China's economy heading for a spill? Hi folks, long time no see, as my students enjoy saying. And no wonder, the Chinese (Mandarin) language doesn't use articles like "a'," "an" and "the", or verb tenses, so "long time no see" is a more literal translation of what a Chinese person might actually say, as opposed to, "It's been a long time since the last time we saw each other."
I have all kinds of resolutions for blog posts in the summer months -- pictures! trenchant commentary! unsolicited opinions! jokes! reflections on teaching! insider scoops! but for now, please excuse me while I finish the last of the oral exams, mark the last tests, enter the last scores in the spreadsheet, and pack up another semester...
I have all kinds of resolutions for blog posts in the summer months -- pictures! trenchant commentary! unsolicited opinions! jokes! reflections on teaching! insider scoops! but for now, please excuse me while I finish the last of the oral exams, mark the last tests, enter the last scores in the spreadsheet, and pack up another semester...
Just a brief note about the current stock market collapse in China. I am no economics expert. In fact, my eyes glaze over whenever I try to read an article about the IMF or the World Bank. This collapse looks similar to the dot com bubble/bust of the late nineties. I have no idea what the consequences will be. Perhaps Communist Party hard liners will at last be able to say, "See? Capitalism sucks. Told you." And maybe there is a connection between China, China hackers, the Chinese stock market, and today's shutdown of the NYSE. Wheels within wheels, people.
One thing Ross and I do know about is the boom and bust of construction cycles. He's worked in construction all his adult life, so we have lived through lots of booms and busts and we know how government policy has a direct influence on whether you hear hammers ringing at a construction site or not. We learned in fact that the political party that my husband's union sent his dues to, the New Democratic Party, chased Capital out of the province every time we elected them and presto -- no more construction jobs. After this happened twice we decided, gee, maybe we won't support the party that made us, personally, poorer because it couldn't learn this simple lesson -- the people who risk their money to build companies and develop properties will just move their money elsewhere when socialists try to take it.
The housing busts that follow housing bubbles are pretty painful, too. The well-meaning efforts, by Republicans and Democrats, to stimulate more home ownership in the United States led to world-wide catastrophe. Food for thought about whether putting your all-knowing hand on the levers of the economy to help this group or that group is a great idea, no? What was it Adam Smith said? Oh, yes: The statesman who should attempt to direct private people in what manner they ought to employ their capitals would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted, not only to no single person, but to no council or senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it.
One thing Ross and I do know about is the boom and bust of construction cycles. He's worked in construction all his adult life, so we have lived through lots of booms and busts and we know how government policy has a direct influence on whether you hear hammers ringing at a construction site or not. We learned in fact that the political party that my husband's union sent his dues to, the New Democratic Party, chased Capital out of the province every time we elected them and presto -- no more construction jobs. After this happened twice we decided, gee, maybe we won't support the party that made us, personally, poorer because it couldn't learn this simple lesson -- the people who risk their money to build companies and develop properties will just move their money elsewhere when socialists try to take it.
The housing busts that follow housing bubbles are pretty painful, too. The well-meaning efforts, by Republicans and Democrats, to stimulate more home ownership in the United States led to world-wide catastrophe. Food for thought about whether putting your all-knowing hand on the levers of the economy to help this group or that group is a great idea, no? What was it Adam Smith said? Oh, yes: The statesman who should attempt to direct private people in what manner they ought to employ their capitals would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted, not only to no single person, but to no council or senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it.
The experts have been warning that China has been in a government-created housing bubble for years now. For years we've been seeing pictures of the strange "ghost cities" all over China, large apartment complexes with nobody living there. Chinese apartments are sold unfinished -- that is, truly unfinished, no fixtures, sink, just the bare cement walls -- so a "ghost" apartment may in fact be owned by somebody who has bought the place for their son in contemplation of a future marriage, even though the apartment isn't needed at present. A middle-class Chinese woman will not get married unless her groom and his family buy an apartment for the newlyweds, preferably one without in-laws. Because women are in short supply, it's a seller's market for brides. Also as the result of government policy, of course.
