ANZ is out with a quick note on China’s Central Economic Work Conference.
In short China is going to build more, while rebalancing and driving slowly towards internal consumption with market-based reforms and liberalization.
Sounds like an economic miracle to me, and not far removed from the promises of the last 5 years. So it probably means they’re just going to build more stuff.
ANZ China Quick Reaction – 17 December 2012
I think it will.
(can’t seem to post relevant links)
Rebalancing from a high dependency on investment-fuelled growth to total dependency?
Lol. Rebalancing with Chinese characteristics. Lorax will love it.
It’s an addiction they will find it fiendishly difficult to kick.
If they built 1 billion square metres of apartment space last year, then they need to build another billion SQM this year just to keep growth above 0%. If they built 10,000 bridges to nowhere last year, they need another 10,000 bridges to nowhere in 2013 just to avoid going backwards.
A lot of commentators seem to miss this basic logical point. If China says “we are going to build lots of bridges and apartments in 2013″ that doesn’t necessarily mean that infrastructure investment is going to be a net contributor to growth. Because “lots of apartments” might be half what they built the year before. 20 million apartments per year falling to 10 million apartments per year is still an amazing rate of construction, but it is 50% drop, and if that happened overall GDP growth would almost certainly be negative.
They have to run very, very fast just to stand still.
If the build 1 billion square meters of residential apartments every year then the contribution to growth is ZERO. Because we are measuring the change in construction activity, not the change in the stock of infrastructure.
“China’s urban population, which outnumbered that of rural areas for the first time at the end of last year, is expected to account for 70 percent of the total population by 2030, according to the World Bank’s forecast.
An increase of a single percentage point indicates an addition of more than 10 million urban residents, each of whom will spur at least 100,000 yuan (15,892 U.S. dollars) in infrastructure investment, according to previous estimates by experts.”
So build it will, but I suspect more carefully targeted to achieve the dual aims of increased urbanisation and ‘beautiful China’.
http://english.sina.com/china/p/2012/1216/538398.html
The words, ‘Beautiful’ & ‘China’ do not belong in the same sentence!!!
For China this will be just one more economic miracle.
Considering they inflated the crap out of their numbers here is a good piece talking about how they inflating the numbers
http://www.forbes.com/sites/gordonchang/2012/12/16/chinas-recent-trade-statistics-have-been-artificially-inflated/