[Loe Diben]

There is no real difference economy wise if your building houses or infrastructure. To the contrary belief that there can't be too much housing or infrastructure, there certainly can be and it has happened many times in human history before even capitalism was invented.

The basic idea is that everything costs money to build or debt or financing or assets. If your return on investment is below 1-1 then you shouldn't be building it unless it is a common good. Actually even 1-1 ratio is bad because there are always at a given time investment that will produce more than 1-1 ratio meaning that they should be prioritized first. It goes down to the whole efficiency of economy argument and those who have inefficient economies will basically lag severely behind the rest and become poor while the ones that do those investment properly will prosper.

Going below 1-1 is basically becoming a zombie company/economy. There are plenty of them around even in the West. Usually these companies have to go in to bankruptcy and to the common belief that bankruptcy is bad, it is not. It is a tool to free up assets to be used in more productive ways in a fast manor in other sectors or places. And if you do not declare bankrupcy then you are just building up losses for the company and economy.

Now you can argue that infrastructure or housing is a common good but that is not something that you or me can decide. This is a societal decision of a country taking in to account the downsides of that decision that it will be a drain on the society if you decide it. But if you consider just the pure economic aspect of housing and infrastructure then China has crossed the road of no-return on its investment back in like 2010 for infrastructure and housing if not earlier. Not everywhere once again since Geography matters but in a lot of places. They will never get enough users of infrastructure and housing especially with declining population as of right now.

@JohnRawls ROI is just an expectation, but whether things will go as expected is another matter. If you question from the perspective of hindsight why you should do this kind of loss-making business with an investment return rate of less than 1, then unfortunately, this is investment. There is no business that is 100% guaranteed to make a profit, and no one can predict the market development 100%. Before the development of a real estate, the expected return on investment must be much greater than 1, otherwise the project will not be approved, because this is not a small amount, and no one wants to screw it up. As for investment failure, I don't think investors will have any complaints.

Real estate is not a state investment, but a corporate investment. Infrastructure construction is synchronized with people. There are roads first and then buildings. This is one example of how real estate and infrastructure are two different things. Rather than the government building roads for the purpose of building housing. People do not choose certain properties. This is an investment failure by real estate developers and has nothing to do with the government.

[Wellsy]

Spoiler: show

Its a bit more complicated then that. The thing that you wrote is basically correct if you talk about investment from EU or US but it is not just intervention. Intervention by itself really doesn't matter to business and since we are talking about high tech or high creativity industries than it doesn't matter even more. How are you going to regulate the most precise machinery equipment or the most advanced CPU design? What matters is uncertainty legally, that your business can be arbitrarily given away or taken by the state because the party thinks that it is important. Or it can be given to a private individual who is loyal to the party. Or that your research can be undermined by a government institution to propagate Chinese influence for example through bugs in software to spy on people etc. Outsiders won't invest in to high tech/high yield industries because it takes decades to build them up and then get a profit, the ROI is too long and the uncertainty both political or government structure wise or foreign policy wise is impossible to predict and too risky.

But that is just one part of it. You can grow the economy yourself albeit slowly because investment just speeds up the process folds. You can invest yourself like China is doing now but once again you run in to the same problem that now people are unwilling to start business for the same reason even your own. So China is left with manufacturing that it got for export and infrastructure construction and investment in to both categories. But at some point you can't grow it anymore because there is a limited need in infrastructure and manufacturing. This example might have been brought before but digging a hole is creating GDP, it is useless GDP but its GDP. This is in essence that China has been doing for now, there is too much bloat in useless projects that don't really serve any purpose. You don't need 20 bridges or 20 railroads if people can use realistically only 2 and the other 18 are not that used. Since you pay for those holes or bridges or railroads then you accumulate debt or loose money if you used money. Debt will then pile on like a brick holding you down.

