaries on the HK - Macau bridge. As an engineer, the bridge is a 11/10 engineering marvel, 10/10 construction speed.
What the documentaries did not cover is any environmental study nor an economic need to build the bridge. When I took the hydrofoil from HK to Macau, in 2017
(just a day before typhoon Hato) I only had to wait around 20 minutes for the next departure. The trip was smooth and inexpensive.
Today I watched a video of a person explaining how to take the bus from HK to Macau.
https://www.youtube.com/watch?v=LFI2BoRi3vM
The bridge trip is super smooth and not difficult. Time stamp 6:30 to about 7:00 and
see how many vehicles you see. for the price of 18.77 Billion USD or 126 B Yuan.
if the Bridge took 3 years to build, it added 6 Billion to GDP for 3 years.
In my book this was an engineering success 100% but financial planning was 0/10. There was no need for the bridge even if the number of trips doubled instead of decreased.
If there was a high demand, it would be very easy to add another sailing time or two or even buy another hydrofoil for 50million (to add to the 14 existing hydrofoils) and run the sailings slightly more often.
After it was built, the bridge adds a very small GDP by employing boarder crossing agents, maintenance crews etc. but a huge negative GDP by being a huge drain on government coffers
because of the interest on 18 Billion dollars expenditures but adding virtually 0 income to the government's coffers by charging cars, trucks and busses for crossing. If this project was
amortized over 40 years it would be a negative 1B per year drain on the government for the next 40 years.
The reason I posted today was that I was got upset. I was having lunch yesterday with the friend that was in West China during Covid and he was telling me that it is very
bad now (economically) in China. One of his Chinese co-workers sent him a message. 4years ago they were making 8000yuan/mo. and now they are making only 3000yuan/month and there
is widespread negative outlook and impossible to get a good job. Unemployment for young people is super high. (over 20% when the government stopped reporting last year)
He said that his friend was contemplating suicide as the outlook is so bleak. I have probably watched over 100 videos in recent weeks saying the same thing, but did not think it was worth bringing up. Until he read the message that his friend had sent, those videos did not seem real.
It is like listening to the war in Ukraine. It is far away and has no real impact until you find out that one of your friends has a Ukrainian gf whose parents were just killed.
I am certain that the HK - Macau bridge is NOT an outlier. You will find the same problem in Residential Construction, High speed rail, Train stations, SOE Manufacturing, Steel, Concrete, Infrastructure, even Electric Vehicles. The quality is very high for the most part but the demand is not there. China has for 40 years been under a supply side economic model, with
the assumption that there is an endless demand to match supply. For the first 20years this was true. I cheered for China's +10% growth rates. China became the world's manufacturing plant. For years 20-30, not so much and for the last 10 years definitely not and to the point where the economy is in total disarray. The last sentence may sound like a criticism, but it is not. It is just an observation. I do think Xi was helping when he tried to rein in
unbridled investment by saying that homes were for living in and not investing, but it did not have enough braking power on the economy. He was correct in thinking that a growth that matched the demand would be slower but more controlled growth that did not rely so much on debt would be better.
Oct 18, 2017 — "Houses are built to be inhabited, not for speculation," Xi said
If you studied first year University Economics you would recognize the simple equation
GDP = C + G + I + Net X
All Western economies just measure C, G, I, Net X and calculate GDP. In China, they set GDP and then tell SOE's (State owned Enterprises) and Firms to create G, I and Net X to match.
In the last 10 years, it has been infrastructure and subsidies to boost G, I and Net X. By extension, when the economy is booming C increases.
Please note that I am not saying this is good or bad, only that it is what I have observed in news and from friends that are in China and/or have recently returned from China.
In recent years, from 2022 on, China has been battered on every one of the 4 components. In addition, if you understand the multiplier effect small changes in any component will be amplified in C. ie. The employee who makes steel gets laid off. He spends less on restaurants, the restaurants spend less on waiters and farm food, the farmers spend less on fertilizer etc.. on and on.
C, Household spending/personal consumption of individuals.... Individuals have cut way back on spending and are saving everything they can. I see endless videos of citizens saying that they have cut way back on personal consumption. The knock on effect is that I also see endless videos of virtually empty malls and businesses shutting down due to lack of customers. This has lead to the
Lay Flat Culture of the young generation.
G, Government Expenditures...the government has cut back on infrastructure projects. Bridges, Dams, High Speed rails, Train Stations, all put on hold because they have negative returns. no more high speed rail and bridges like the HK-Macau bridge are being approved. For certain this was done in recognition of malinvestment. I see many videos of the government blaming this on corruption. You know that things are really bad when the government starts laying off iron rice bowl employees like bus drivers and garbage collectors, increases fines, claws back prior year bonuses, and starts 30 years of company tax audits to increase government income.
Jan 2024
"Increasing its efforts to manage $13 trillion in municipal debt, the State Council in recent weeks issued a directive to local governments and state banks to delay or halt construction on projects with less than half the planned investment completed in 12 regions across the country, the sources said."
I , Company/Firms investing in manufacturing equipment, buildings, inventories... I is clearly decreasing. Foreign companies are fleeing China, SoE's and Private Companies like Foxconn are cutting back on production. Production is moving to lower cost SEA countries like Indonesia, Philippines, Vietnam. I have seen video after video of private companies posted by employees saying that after 30-40 years their company is closing down and 100's or 1000's of employees have been let go. Foxconn (makes Apple products) being one of the most famous shutting down plants and laying off 50,000 employees in Nanning
"A local man told the report the plant required massive resources to go with its 50,000 employees. This included 60 tons of rice per day, as well as 280 pigs, 1.2 million eggs, and 80,000 chickens."
That single plant supported Hospitals, nurseries, schools/teachers/farmers/cooks, restaurants, theaters, entertainment, fire departments, police, ..essentially a whole city build around those employees. usually 2.5x the plant workers worked in support of those employees directly, NOT including those that worked upstream or downstream in the product production cycle such as small component suppliers, (chips etc.) truckers, warehouse, freight forwarders it goes on and on.
Net X (Exports minus Imports) China is being blocked by more and more countries (USA, EU, Austrialia, Canada, Mexico, Turkey... etc) saying that China is dumping low cost materials (like Steel and cement and Aluminum) that used to go into infrastructure projects) These goods are now being subject to high tariffs. This number is hard to cheat on because other countries report on imports , which equates to China's exports.
CNN March 26, 2024 The oversupply of Chinese goods in key industries is stoking tensions between the world’s biggest manufacturer and its major trading partners, including the United States and the European Union. Its global trade surplus in goods has soared and is now approaching $1 trillion. But China needs to increase exports as a key measure to revive its economy, which is grappling with a protracted property slump, weak household spending and a shrinking population among other problems.
I used to know this stuff well as I used to import goods from China and you had to fill out forms (Form A) that stated the category of good so that the importing country could apply the appropriate tax on that value of goods
I can speak on any of these topics in detail if anyone is interested.
As a secondary note, I am beginning to see the knock on effects of the Chinese economy in my city's real estate market as my city/country was/is a top investing target of wealthy Chinese.
Last edited by mindflayer; 07-12-2024 at 03:01 AM.