Counterparties: Should we envy China?

By Ben Walsh
November 12, 2012

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If you’ve been paying attention to the US spending cuts which are scheduled to take place automatically on January 1, the Chinese Ministry of Railways has a glimpse of a utopian parallel universe: $32 billion in spending in November and December alone. Even for an organization with an annual budget of approximately $100 billion, that’s a huge spike. As Quartz’s Naomi Rovnick puts it, it’s the latest example of the “money-go-round that is China’s state-owned economy”.

The spending isn’t limited to trains: There’s also the $157 billion in broad infrastructure investment that was approved last month. From the perspective of a deadlocked DC, it’s easy to envy China’s vast infrastructure budget. But while Chinese policymakers are good at building trains that run between cities, in urban areas they are repeating many of our car-centric mistakes and all the construction is arguably making its cities even less livable.

As Michael Schuman argues in Time, the myth of an efficient, far-sighted China is believed largely by those inside its business-class cocoon. “Live here for a while”, he says, and economics, politics, and daily life look much more messy and complex.

The perception that China is ruled by wise leaders adhering to neo-Confucian ideals has been contradicted by revelations of the massive wealth accumulated by its elite: an estimated $2.7 billion by the family of Prime Minister Wen Jiabao; $376 million by the family of incoming president Xi Jinping; $89 billion by just the 70 wealthiest members of the National People’s Congress; $136 million by the family of the now ostracized Bo Xilai.

FT Alphaville’s Kate Mackenzie smartly identified the reality of much of China’s infrastructure projects — large-scale fixed assets are gleaming yet uneconomic and corruptly constructed, while local-level projects like sewer systems and other basic safety needs are ignored. When those two problems converge, the results can be deadly and socially destabilizing, as Evan Osnos’ excellent piece on China’s high-speed rail disaster illuminates. — Ben Walsh

And on to today’s links:

JPMorgan
No individuals will be charged in “landmark” mortgage bond fraud case against JPMorgan – WSJ

Taxmageddon
The fiscal cliff is like a nighttime baby feeding – Christina Romer

Overachievers
How to learn a language in 22 hours – Guardian

Governance
It’s time someone reined in the absolute, unchecked power of Martha Stewart – NYT

Must Read
How prescriptions from 71 doctors became factors in 298 deaths in California – LAT

Possibilities
Five choices to replace Tim Geithner that aren’t Erksine Bowles – Simon Johnson
“The far and away best candidate is one who probably doesn’t want the job: Hillary Clinton” - Mark Dow

Popular Myths
“How I was drawn into the cult of David Petraeus” – Spencer Ackerman

Apple
Since the iPhone launch, every big drop in Apple’s share price was followed by a surge in earnings – Horace Dediu

Crisis Retro
Surprisingly, Treasury purchases of Goldman Sachs preferred stock did not increase lending to small businesses – Matt Levine

In Case You’re Interested
There is “a conference dedicated to the history, theory, practice and future of note-taking” – Atlantic

Data Points
1/1000th of  a cent: the true cost of sending a text message – Barking Up The Wrong Tree

Milestones
By 2020, the US may be the biggest oil producer in the world – Bloomberg

Charts
America is slowly getting back to creating more households – Catherine Rampell

Added Value
A private equity firm bought and sold a company in one day – Reuters

Remuneration
A look at Vikram Pandit’s golden parachute from Citi – Bloomberg

Pivots
YouTube pulling the plug on at least 60% of its original programming channels – All Things D

Explainers
A guide to the scandal at the top of the BBC – CJR

More From Felix Salmon
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The Piketty pessimist
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The problems of HFT, Joe Stiglitz edition
Private equity math, Nuveen edition
Five explanations for Greece’s bond yield
Comments
2 comments so far

Probably the only people who envy China are employers who would like workers that would accept $1/hour. Not that any of those workers could afford to buy their stuff, but, hey, that’s somebody else’s problem.

Posted by KenG_CA | Report as abusive

So it looks like we spend 109 billion over 2 years. Even if that’s 1/2 of China’s spend it’s 2x per person.

There is a big infrastructure gap between China and the US… and it will take them another generation to catch up.

Posted by y2kurtus | Report as abusive
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