And then we come to just pure inefficiency of Chinese economy. Their economy, sort of like Russias economy, is based around large enterprise which is often controlled by the CCP in one way or the other. You can be a private business but you are a private business that is either loyal to the CCP or you are out of business. Then there are the state run monopolies so to speak in their categories. There are many forms of how the central governing body controls those enterprises be it loyalists or outright coersion and permitting stealing of those businesses or subsidies without which that business won't survive but the bottom line to all that is the businesses themselves are not very efficient and are run by pretty much men whos main quality is loyalty and not really business prowess or invention so to speak. These kind of things might be a good start if you have 0 gdp but over a long period of time something needs to be done about them because if your salaries are no longer 0.1 cent then this inefficiency starts to become a bigger and bigger problem overall for the economy. They are basically an anchor for everything else within the economy.

These models are essentially good for starting from 0 or copying existing technology. The model did serve its purpose for a time but now you have to reform to move on.You are not inventing or producing cutting edge stuff here and that is the main problem.

One issue I seekther than investment is how the subsidies that have given China an advantage in international investment has meant that there is less of a domestic market because wages are crap, there isn’t as much welfare as in many wealthy nations and so many Chinese are more insecure about their consumption and this is pronounced in how after lockdown, opening up didn't produce a massive frenzy of consumption but a more restricted kind although China benefited from the consumption of those internationally.

China doesn't seem to be moving towards reforming their economy away from the dead end projects as they've already built plenty of infrastructure that it doesn't need more. So instead of changing their economy to be for domestic consumption more so and not entirely for foreign investment in commodities, they may try to maintain production but push harder on European markets to sell their goods. This is more politically tenable and does not require an advanced manuever as to restructure their economy.

[JohnRawls]

One issue I seekther than investment is how the subsidies that have given China an advantage in international investment has meant that there is less of a domestic market because wages are crap, there isn’t as much welfare as in many wealthy nations and so many Chinese are more insecure about their consumption and this is pronounced in how after lockdown, opening up didn't produce a massive frenzy of consumption but a more restricted kind although China benefited from the consumption of those internationally.

China doesn't seem to be moving towards reforming their economy away from the dead end projects as they've already built plenty of infrastructure that it doesn't need more. So instead of changing their economy to be for domestic consumption more so and not entirely for foreign investment in commodities, they may try to maintain production but push harder on European markets to sell their goods. This is more politically tenable and does not require an advanced manuever as to restructure their economy.

This is too simplistic. What realistically can they push to US or EU markets that they aren't pushing already? Sure they will subsidise and we will punish them for those subsidies by cutting them off. There is no realistic way to push more exports to grow Chinese economy even with subsidies. This also excludes increasing competition from anybody else in the region or India for example. There is only so much stuff that you can build before people do not need more stuff. American and European economy is 80% services and only 20% industry and agriculture after all.

The crucial industries that are in EU or US are all high end that China can't mimic and won't be able to mimic any time soon. Precise machinery? Nah, I doubt anyone can beat the Germans in that. Litography equipment of ASML? They are 10-15 years ahead of Japanese and like 30 years ahead of the Chinese so I doubt anyone can catch up any time soon. etc etc etc

This is the problem with the middle income trap -> You have to grow your internal market and your high end creative/research markets to grow further. But growing internal market and high end creative/research markets doesn't go well hand in hand with total control, autocracy, dictatorships and absence of rule of law.

[JohnRawls]

One issue I seekther than investment is how the subsidies that have given China an advantage in international investment has meant that there is less of a domestic market because wages are crap, there isn’t as much welfare as in many wealthy nations and so many Chinese are more insecure about their consumption and this is pronounced in how after lockdown, opening up didn't produce a massive frenzy of consumption but a more restricted kind although China benefited from the consumption of those internationally.

China doesn't seem to be moving towards reforming their economy away from the dead end projects as they've already built plenty of infrastructure that it doesn't need more. So instead of changing their economy to be for domestic consumption more so and not entirely for foreign investment in commodities, they may try to maintain production but push harder on European markets to sell their goods. This is more politically tenable and does not require an advanced manuever as to restructure their economy.

So China didn't manage to think of anything new and is basically now pumping investment in to manufacturing more and in infrastructure a bit less. Seems you were right. But this is essentially the same thing what they did with property, there is only that much stuff that the world needs or willingly accept because it is subsidized manufacturing.

