odin

Chinese Takeaway: Capex Growth Keeps Humming Along

MM: This, of course, begs the question of who the Chinese plan on selling to. It's all well and good continuing to build factories and export capacity, but the real world isn't like Field of Dreams; just because you build it doesn't mean that customers will come

A great point succintly made. I often wonder that myself. While there is a great deal of incentive for the Chinese authorities to keep the factories humming and to initiate New Deal-esque programs, they seem to all target export-oriented industries. While the actual impact on economic recovery is debatable, the New Deal investments (for e.g. in the highway system) produced great RoI over the long run for the nation. This was so because the US is capital-rich and the vast center of the country is very productive. I am not convinced that spending vastly on infrastructure development in barren west of China will produce quite the same sorts of returns.

I have heard that there is a great deal of mineral wealth in the hinterlands but I must admit that I havent dug deeply into that story. However, if true, developing infrastructure will indeed prove profitable -- more so than spending money abroad in questionable areas and on questionable regimes to acquire mineral resources. (If China thinks that property rights in Africa or South America are sacrosant, they are in for a surprise.) But, I dont see infrastructure development targetted towards such growth (highways, waterworks). The energy generation projects also seem to be targetted towards industry/manufacturing. But these are all shallowly researched opinions. Would welcome more of an expert commentary.