It’s very refreshing to get any counterpoint to the prevailing China love that dominates the media and the highest-ranks of our blue-chip corporations.
Thomas Friedman recently talked up China’s infrastructure, especially its trains, though some experts on the ground have described these measures as nothing more than Beijing wanting to have a big train set.
Add Nouriel Roubini to the China sceptics, and a bear along the lines of Jim Chanos and Hugh Hendry, who see massive infrastructure spending without the demand to support it.
All that spending is creating destabilizing gluts, particularly in production capacity. Mr. Roubini singles out the car industry as an example. This year, car sales jumped from eight to 12 million vehicles, a 50% increase. But production capacity went from 10 million to 20 million vehicles. “China now has 100 separate car makers,” he says. “The U.S. has only three.”
“You know, I go to China six or seven times a year, and you have brand-new airports three-quarters empty,” he says. “Highways to nowhere all over the country.”
It’s obvious what the counterpoint is: the demand is not there now, but there’s a massive pool of untapped demand that will come in as the folks in the countryside urbanize.