Famous economist Nouriel Roubini took a fast train from Shanghai to Hangzhou and saw it was almost empty. Shaun Rein explains him in Forbes why one train ride is not enough to predict a bubble in China that will pop in 2013.
He has been quoted by Reuters as saying, “‘I was recently in Shanghai and I took their high-speed train to Hangzhou,’ referring to the new Maglev line that has cut traveling time between the two cities from four hours to less than one. ‘The brand new high-speed train is half-empty and the brand new station is three-quarters empty. Parallel to that train line, there is also a new highway that looked three-quarters empty. Next to the train station is also the new local airport of Shanghai and you can fly to Hangzhou,’ he said. ‘There is no rationale for a country at that level of economic development to have not just duplication but triplication of those infrastructure projects.'”…
However, most of Roubini’s conclusions are based on phantom facts, as is his evidence for why China will have economic problems. There is no direct flight between Shanghai and Hangzhou, nor is there a maglev train system connecting the two cities. Shanghai has two, not three, airports, and the last new one opened a dozen years ago, in 1999. Both the Hongqiao and Pudong airports have been adding runways and terminals because the airports are too crowded, contrary to Roubini’s suggestions of emptiness. Pudong’s passenger and cargo traffic grew 27% in 2010, to 40.6 million passengers. It is now the third busiest airport in the world in terms of freight traffic, with 3,227,914 metric tons handled every year…
China is not immune to economic cycles. It will definitely go through rough patches in the coming years, and housing prices may in fact fall. Despite a relatively efficient bureaucracy, no government can stave off market forces forever, and problems are starting to arise. However, the headwinds are coming from raging inflation, a shrinking labor pool and a weak education system, not from over-construction in infrastructure spending, as Roubini argues. It is important that analysts use real, not phantom, data points to draw conclusions about China.
Shaun Rein is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? D
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