Michael Pettis
Before starting on the subject of debt I wanted to make a quick reference to something sent to me by Charles Horner, a senior fellow at the Hudson Institute. I am glad to say that the overinvestment thesis is much more widely acknowledged today than it was even two or three years ago, but one myth, I think, is that most of the overinvestment excesses in China are concentrated in the real estate sector. I have always argued that it is infrastructure where the most amount of investment has been wasted.
Its impossible to prove one way or the other, but Horner sent me a paper in the Oxford Review of Economic Policy, by Oxford’s Bent Flyvbjerg, with the rather alarming title “Survival of the unfittest: why the worst infrastructure gets built—and what we can do about it”, which suggests why we need to be so worried about infrastructure spending in China – aide from the fact that the numbers are simply huge.
Before starting on the subject of debt I wanted to make a quick reference to something sent to me by Charles Horner, a senior fellow at the Hudson Institute. I am glad to say that the overinvestment thesis is much more widely acknowledged today than it was even two or three years ago, but one myth, I think, is that most of the overinvestment excesses in China are concentrated in the real estate sector. I have always argued that it is infrastructure where the most amount of investment has been wasted.
Its impossible to prove one way or the other, but Horner sent me a paper in the Oxford Review of Economic Policy, by Oxford’s Bent Flyvbjerg, with the rather alarming title “Survival of the unfittest: why the worst infrastructure gets built—and what we can do about it”, which suggests why we need to be so worried about infrastructure spending in China – aide from the fact that the numbers are simply huge.
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