Too Late For China?

I’ve never been convinced by “the Chinese Miracle”. For years the Chinese economy has been presented as having rapid sustainable growth. Their government reserves of precious metals and hard currencies were at 4 trillion dollars. But I have always thought that “what goes up must come down” was especially applicable to Chinese investments and the Chinese economy. I don’t trust any financial statements prepared in China, and I don’t see how a country with its pollution and demographics and in-depth government interference in the economy can maintain general prosperity. False price signals would surely cause massive misallocation of resources.

Too Many Mouths; Too Few Workers

The one child per family policy that lasted about 30 years before it was relaxed, led to an unbalanced current demographic of too many old people for the number of workers that are available to tax.  A huge portion of the population has retired or will soon retire, and of course this consists of the most experienced, and often the most skilled, workers. Add to that the problem of 5 million people per year moving from farms and villages into cities, and there is an additional pressure upon an already over-stressed situation.

The Ghost Cities

So China has built new cities to house and employ these people, but these cities are too expensive for these people.  Go to Youtube and search for China “ghost cities” and watch the videos. Building cities that remain empty is a huge drain on the resources of the country. These resources may as well have been blown to bits for all the economic good they have done.

China’s Cash Drain

China has been draining its foreign reserves by up to 100 BILLION dollars a month. It no longer has 4 trillion in reserve. It is running out of money. Yet the retired people need to be supported and the migration to the cities keeps happening. Government has been loaning money for years to inefficient businesses to create jobs, and the debt load in China is now huge. Unlikely these debts will be repaid.

Unravelling the Miracle

No, I don’t accept the Chinese Miracle. I think China is going down the toilet. And I think the problem may cascade to envelope countries as far away as Australia. 

(follow-up:
http://gordon-feil-economics.blogspot.ca/2017/01/china-is-going-broke.html)