New university research, published by Chinese academics, has calculated that over the last decade China has wasted an astonishing $6.8 tn on useless investment. The academics, who are seemingly taking a major risk publishing this paper given the Chinese Communist Party’s intense oversight of domestic academia, believe that much of the money was wasted on failed or useless government infrastructure projects, and investments in indebted industries, such as steel, coal, or mining. Such overinvestment has become a key feature of China’s current economic struggles, as real estate and related industries decline ever further in the face of the massive overbuilding of houses and apartment blocks, which are often called “ghost towns”. The academics blame senseless policy and poor oversight by the government for the nearly unimaginable waste, the overhang of which leaves many local governments heavily indebted.
OxWFD: Everyone knows that China has completely overinvested in infrastructure, but putting a figure on it really brings the scale of such investment to the forefront. Worse yet, in the last two years China has completely reverted to its old habits of massive government investment stimulus, which is exacerbating the problem. How will the country break free of its debt addiction?
And from Brown University:
I guess the Chinese have us beat on useless investment. But at least theirs killed a lot less people, and created a lot fewer enemies. And might, at some point, turn out to have some use.