China's Investment Driven Growth Makes Sense

Moneybox
A blog about business and economics.
April 12 2012 2:57 PM

China's Investment Driven Growth Makes Sense

1334257029722

I had a hazy intention to write an anecdote-driven piece arguing that all this hysteria about China's level of investment is overblown, but fortunately for me Ryan Avent wrote a column with actual data to make the same point. China is adding capital at an extremely rapid rate for the fairly good reason that it's a country with an extremely low level of capital goods per person.

This seemed fairly obvious to me on an anecdotal level even just based on a government-affiliated tour that deliberately avoided visits to any of the poorest parts of the country. I saw people living in shacks, bicycles being used to transport wholesale quantities of socks, vast quantities of laundry drying in the open air in Shanghai, workers digging holes with shovels, etc. It's important not to confuse rates with flows. If your country was extremely poor until very recently, then most of your stuff will be very new. Consequently, it may look more impressive than the stuff in a richer but slower growing country. The most recent time I flew into Logan Airport in Boston I was in a terminal that had obviously been renovated recently and it looked really impressive—reminded me of China. The median American airport terminal is considerably older than the median Chinese airport terminal, so it looks much shabbier. But even an old airport terminal is a more useful piece of infrastructure than a terminal that's not there. An old van or truck is an easier way to transport socks than a bicycle. China's stock of capital goods is quite low, so it makes some sense to try to add to it at a very rapid pace.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

TODAY IN SLATE

Justice Ginsburg’s Crucial Dissent in the Texas Voter ID Case

The Jarring Experience of Watching White Americans Speak Frankly About Race

How Facebook’s New Feature Could Come in Handy During a Disaster

The Most Ingenious Teaching Device Ever Invented

Sprawl, Decadence, and Environmental Ruin in Nevada

View From Chicago

You Should Be Able to Sell Your Kidney

Or at least trade it for something.

Space: The Next Generation

An All-Female Mission to Mars

As a NASA guinea pig, I verified that women would be cheaper to launch than men.

Terrorism, Immigration, and Ebola Are Combining Into a Supercluster of Anxiety

The Legal Loophole That Allows Microsoft to Seize Assets and Shut Down Companies

  News & Politics
Jurisprudence
Oct. 19 2014 1:05 PM Dawn Patrol Justice Ruth Bader Ginsburg’s critically important 5 a.m. wake-up call on voting rights.
  Business
Business Insider
Oct. 19 2014 11:40 AM Pot-Infused Halloween Candy Is a Worry in Colorado
  Life
Outward
Oct. 17 2014 5:26 PM Judge Begrudgingly Strikes Down Wyoming’s Gay Marriage Ban
  Double X
The XX Factor
Oct. 17 2014 4:23 PM A Former FBI Agent On Why It’s So Hard to Prosecute Gamergate Trolls
  Slate Plus
Slate Picks
Oct. 17 2014 1:33 PM What Happened at Slate This Week?  Senior editor David Haglund shares what intrigued him at the magazine. 
  Arts
Behold
Oct. 19 2014 4:33 PM Building Family Relationships in and out of Juvenile Detention Centers
  Technology
Future Tense
Oct. 17 2014 6:05 PM There Is No Better Use For Drones Than Star Wars Reenactments
  Health & Science
Space: The Next Generation
Oct. 19 2014 11:45 PM An All-Female Mission to Mars As a NASA guinea pig, I verified that women would be cheaper to launch than men.
  Sports
Sports Nut
Oct. 16 2014 2:03 PM Oh What a Relief It Is How the rise of the bullpen has changed baseball.