Government policy also fuels the amazing building boom across China -- municipal governments have used the Chinese version of eminent domain to take land from villages, clear away the goats and chickens, and contract with private companies to build business centers and apartment complexes. And in this process a lot of people have gotten very rich.
Government policy also fuels the amazing building boom across China -- municipal governments have used the Chinese version of eminent domain to take land from villages, clear away the goats and chickens, and contract with private companies to build business centers and apartment complexes. And in this process a lot of people have gotten very rich.
Is it all a mad whirligig to financial doom? Or is there a reason for the apparent irrationality?
With millions of people leaving the farm and moving to the cities looking for jobs, the government focuses on keeping unemployment rates low. Thus, building projects offer lots of jobs for unskilled construction labor. (I mean no slur to skilled carpenters and tradesmen, which China could use a lot more of).
It's very important to the government to keep people employed to stave off unrest. But instead of food banks or welfare handouts, Chinese officials build for the future in the way that our municipal governments don't. Near our college, workers are landscaping huge elaborate linear parks for apartment dwellers who don't yet exist.
In contrast, in my home town, the city approves a subdivision in the hills such as Crawford Heights. The residents of Crawford Heights have to get into their car to get to any amenity and drive down an unimproved two lane country road to get into town. They were promised an elementary school -- hasn't happened. In Shandong Province, the road would have been built first, along with the landscaped parks and the schools and the shopping center.
As nice as that is, from my North American perspective, these Chinese levels of activity and the size of the public workforce look financially unsustainable. For example, as I've mentioned, there are public plantings of trees and shrubs and flowers on a massive scale, which will require care for the foreseeable future, especially since the Chinese plant everything so densely. That's a lot of labor to prune, water and haul fallen leaves away for decades to come.
Even though the Chinese officials don't have to curry the votes of their citizens, they still have to keep them happy. So say the experts. They say that the Chinese people are used to galloping growth rates -- the rapid increase in material well-being is the only thing that's kept the party from facing another Tiananmen-style uprising, so a slowdown, any cutbacks in public works, and rising unemployment will be a tremendous threat to the regime. We'll see.
If you're interested, this short article is useful for explaining China's current economic situation and problems in terms that even I can understand.
With millions of people leaving the farm and moving to the cities looking for jobs, the government focuses on keeping unemployment rates low. Thus, building projects offer lots of jobs for unskilled construction labor. (I mean no slur to skilled carpenters and tradesmen, which China could use a lot more of).
It's very important to the government to keep people employed to stave off unrest. But instead of food banks or welfare handouts, Chinese officials build for the future in the way that our municipal governments don't. Near our college, workers are landscaping huge elaborate linear parks for apartment dwellers who don't yet exist.
In contrast, in my home town, the city approves a subdivision in the hills such as Crawford Heights. The residents of Crawford Heights have to get into their car to get to any amenity and drive down an unimproved two lane country road to get into town. They were promised an elementary school -- hasn't happened. In Shandong Province, the road would have been built first, along with the landscaped parks and the schools and the shopping center.
As nice as that is, from my North American perspective, these Chinese levels of activity and the size of the public workforce look financially unsustainable. For example, as I've mentioned, there are public plantings of trees and shrubs and flowers on a massive scale, which will require care for the foreseeable future, especially since the Chinese plant everything so densely. That's a lot of labor to prune, water and haul fallen leaves away for decades to come.
Even though the Chinese officials don't have to curry the votes of their citizens, they still have to keep them happy. So say the experts. They say that the Chinese people are used to galloping growth rates -- the rapid increase in material well-being is the only thing that's kept the party from facing another Tiananmen-style uprising, so a slowdown, any cutbacks in public works, and rising unemployment will be a tremendous threat to the regime. We'll see.
If you're interested, this short article is useful for explaining China's current economic situation and problems in terms that even I can understand.
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