Image of the Wuhan Ring Road from the New York Times.
Although much of the Western world is still recovering from its easy debt habit and the building boom of the mid-aughts, China is in the middle of an urban boom, which includes ambitious megacity projects to link cities and brand new cities with plenty of shiny new buildings, but few residents.
This article from yesterday's New York Times takes a closer look at what appears to be a precarious debt scenario:
As municipal projects play out across China, spending on so-called fixed-asset investment — a crucial measure of building that is heavily weighted toward government and real estate projects — is now equal to nearly 70 percent of the nation’s gross domestic product. It is a ratio that no other large nation has approached in modern times.
Even Japan, at the peak of its building boom in the 1980s, reached only about 35 percent, and the figure has hovered around 20 percent for decades in the United States.
While this article touches upon many interesting questions, including how swiftly the Chinese government can turn a project from a sketch into a major roadway, I'm most concerned with the question of money. Many times, developments in both the U.S. and China happen because the money is available. Should we build things just because the money is there?
As an aside, China is also building these projects when it may soon face the 4-2-1 demographic timebomb, where the one child policy has lead to families with an inverted pyramid of four grandparents and two parents, all on the shoulders of one child.
