Good article via the WSJ:
"Pretty much everybody has been bullish on the prospects for Chinese growth for about as long as we can remember. The sentiment in the markets seems pretty much uniform: “Yeah, they have some short term issues with getting their inflation under control, but the longer term growth path is pretty evident.” Not so fast, says Nouriel Roubini:
China’s economy is overheating now, but, over time, its current overinvestment will prove deflationary both domestically and globally. Once increasing fixed investment becomes impossible – most likely after 2013 – China is poised for a sharp slowdown. Instead of focusing on securing a soft landing today, Chinese policymakers should be worrying about the brick wall that economic growth may hit in the second half of the quinquennium….The problem, of course, is that no country can be productive enough to reinvest 50% of GDP in new capital stock without eventually facing immense overcapacity and a staggering non-performing loan problem. China is rife with overinvestment in physical capital, infrastructure, and property. To a visitor, this is evident in sleek but empty airports and bullet trains (which will reduce the need for the 45 planned airports), highways to nowhere, thousands of colossal new central and provincial government buildings, ghost towns, and brand-new aluminum smelters kept closed to prevent global prices from plunging."
The video above is from the Australian news magazine Dateline, showcasing some of the “ghostmalls,” “ghost-highrises” and “ghost towns,” that are the product of China’s booming economy. We can’t help but wonder when/how this is going to become a worry for the market. "
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