China's Prospects

Isuppose it is time to ask oneself where this all ends.  In the best of all worlds, we end up with aestablished middle class living in nice homes and apartments representing overfifty percent of the population.  That isa good thing.

The question is whether or notthis can be done without a big hiccup. Perhaps the answer is that Taiwanand Japandid it.  Once achieved though, theslowdown becomes also inevitable.  Thosecountries are trying to avoid it by investing heavily offshore to jump startother economies and it may be working.  However,Taiwan and Japan today look pretty ordinary while playingheavily in China.

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

Yet China itself still has two moredecades of solid growth ahead of itself before demographic pressures become amajor drag.  Recall that the one childpolicy began during the sixties and provided the sons and daughters that madethe first cohort in 1980.  That cohorthas just reached retirement age in China (Age fifty is treated as acut off when a worker typically returns to his home village to raise his grandchildren).  Thus the most workers are nowworking as will ever be.

In fact we now have an agingforce similar to Japanon the way.

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

JANUARY 08, 2011

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

In case you missed it – 

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

Chinawill also have megabuses so that they can rapidly get more mass transit withoutdisrupting 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 (Chinawill spend $146 billion to add over 2000 kilometers of subway by 2015.)

China'sold target for 2020 for nuclear power was 40 GWe. A new target is 48.5Gigawatts 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 hourinstead of 65 miles per hour. 

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