The General Glut In China

Moneybox
A blog about business and economics.
Aug. 23 2012 9:39 PM

The General Glut In China

149201775
This picture taken on July 23, 2012 shows one of the oldest statues of Mao Zedong, prominently overlooking the main city square in Chengdu, southwest China's Sichuan province.

Photo by AFP/AFP/GettyImages

Keith Bradsher reports that China has too much stuff:

Interviews with business owners and managers across a wide range of Chinese industries presented a picture of mounting stockpiles of unsold goods.

Business owners who manufacture or distribute products as varied as dehumidifiers, plastic tubing for ventilation systems, solar panels, bedsheets and steel beams for false ceilings said that sales had fallen over the last year and showed little sign of recovering.

“Sales are down 50 percent from last year, and inventory is piled high,” said To Liangjian, the owner of a wholesale company distributing picture frames and cups, as he paused while playing online poker in his deserted storefront here in southeastern China.
Advertisement

Given that the amount of stuff per capita in China is substantially lower than the amount of stuff per capita in Mexico (to say nothing of France or the United States) this seems to me like a strange problem to have. But if the PRC leadership was paying attention during their Marxism-Leninism classes they'll recall that Marx thought capitalism would inevitably lead to crises of overproduction that could not be dealt with by active demand management strategies. I don't know much about China or the market for steel beams for false ceilings, but my general view is that Marx was wrong and a "glut" of this sort is a sign of bad aggregade demand policies.

It would, however, be quite ironic if Marx turned out to be right and China's success in becoming a manufacturing powerhouse led to a socialist revolution.

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