Has China really wasted $7 trillion since the global financial crisis? Yes, yes it has, say researchers. The Financial Times:
In 2009 and 2013 alone, “ineffective investment” came to nearly half the total invested in the Chinese economy in those years, according to research by Xu Ce of the National Development and Reform Commission, the state planning agency, and Wang Yuan from the Academy of Macroeconomic Research, a former arm of the NDRC.China is this year on track to grow at its slowest annual pace since 1990, and the report highlights growing concern in the Chinese leadership about the potential economic and social consequences if wasteful investment leaves projects abandoned and bad loans overloading the financial system.
Anyone who has driven past miles and miles of empty residential skyscapers surrounding second tier cities in China has figured something like this was at work. And the scale of misdirected investment is truly immense.How it all works out is anyone’s guess, as nothing on the scale of China’s industrialization has ever been seen before, and those who call time on China’s bubble have been proven wrong many times over. Nevertheless, the least likely scenario of all would be for China to move seamlessly and smoothly from its current state up to fully developed status without suffering one or more massive economic checks and setbacks.