The long trend for this is that China and Europe will put tarifs to fight this, China will probably get nowhere and piss of many countries while once again, investing and inflating debt now in manufacturing because Return on Investment is less than 1.

Why don't the Chinese learn, just look at any developed country. You have to have a prosperous consumption within your own country. US and Europe are rich and capable of growing their own economies because like 55% and 65% are our consumption numbers as percentage of GDP. It is like 35% in China for comparison.

[Fasces]

So China didn't manage to think of anything new and is basically now pumping investment in to manufacturing more and in infrastructure a bit less.

Western commentators continue to frame China mostly as an export-oriented processing economy, importing raw materials then re-exporting them as manufactured products.

While that may have been true in the late 1990s and early 2000s, it is no longer an accurate and representative picture.

China has shifted from a small open economy into a very large continent-sized and much more closed economy in the 2020s.

It has become more like the United States, and quite different from trade-dependent economies such as Japan, Germany or the United Kingdom, or large emerging markets like Brazil.

Chinese exports accounted for almost 20% of gross domestic product in 2018, down from a 2006 peak of 36%, World Bank data shows.

https://www.reuters.com/article/idUSKBN20Q2BL/

World Bank Exports of Goods and Services as % of GDP (2022):

- Australia 25.4%
- Austria 60.4%
- Belgium 95.7%
- Canada 33.4%
- China 20.1%
- France 34.7%
- Germany 50.9%
- Israel 31.7%
- Italy 36.4%
- Poland 62.7%
- Spain 40.2%
- United Kingdom 33.4%
- United States 11.8%
- OECD Average: 30.4%
- High Income Average: 34.3%

You have to have a prosperous consumption within your own country. US and Europe are rich and capable of growing their own economies because like 55% and 65% are our consumption numbers as percentage of GDP. It is like 35% in China for comparison.

World Bank Final Consumption Expenditure as % of GDP (2022):

- Australia 70.1%
- Austria 72.1%
- Canada 73.5%
- China 56.6%
- France 77.7%
- Germany 73.2%
- Israel 70.4%
- Italy 78.8%
- Poland 76.1%
- Spain 77.8%
- United Kingdom 82.9%
- United States 82.9%

[JohnRawls]

:eh:



World Bank Exports of Goods and Services as % of GDP (2022):

- Australia 25.4%
- Austria 60.4%
- Belgium 95.7%
- Canada 33.4%
- China 20.1%
- France 34.7%
- Germany 50.9%
- Israel 31.7%
- Italy 36.4%
- Poland 62.7%
- Spain 40.2%
- United Kingdom 33.4%
- United States 11.8%
- OECD Average: 30.4%
- High Income Average: 34.3%



World Bank Final Consumption Expenditure as % of GDP (2022):

- Australia 70.1%
- Austria 72.1%
- Canada 73.5%
- China 56.6%
- France 77.7%
- Germany 73.2%
- Israel 70.4%
- Italy 78.8%
- Poland 76.1%
- Spain 77.8%
- United Kingdom 82.9%
- United States 82.9%

Final Consumption Expenditure is not exactly the data that I am looking it. It containers many expenditure factors including government final consumption and so on.

Here is the household data for private consumers since you like the world bank:

Source: https://data.worldbank.org/indicator/NE ... s=CN-EU-US

Edit: Worldbank image is funky and doesn't want to appear. Link above.

Exports/Imports as %ofgdp are confusing. They don't add that much to gdp because its calculated as GDP = C + I + G + X(total exports) – M(total imports). Actually it diminishes GDP in most developed countries since we are net importers.

[Fasces]

If your goal is to remove all government-influenced spending, this figure isn't much better. NPISH includes spending by independent non-profit institutions, though these institutions often receive healthy subisidies and funding by the government. China doesn't have as healthy a civil society as the EU or US, so it is naturally lower because such institutions aren't 'independent' - but consequently, this figure also doesn't really tell us anything about general household spending by itself, given the popularity of private-public partnerships in the US and EU.

