China wasted $6.9 trillion

Discussion in 'China' started by Nicky G, Nov 29, 2014.

  1. Nicky G

    Nicky G Senior Member Senior Member

    Joined:
    Nov 24, 2014
    Messages:
    1,385
    Likes Received:
    1,234
    Location:
    NA
    China wasted $6.9 trillion on bad investment post 2009 - media

    China wasted $6.9 trillion on bad investment post 2009
     
  2.  
  3. Otm Shank2

    Otm Shank2 Regular Member

    Joined:
    Nov 14, 2014
    Messages:
    188
    Likes Received:
    116
    Location:
    canada eh
    Seems like a drop in the bucket for them..
     
  4. Hari Sud

    Hari Sud Senior Member Senior Member

    Joined:
    Mar 31, 2012
    Messages:
    1,054
    Likes Received:
    863
    Location:
    Ontario
    $6.9 trillion a drop in the bucket, hardly......
     
    Sylex21 likes this.
  5. Sylex21

    Sylex21 Regular Member

    Joined:
    Sep 6, 2014
    Messages:
    439
    Likes Received:
    326
    Location:
    USA
    Their entire GDP is about $8 Trillion. Not sure why you'd say that unless you read the part about TRILLION wrong.

    I wish the article elaborated on what they consider "ineffective investment", and what percentage of "ineffective investment" is normal for other nations, to provide some sort of perspective.
     
  6. jus

    jus Senior Member Senior Member

    Joined:
    Mar 31, 2014
    Messages:
    1,848
    Likes Received:
    1,208
    Location:
    Universe
    ^^^

    "Ghost cities" lined with empty apartment blocks, abandoned highways and mothballed steel mills sprawl across China's landscape – the outcome of government stimulus measures and hyperactive construction that have generated $6.8 trillion in wasted investment since 2009, according to a report by government researchers.

    China is this year on track to grow at its slowest annual pace since 1990, and the report highlights growing concern in the Chinese leadership about the potential economic and social consequences if wasteful investment leaves projects abandoned and bad loans overloading the financial system.

    The bulk of wasted investment went directly into industries such as steel and automobile production that received the most support from the government following the 2008 global crisis, according to the report.

    Much of the investment in recent years has been funneled into real estate projects, but apartment sales and prices have fallen this year, leading to fears of an impending property crash. Most of the industries that feed the real estate sector, such as steel, glass and cement, are awash with overcapacity and have been hit hard by the property downturn............. circle,Ghost cities ...price rise of steel, glass and cement..... no one living...... BUBBLE BURST :pound:

    A significant portion of China's post-crisis stimulus binge was simply stolen by Communist Party officials with direct responsibility for boosting growth through investment.......Rampant corruption

    China has ‘wasted’ $6.8 trillion in investment, warn Beijing researchers.
     
  7. Srinivas_K

    Srinivas_K Senior Member Senior Member

    Joined:
    Jun 17, 2009
    Messages:
    4,676
    Likes Received:
    3,355
    They wasted 6.9 trillion in four years and added some percentage to GDP as a result of growth from this investment.
     
  8. Nicky G

    Nicky G Senior Member Senior Member

    Joined:
    Nov 24, 2014
    Messages:
    1,385
    Likes Received:
    1,234
    Location:
    NA
    Investments can certainly shore up GDP during the years of investment but if it fails to generate economic activity in the subsequent years, it becomes a problem. Worse still, the only way to keep the GDP growth rate up is to cover up for the non-performing investments by making even more investments, which the Chinese might be making as we speak. Bad investments can start vicious cycles.

    Unless I am much mistaken 6.9 trillion over four yeas would be 75% of their annual budget. Hardly something to scoff at.
     
  9. LETHALFORCE

    LETHALFORCE Moderator Moderator

    Joined:
    Feb 16, 2009
    Messages:
    20,553
    Likes Received:
    6,565
    Much of the backing for the banks in china is us bonds and treasury notes which pay
    No interest and have no willing buyers on the international market.
     
  10. Otm Shank2

    Otm Shank2 Regular Member

    Joined:
    Nov 14, 2014
    Messages:
    188
    Likes Received:
    116
    Location:
    canada eh
    China is an economic superpower they grow at four indian gdps every forthnight and an american gdp every christmas. This was chump change to them
     
  11. no smoking

    no smoking Senior Member Senior Member

    Joined:
    Aug 14, 2009
    Messages:
    3,174
    Likes Received:
    423
    So, China is going to collapse again?
    Wait, did i just say "again"?
     
