Tuesday, February 1, 2011

China's Prospects

I suppose it is time to ask oneself where this all ends.  In the best of all worlds, we end up with a established middle class living in nice homes and apartments representing over fifty percent of the population.  That is a good thing.

The question is whether or not this can be done without a big hiccup.  Perhaps the answer is that Taiwan and Japan did it.  Once achieved though, the slowdown becomes also inevitable.  Those countries are trying to avoid it by investing heavily offshore to jump start other economies and it may be working.  However, Taiwan and Japan today look pretty ordinary while playing heavily in China.

Two years ago the Chinese topped out their uptake from the villages of bright young workers and I must the curve must be now negative.  Thus exploitation of their best growth driver is peaked and in decline.

Yet China itself still has two more decades of solid growth ahead of itself before demographic pressures become a major drag.  Recall that the one child policy began during the sixties and provided the sons and daughters that made the first cohort in 1980.  That cohort has just reached retirement age in China (Age fifty is treated as a cut off when a worker typically returns to his home village to raise his grand children).  Thus the most workers are now working as will ever be.

In fact we now have an aging force similar to Japan on the way.

I do not know how much longer the present growth rate is sustainable but down ticks can now be anticipated and are way more likely than any continuation.

JANUARY 08, 2011

Having a lot of overbuilding would be a huge issue for a western real estate market. The difference is that they are not urbanizing at 20-30 million people per year and they do not have a political system where the government can go to the villages and rural areas and say - We have a million buses over there - get on your going to Kangbashi. There are more processes and procedures than that but Chinese leadership has far more flexibility to manage and direct the economy.

In case you missed it – 

They will have more high speed rail (13,000 km) by the end of this year than the rest of the world combined (10,500-11,000 km. Europe + Japan + everyone)

China will also have megabuses so that they can rapidly get more mass transit without disrupting existing roads. The Megabus system will Ten times cheaper than subway systems in china. Less than $2 million per kilometer for megabus system instead of $70 million per kilometer for subway (China will spend $146 billion to add over 2000 kilometers of subway by 2015.)

China's old target for 2020 for nuclear power was 40 GWe. A new target is 48.5 Gigawatts by 2015. More than the old 2020 target and in half the time.

Things are just different when your economy is going at 300 miles per hour instead of 65 miles per hour. 

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