Why China Is Not a Role Model for Government Spending

There has been a lot of talk over the past few years about how China is doing all this spending and somehow getting ahead of the U.S. Well, I was always a bit skeptical of that, and apparently I was correct to be so. A few days back at reason, Scott Shackford posted some links to info about just how well China is doing. So let’s take a look at that info.

Some people keep trying to tout China’s high speed rail as an example for us to follow. In California, the state government is desperately trying to get a high speed rail going, and wasting huge amounts of money in the process. So let us see what China has accomplished. According to NPR:

China’s high-speed trains were supposed to be a gleaming testament to the country’s progress and modernity. Instead, a recent crash that killed 40 people has come to symbolize much that’s wrong with China’s warp-speed development. In particular, a “Great Leap Forward” mentality toward development is clashing with questions of safety.

The notion that fatal accidents are the price of progress seems to have trickled down to some of the passengers on a recent high-speed train journey between Beijing and Nanjing, many of whom characterized the accident as “normal.”

[…]

Ren Xianfeng, a senior analyst at IHS Global Insight in Beijing, says China has been building too quickly.

“In a couple of years, the investment in high-speed-rail projects has increased by more than 10 times, which is simply unsustainable,” she says.

Ren says the sacking of Railways Minister Liu Zhijun in February for corruption, followed by the subsequent arrest of another senior railway official on corruption charges, raised red flags. Official reports said that $30 million of funding was misappropriated on the high-profile Beijing-to-Shanghai line alone.

“With this speed of construction, there are a couple of issues. First is the quality of the project; the second thing is corruption,” Ren says. “It’s a legitimate concern about safety: How safely have they built their railway system, because so much money has been siphoned off to private pockets.”

[…]

Resident Chen Changfeng still doesn’t understand how the train line came to be built directly overhead, but he suspects corruption may have played a part.

“I don’t understand how the government got approval to build the train line here, even though we hadn’t agreed to move,” he says. “Our government is advocating ‘putting people first’ and a ‘harmonious society.’ But in practice, they placed more importance on building the high-speed rail than on us people.”

Many are now asking if this accident could and should herald the end of the Great Leap Forward mentality, when corners are cut to hit political targets. For the government, this accident has led to a credibility crisis.

And reason has done a little more reporting on related issues that should concern people who want to build high speed rail here:

An early investigation by the Ministry of Rail revealed that the Chinese bullet train’s budgeting is extremely murky (with some parts of the initiative costing two or three times as much as projected); its ridership is low (after only two months of operation, the Beijing-Fuzhou line was quietly shut in 2010); and ticket prices are beyond the means of lower-income people who actually use mass transit.

As for the notion that we are going to fall behind in the solar panel market if we do not keep up with China, Caijing.com suggests China’s solar panel industry is about to go bankrupt:

China’s top ten photovoltaic makers have accumulated a combined debt of 17.5 billion U.S. dollars so far, leading the whole industry to the brink of bankruptcy, data from U.S. investment agency Maxim Group showed.

LDK Solar, the world’s second-largest maker of solar wafers, and Suntech Power, the world’s largest solar panels producer, are the mostly likely to be headed for bankruptcy, Maxim noted.

[…]

Based on preliminary results of domestically traded photovoltaic companies for the first half, nearly 80 percent have slashed their earning forecasts while the top ten brands, listed overseas, posted a loss of 612 million U.S. dollars in the first three months this year.

And as for the infrastructure in China, which then candidate Obama called “vastly superior” to that of the U.S., we turn to a report from the BBC:

A section of a multi-million dollar bridge in China that opened in November has collapsed, leaving three people dead and five injured, state media say.

Four lorries fell off the Yangmingtan Bridge in Harbin City, Heilongjiang province, when part of it collapsed, Xinhua news agency said.

Shoddy construction and over-loading have been blamed for the incident, it added.

[…]

This is the sixth major bridge collapse in China since July 2011, the agency said.

So let us not get too worried that the Chinese government is going to somehow out do the U.S. They are not a glorious example of government spending. So when politicians again try to hold up China as an example of a country whose government is doing wonderful things with massive government spending, be skeptical. 

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