  12. roma

    roma NRI in Europe Senior Member

    Joined:
    Aug 10, 2009
    Messages:
    3,252
    Likes Received:
    1,868
    it's a drop in the ocean of what they will have to pay if they insist on keeping
    packland going in one piece .....as time drags on for packland
     
  13. SADAKHUSH

    SADAKHUSH Senior Member Senior Member

    Joined:
    Sep 7, 2010
    Messages:
    1,802
    Likes Received:
    758
    Location:
    Winterland
  14. mattster

    mattster Respected Member Senior Member

    Joined:
    May 30, 2009
    Messages:
    1,048
    Likes Received:
    518
    Location:
    California
    The number seems excessive and maybe exagerated.

    I am sure that if you look at all the state-level corruption, inefficiency, bloated and waste in India = probably over couple of hundred billion as well over a 10 year priod
     
  15. Nicky G

    Nicky G Senior Member Senior Member

    Joined:
    Nov 24, 2014
    Messages:
    1,385
    Likes Received:
    1,234
    Location:
    NA
    I am not sure I even understand what's written here.

    I don't believe that's stated anywhere or even implied.

    The point is wasteful economic activity adds to GDP and since it does not generate any positive activity in subsequent years, the government would need to do more investments only to keep the growth rate up.

    Certainly.
     
  16. no smoking

    no smoking Senior Member Senior Member

    Joined:
    Aug 14, 2009
    Messages:
    3,174
    Likes Received:
    423
    If any country did waist half of its GDP in 4 years, I think "Collapse" is the only direction it is going.

    In last 30 years, most of China's infrastructure projects wouldn't generate much positive activity in first several years.
     
  17. badguy2000

    badguy2000 Respected Member Senior Member

    Joined:
    May 20, 2009
    Messages:
    4,957
    Likes Received:
    613
    after wasting 6.8trillion USD, china' GDP has succeeded in rising from 1 trillon USD(2000) to 10 trillion USD(2014). According to the wonderful analyse,China is to waste another 68 trillion USD,so that china's GDP can rise from 10trillion USD(2014) to 100 trillion USD(2024).
     
  18. Nicky G

    Nicky G Senior Member Senior Member

    Joined:
    Nov 24, 2014
    Messages:
    1,385
    Likes Received:
    1,234
    Location:
    NA
    Not really, governments are usually good at accounting gymnastics to cover over the facts they don't wish to get out.

    For an undemocratic government, it would only be much easier to do so.

    It would be really helpful if you could back that statement up. As in precise investments that were NPA for several years before suddenly starting to generate profit. More significantly how much were these investments worth as a percentage of the GDP.

    Sure go right ahead, waste as much money in NPA as you wish.
     
  19. LalTopi

    LalTopi Regular Member

    Joined:
    Mar 28, 2012
    Messages:
    582
    Likes Received:
    299
    This was not by accident or corruption but by conscious choice. China was heavily export dependent for growth, but with the severe recession in their Western export markets, the Chinese Central authorities faced a stark choice, either to go into recession themselves and face civil discontent, or to 'create' money and pump it into the economy. They chose the latter route and also slightly masking the money creation by managing it through the shadow economy, I.e. local authorities rather than their banks. Result, they avoided recession and maintained growth, but with a lot of investment in useless or inefficient assets. Whether this was a good move or bad move remains to be soon, as China still has plenty of dollar reserves to keep itself solvent. But yes, it's a given that growth will slow substantially over the coming years, and indeed the central authorities are trying to manage a graceful transition towards this target. Trouble with graceful slowdowns is that it might all blowup in your face.
     
  20. Nicky G

    Nicky G Senior Member Senior Member

    Joined:
    Nov 24, 2014
    Messages:
    1,385
    Likes Received:
    1,234
    Location:
    NA
    I'd agree. This was basically their version of printing their way our of trouble as the US did. However as I pointed out, merely to prevent a severe drop in the growth rate, they would need to continuously invest more and more in assets that are likely never going to generate revenue, just as the US had to keep printing billions.

    Sure, they have a lot of money. Their forex reserve is twice our GDP, but their mal-investments would seem to be even bigger. Though, I'd agree their is noting catastrophic that's likely to happen anytime soon, we'll only see significant slow down.

    The interesting part would be how civil unrest picks up with a slowing economy. The Chinese have enjoyed the good-side of being dictatorial, maybe its time they face the down-side.
     
  21. LalTopi

    LalTopi Regular Member

    Joined:
    Mar 28, 2012
    Messages:
    582
    Likes Received:
    299
    Off topic but who is that guy in your picture. looks like Xi Jinping. certainly goes around flexing his muscles.
     

Share This Page