[JohnRawls]

If your goal is to remove all government-influenced spending, this figure isn't much better. NPISH includes spending by independent non-profit institutions, though these institutions often receive healthy subisidies and funding by the government. China doesn't have as healthy a civil society as the EU or US, so it is naturally lower because such institutions aren't 'independent' - but consequently, this figure also doesn't really tell us anything about general household spending by itself, given the popularity of private-public partnerships in the US and EU.

By the looks of it its negligible. OECD data just for household consumption are pretty much the same numbers: https://data.oecd.org/hha/household-spending.htm They use different methodology though probably.

Not sure why you are trying to say that its the same in Europe or US. There has always been a difference in those regards and its not something good or bad, it is just, well reality that can be changed.

As for my main point, why exactly do you try to defend excessive investment that won't produce a return. At least in infrastructure you had an argument that "It can produce more benefits than just money" sure, we talked about it and yeah it can but at a certain point it doesn't matter was my argument. But there is no such argument for manufacturing though, at the end of the day you make goods and you need to sell those goods with a return higher than 1 per Yuan/Dollar/Euro whatever. There is a saying in Russian "stepped on the same rake" which literally means repeating the same mistake basically and China is basically trying to do the same thing right now in relatively the same way. Isn't that the wrong way to do it?

[Fasces]

Won't produce a return? China's major investment right now is in affordable mid-tier products for emerging Asian, Middle Eastern and African markets, where it is absolutely growing. The Global South isn't going to cease developing economically and consumer demand isn't going to fall there. China's labor productivity is still well below OECD nations, with room to grow, so even a declining population won't necessarily effect its ability to meet growing demand in these regions.

[JohnRawls]

Won't produce a return? China's major investment right now is in affordable mid-tier products for emerging Asian, Middle Eastern and African markets, where it is absolutely growing. The Global South isn't going to cease developing economically and consumer demand isn't going to fall there. China's labor productivity is still well below OECD nations, with room to grow, so even a declining population won't necessarily effect its ability to meet growing demand in these regions.

Yeah okay, but it kinda ignores that consumption of goods is not a infinite number and it also ignores that literally all countries in the world will become protectionist against China since its Illegal since we are talking about export subsidies here and they will pile up on to China with WTO rules violations and such or/and take unilateral action.

[Fasces]

it also ignores that literally all countries in the world will become protectionist against China since its Illegal since we are talking about export subsidies here and they will pile up on to China with WTO rules violations and such or/and take unilateral action.

Absurd statements like this always give me "US Pundits Map of the World" vibes.

[JohnRawls]

Absurd statements like this always give me "US Pundits Map of the World" vibes.

How is protecting your economies from subsidized export which is unfair competition "US pundits". US is not the only one that does it. Europe also as is rest of the world including India and Chinese neibhours.

[Fasces]

Mentions US, Europe, China, and India.

Map checks out.

[JohnRawls]

Mentions US, Europe, China, and India.

Map checks out.

You missed the neibhours part, no?

[Fasces]

For a liberal, who in theory believes in comparative advantage, you really think the vast majority of the Global South is going to enact protectionist tariffs against companies like Xiaomi or Niu to protect industries they don't have in the first place? How'd the world's sanctions on Russia work out? There just isn't as much consensus as your comment presumes.

[AFAIK]

One of the reasons developed countries have high consumption is the fact that they have extensive welfare states that provide healthcare, education and pensions to everyone at great expense to the state. In China saving rates are much higher because people can't rely on the gov't to take care of them. I'd imagine the cost of running massive welfare systems would be much higher than the state led investment and subsidy policy that is currently followed.

[JohnRawls]

One of the reasons developed countries have high consumption is the fact that they have extensive welfare states that provide healthcare, education and pensions to everyone at great expense to the state. In China saving rates are much higher because people can't rely on the gov't to take care of them. I'd imagine the cost of running massive welfare systems would be much higher than the state led investment and subsidy policy that is currently followed.

I mean the end goal should be the wellbeing of the people or high Per Capita GDP I guess in nominal terms. Right now it just seems the investment is going in very unproductive directions that will create debt and not much return. Somebody is going to shoulder the debt. For large countries you need to kinda have that consumption to fall back on in case of world wide or local crysis I would say. Even US runs those programs in one form or the other although they could be described as extreme right on these sort of questions.