I don't know how old you are But I have been reading western prediction of coming China collapse for 30 years Nothing even close come to reality. Western media love to make comparison what will go wrong with China now that China collapse is completely rebutted. They come up with new flavor of the day China trap in middle income citing Latin America for comparison.
To begin with China is not Latin America . China spend on infrastructure can be justified because the country is way behind compare to Developed country. If you even bother to look at the number 30% of the infrastructure is for housing and another big component is railway and port and airport etc.
Even today the US still have 200,000 railway track compare to china less than 100,000.Plus building houses is needed in the next coming decades 400 million surplus labor need to be housed,schooled, fed transported. Ever been to Europe and see the rail density even today the most dense railway in China is not even close to Europe rail network. When China built expressway the western media make joke of empty highway and convinced that it will be waste of effort. Little did they know that within 2 decade China is the largest auto producer . the same thing now with high sped railway. which according to the latest report is now running close to capacity and ticket are all booked up on week end
Latin America spend their surplus on consumption and don't invest in infrastructure hardly any comparison at all.
Another thing Chinese are by nature individualistic, entrepreneur, risk taker, materialistic.
Where there is money they will try to make it. As a proof , just go to any South east Asia countries where the business are dominated by the Chinese.Even in China handicapped as it the small business generate 50 to 60% of the jobs .Bank like everywhere want safety that is the reason they don't lend on small business. What they should do is to make easier for people to enter banking lending business which they do by the recently easier permit for small banking.
Even the interest rate is now liberated. For long time they were mandated because the country still need capital to do the infrastructure where else can you get money if you are poor. You think this is only peculiar for China Singapore for long time forced people to safe at low interest rate so the government can use to built infrastructure. Unfair you say sure it is . but there is no other way
Another thing Chinese value education and willing to suffer inconvenience of hard work for better future I went to school with a lot of Latin American.I can't say the same thing for them. At the same time there are hundred of Taiwanese all of them study electronics and some do doctorate. This is before the PC and internet time Now you see where is Taiwan and where is Latin America.
i know the china bashers in the western media, but please do not connect everyrthing critical about china to china bashing. when you assume someone has a political stance or are influenced by "the left" or "the right" or whatever label you want to put on them, you stop listening to what they have to say because you bring with it your own preconcieved notions about that "stance."
china's economy is making an obvious transition because of its own circumstances and circumstances overseas. like i said, they need to make lending more available to small enterprises and free up capital for private individuals to develope the domestic economy. like you said they just liberalized interest rates which is a major step in the right direction.
it is not that china does not need infractructure, but it needs the right infrastructure. under the export/investment led growth regime that china has utilized since deng xiaoping, small circles are able to monopolize the economy and alot of money becomes wasted through corruption and through general lack of accountability. admittedly, china has still managed to put alot of money in good places but the waste is still staggering. now that it is harder and harder to maintain export led growth, the government has understandably called for more financial liberalization to bring up domestic capital.
however what is critical about this wave of liberalization is that if it is not done accountably, it will result in more massive corruption and a credit shortage. think about it: china's first wave of financial liberalization privatized the major SOEs, but did it in an insider way so that massive firms were bought at pennies to the dollar in the 1980s and 1990s. granted, these new owners, corrupt though they were, were able to efficienize their firms toward export manufacturing enough to generate positive revenues in spite of graft and a bit of embezellment. this was good for the chinese economy, but millions lost their jobs as these firms restructured. (ever heard the rhyme: 江泽民挥挥手，下岗工人片地走)
at that point, china was still comparatively poor and lacked all manner of infrastructure, export demand was strong and there was room to grow fast and easy with single direction/sector development. (japan, taiwan, korea, now china have followed the asian development state model) however korea and taiwan grew into prosperity while demand was still strong. china is not quite there yet and now the export market is not so hot anymore while domestic wages are catching up.
the solution? stimulate domestic spending (china as big as it is could easily support itself via its domestic economy, much room for growth) and that takes yet another wave of financial liberalization. however this time it is trickier, because growing domestically means liberalizing capital availability which means that the country will get richer, but the guys used to playing the system can't get away with what they used to be able to do. now that is if china liberalizes finances properly... if it is as unfair and insider dominated as the last time, there will be a lot more corruption as connected individuals write up rules favourable to themselves, and this time i don't think china could take it. at worst they will have unrest, and at best they would have sold out china's future. (where do you think china's embezelled cash goes? -england, singapore, switzerland and the u.s.)
this is why i am so adamant about accountability now. you say chinese people are exceptional and make better entrepreneurs/leaders, well let's hope they can do it right this time and not screw over the country, because in the way china's political system is set up as it is, there is little that keeps them from being selfish and doing the same insider crap they did last time in the '90s. this time, it's exactly what china's economy doesn't need.
perhaps china's political leadership is more responsible this time or at least care about the consequences of committing fraudulent insider restructuring in an impending credit shortage. however i will not trust their ability to do it properly left up to their own devices. as chinese people, we ought to educate ourselves about the potential pitfalls of economic restructuring and be vigilant and vocal when we see something wrong instead of wanting to reassure ourselves about "how strong china is" just to counter what we precieve as western antagonists.
in america, the last wave of financial liberalization was so thorough that wall street was essentially allowed to write its own rules, the result over the last 20 odd years is that the superrich has got alot richer, the middle class is diminishing, and upward mobility is much more difficult. in fact, the 2008 credit crunch (and subsequent weak demand in the u.s./the west) is the direct culmination of this unchecked financial liberalization. this was because reagan's cronies were in bed with wall street and were able to put it through congress because nobody knew anything about economics and only believed in the laissez faire neoliberal dogma. as a result, wall street showed that it is not accountable to the american people but only to itself.
in china, a comparable restructuring has to occur, but china does not have the advantages america had in the 80s. (an already strong domestic consumer base, accountability measures in the form of open political procedure) this is why the potential for abuse during china's current economic restructuring is so high, while the consequences would be alot more dire. it is hard to say that the ccp would be more accountable to the people this time around, (than in the '90s) this is why i think they can use all the public scrutiny and pressure needed to make sure they do it right.
