tl;dr The immense government-driven spending boom on building infrastructure and real estate since 2008 has made the construction, real estate, and banking sectors disproportionately large compared to the rest of the economy, larger proportionally even compared to the Japanese economy before its real estate bubble crashed. The government is going to have to enact a potentially long period of enforced austerity on these sectors in order to allow other sectors, especially capital-intensive industry like electronics manufacturing, to catch up. But the current geopolitical climate and continuing pandemic conditions might put a damper on their desire to use these new industries in an export drive. Therefore China is likely looking at a significant period of low growth like it did in the late 90s.
Good. Unrestrained growth is only a good thing if you're a capitalist. Sounds like they've built enough housing and real estate for now. A transition to growth in other sectors is certainly possible, it just has to be managed well.
Yeah, but have you considered that credit doesn’t matter. :shrug-outta-hecks:
they have to apply robotics growth with decreased worker hours, and they can continue to grow without exports increase for like 20 years
I'm sure they'll be fine, this isn't a "China's Coming Collapse" type article. Theyre essentially in a dilemma where growth has (predictably) slowed (massive investment into constant fixed capital->falling rate of profit), which has made their economy volatile (crisis of overproduction), so they're have to make a painful choice to further cut growth to head off a truly damaging disaster.
It's made me reevaluate overly optimistic predictions that China will overtake or displace the US as hegemon anytime soon, but at the rate the US is inflicting self-harm through unforced errors, its not, you know completely implausible.
But the thing is, making houses and infrastructure is not crisis of overproduction, it’s not means of production/fixed capital. Unless government decided to treat it as real problem, all happened in the economy as a whole - buildings got constructed, investors possibly lost money, somebody got apartments. There is neither inflation or anything in the whole situation, again unless they decide to fuck it up.
They’ve both opportunity to invest in means of production and do some big project like national healthcare, where fixed capital is irrelevant, while construction 1000 mri machines is kinda a good avenue for growth
Infrastructure, especially railways, are constant fixed capital
But yeah they definitely do have plenty of room for investment in capital-intensive manufacturing sectors
I've also however seen China pessimists express the opinion they aren't going to escape the middle income trap, but I'm extremely skeptical of that
I would argue they are means of subsistence, as it’s mainly for movement and living of people :shrug-outta-hecks:
Railways are very much constant fixed capital, the commodity they produce is transporting people and commodities geographically. They're one of the burdensome examples of constant fixed capital because they are extremely capital-intensive to build and have to be expensively maintained on a regular basis, which is why the vast majority of railways (especially private railways) tend to hemorrhage money or go bankrupt very quickly, because they tended to be built to traffic goods in areas that didn't develop quickly enough or at all to justify the investment. And as technologies have advanced the need for a large force of human workers to operate and maintain railways has decreased sharply, which only further lopsides the ratio.
The Chinese government of course operates its now-enormous rail infrastructure but it represents an even exponentially larger sunk cost of capital investment that won't be recovered, so these railroads will have to pay for themselves through the hopefully exponentially greater growth they facilitate in the future.
EDIT: What I mean by this is that railways pay for themselves by facilitating growth in the future, because what railways do is exponentially decrease circulation/turnover time by closing the distances of time and space. The more workers (who create value) and commodities (whose value must be realized) they transport from source to destination over the shortest amount of time possible increases the rate of capital accumulation exponentially.
The Chinese government has been extraordinarily successful in not only building a massive rail infrastructure extremely quickly, but also in building massive residential infrastructure, entirely new cities and industries, along these new railways just as quickly, and populated them as well. But such a massive expansion of constant fixed capital is always extremely dangerous. If growth doesn't meet expectations, speculative bubbles form that increase the damage that ensue from future crises of overproduction (hence the comical history of American and British railways and financial panics). But China has beaten the historical examples of US and Britain in this regard, as mentioned. But the spectre still looms - these investments still require constant maintenance, which requires more growth. The question is if China can maintain the balance even at a lower rate of growth.
They’ve both opportunity to invest in means of production and do some big project like national healthcare, where fixed capital is irrelevant, while construction 1000 mri machines is kinda a good avenue for growth
Their plans for expanding AI would be a great fit for healthcare, if they chose to go that route.
Why does everything gotta be called the Great <insert thing> lately? Great Recession, Great Resignation, Great Pause, how about my Great Nuts
China is in a better position than most countries to impose that austerity, correct?
Its austerity in the sense that lines of cheap, government-guaranteed credit for real estate and infrastructure construction are over to avoid continued overproduction shattering the existing bubble. So growth in these sectors are going to crash but it would be much much worse if the Evergrande collapse happened on a national scale, since as the article mentioned a lot of Chinese individual wealth/savings is tied up in real estate.
So yeah theyre better positioned than most to do so because their government actually intervenes to manage the economy, as opposed to most everywhere else who let the market commit suicide and only then maybe try to fix the damage.
This isn't austerity in the sense they're cutting spending and making workers tighten their belts, but the government tightening control of lending which will negatively affect growth.
Low growth is the expectation for a nation moving into postindustrialism. Regardless of the potential of future socialism, right now, China's economy is still primarily a capital-driven economy. One that is, perhaps, somewhat better regulated than the bourgeois democratic equivalent might be, but still one in which the rate of profit must fall. Every industrializing nation reaches this point of slowing down. Economic growth functionally cannot be infinite. Returns, even on investment in infrastructure, must be diminishing.
And, to be clear, even resocializing the economy doesn't overcome the problem of limited returns if you are seeking to expand your economy. There are still a limited number of resources available and your ability to increase production will still be governed by the fact that each additional unit of effort invested after a certain point is still a diminishing return. The difference is that under socialism, no one is going to tell you that you'll be able to live without starving in ten years because capital's profits will grow enough - society will be organized around the production and provision of the standard of living to which we are each entitled. We do not pretend to offer a means of perpetuating growth. We simply propose that the wealth we do create belongs to the working people and that each of us has a fundamental right to dignity.
Hence the Belt and Road. they can use it's construction as a valve for those industries, while domestically beginning a transition.
