The story China’s economy is a bubble that is about to burst, exists as long as the country’s economy started to boom. Economic analyst Arthur Kroeber explains in NPR why we do not need to worry right now and why signs of bubbles are part of the game.
It’s been this way for decades, says Arthur Kroeber, who runs the Chinese research firm Dragonomics. When he first arrived in Beijing in 1985, the city had just finished building a new ring road — a highway that runs in a loop circle around the city center. It was so empty that he and his wife rode their bikes down the middle of the highway.
“At that time I thought, ‘This is crazy,'” he says. “Why enormous roads with nothing on it?”
Since then, Beijing has built three more ring roads, each one farther out than the last. Today, the ring roads are all jammed with traffic.
“It’s kind of an emblem of the way things get done here,” Kroeber says. “At any point in the last 25 years you could walk around and say, ‘They’re building all this stuff, and who will ever possible use it?’ You come back five years later and its not nearly enough. That logic will, I think, eventually come to an end. But it has worked for them pretty well up to now.”
Kroeber and [the more bearish economist] Michael Pettis — and even the Chinese government itself, to judge from its latest five-year plan — agree that the Chinese economy needs to change. The government needs to spend less money building stuff, and ordinary people need to spend more money buying stuff.
What they disagree on is how much time China has to make this change. Kroeber figures China’s got another 10 or 15 years before it has to make the shift. Pettis, thinks it may already be too late.
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