A Bridge Too far

Six bridges falling, three Gorges damming, two trains colliding, many rails collapsing, coal plants polluting, airports they are building, where goes the cash?! No French hens, calling birds but maybe five (six if you count the 2008 Olympics) golden rings. If there has been one huge story in the Peoples Republic of China, it has been about growth, seemingly a vast multiple of anything that west has seen in recent years. But growth based on internally reported statistics, and perhaps, maybe, and it could be that, as my June 27^th blog Math Debaters pointed out, there might not be so much truth in them thar statistics. How about some reality checks that suggest otherwise?

Back in June, I wrote: “While China has downgraded its projected growth for 2012 from an initial forecast of over 9% to a little over 8% and now to 7.7%, are these really the numbers? ‘As the Chinese economy continues to sputter, prominent corporate executives in China and Western economists say there is evidence that local and provincial officials are falsifying economic statistics to disguise the true depth of the troubles.

‘Record-setting mountains of excess coal have accumulated at the country’s biggest storage areas because power plants are burning less coal in the face of tumbling electricity demand. But local and provincial government officials have forced plant managers not to report to Beijing the full extent of the slowdown, power sector executives said… Electricity production and consumption have been considered a telltale sign of a wide variety of economic activity. They are widely viewed by foreign investors and even some Chinese officials as the gold standard for measuring what is really happening in the country’s economy, because the gathering and reporting of data in China is not considered as reliable as it is in many countries.’” New York Times, June 22^nd

The additional signs are everywhere. “After three decades of torrid growth, China is encountering an unfamiliar problem with its newly struggling economy: a huge buildup of unsold goods that is cluttering shop floors, clogging car dealerships and filling factory warehouses…. The severity of China’s inventory overhang has been carefully masked by the blocking or adjusting of economic data by the Chinese government — all part of an effort to prop up confidence in the economy among business managers and investors.

^“But the main nongovernment survey of manufacturers in China showed on [August 23^rd] that inventories of finished goods rose much faster in August than in any month since the survey began in April 2004. The previous record for rising inventories, according to the HSBC/Markit survey, had been set in June. May and July also showed increases… ‘Across the manufacturing industries we look at, people were expecting more sales over the summer, and it just didn’t happen,’ said Anne Stevenson-Yang, the research director for J Capital Research, an economic analysis firm in Hong Kong. With inventories extremely high and factories now cutting production, she added, ‘Things are kind of crawling to a halt.’…

“Corporate hiring has slowed, and jobs are becoming less plentiful. Chinese exports, a mainstay of the economy for the last three decades, have almost stopped growing. Imports have also stalled, particularly for raw materials like iron ore for steel making, as industrialists have lost confidence that they will be able to sell if they keep factories running. Real estate prices have slid, although there have been hints that they might have bottomed out in July, and money has been leaving the country through legal and illegal channels.” New York Times, August 23^rd.

And back up to the infrastructure allusions made at the beginning of this blog, much of it fueled by a governmental stimulus package ($600 billion) focused on these upgrades. “A collapsing bridge in northern China killed three people and injured five others on [August 24^th]… The Yangmingtan Bridge stretched across the Songhua River in the Heilongjiang province, according to the BBC. But the collapsed section [pictured above], which was about 328 feet long, came from a ramp over dry land. It was about 5:30 a.m. when four loaded trucks spilled onto the ground as the road beneath them fell apart… The worst part is that nobody is surprised by [this] tragedy; this was China's sixth major bridge collapse since July of 2011.

“The Yangmingtan Bridge, a multi-million-dollar project, was finished just nine months ago. It is one of many infrastructure projects undertaken by the Chinese government in recent years. These include over 4,200 miles of high-speed rail tracks, which may increase to 12,000 miles by 2020; the Three Gorges Dam on the Yangtze River, which is the largest hydroelectric project the world has ever seen; and the rapid construction of new airports that, if all goes according to plan, will bring China's total up to 230 by 2015… But for all their successes, each of these grand projects has been marked by serious failures.

“China's high-speed trains, for instance, may be going a bit too fast; there have been several accidents over the last few years. In July of 2011, a two-train collision killed 40 people. In March of this year, a 980-foot stretch of track along the Yangtze River collapsed due to nothing more than heavy rains. And in the Heilongjiang Province on Thursday evening, a minor crash injured 24 people… The Three Gorges Dam has plenty of issues too, though it generates enough watts to power Switzerland. It has necessitated the relocation of over a million people, and its construction has come at a huge environmental cost. Lately, a change in the reservoir's water level has resulted in dangerous landslides, and Reuters reported this week that another 100,000 people will soon have to head for higher ground.” International Business Times, August 24^th.

But while we might smirk a bit at this statistical chicanery, we might not exactly get the last laugh. “Problems in China give some economists nightmares in which, in the worst case, the United States and much of the world slip back into recession as the Chinese economy sputters, the European currency zone collapses and political gridlock paralyzes the United States.

“China is the world’s second-largest economy and has been the largest engine of economic growth since the global financial crisis began in 2008. Economic weakness means that China is likely to buy fewer goods and services from abroad when the sovereign debt crisis in Europe is already hurting demand, raising the prospect of a global glut of goods and falling prices and weak production around the world.” NY Times. In today’s world, the butterfly effect sometimes feels like a wind tunnel!

I’m Peter Dekom, and at least our Alaskan bridge to nowhere didn’t kill anyone.