Tuesday, December 21, 2010

Ghost streets haunt China's economic future

Robert Wenzel on the ghost cities (and ghost public infrastructure) in China, as reported at Fortune/CNN:
What's going on here is that the decision to build, or not build, remains in the hands of local central planners, who don't know the difference between a price signal and a traffic signal. For them it's all about showing up at regional central planning meetings with huge growth statistics...
Bottom line, there is still a lot of central planning in China that is a major detriment to the country. Couple this with the bizarre multi-year program to inflate the Chinese money supply to decrease its value against the dollar, and it is obvious that China should not be viewed solely as the next great growth area, but rather a country on the edge, torn between free market trends that could launch China into great prosperity and central planning stickiness that will suffocate the huge country. The outcome is not at all clear.
[Photo of ghost street in Xinyang, Henan province, China: Fortune]

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