Friday, February 22, 2013

Stratfor: China's Real Estate and Geopolitical Implications

Here is a video from Stratfor concerning the geopolitical effects of China's real estate policies. My thoughts below.



Now can any economy were upwards of 30% of their entire GDP is dependent on real estate production be considered healthy? After all, 48% of steel consumption in China is real estate related. If real estate dries up then almost half of China's real estate consumption, and it's related steel fabricators, would be in serious trouble.  Furthermore, what about China's heavy government investment in infrastructure? Add in infrastructure and manufacturing and the share of their economy now goes to 50%. This isn't a balanced, or healthy, economy. While investment in manufacturing is good, the utility of manufacturing investment is that it supports production. An empty, or under utilized, manufacturing plant, much like an empty or near empty office building, adds little to real economic growth. In fact, those products are a net drain on the economy since they are dead weight.

The video also raises another important issue, and that is certain nations dependence on China's growth. There has been a lot of speculation by many individuals on libertarian, alt-right  and manosphere blogs on what they will do when the US sees another painful contraction, and perhaps another major shock towards economic collapse. Many have theorized moving overseas to locations that are not as in poor shape as the US, but many of the nations I have seen bandied about, Australia and Brazil being some examples, are much less secure than they appear to be. Many quickly growing economies today are dependent on first world economies since their largest sector of growth has been the exporting of much needed commodities.  Russia too has shifted from a heavily industrial focus to a commodities one as commodities require less fixed capital investments and are very profitable.

This video has inspired me to do a blog post on what I would call the global economic pyramid, showing the tiers, strengths and weaknesses of certain major nations, or group of nations, in our global economic system. Suffice it to say, it will illustrate how the next cycle of economic contraction will be felt world wide.

2 comments:

  1. This post from the expat chronicles is about a guy who worked in China for a few years. It is one of the most interesting things that I have read recently.

    http://www.expat-chronicles.com/2012/12/business-china/

    ReplyDelete
    Replies
    1. Great link Tim it was absolutely fascinating.

      Delete

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Seattle resident whose real name is Kevin Daniels. This blog covers the following topics, libertarian philosophy, realpolitik, western culture, history and the pursuit of truth from the perspective of a libertarian traditionalist.