Zombie Factories Stalk the Sputtering Chinese Economy | Hacker News Reader

Zombie Factories Stalk the Sputtering Chinese Economy

nytimes.com

39 pointsMarkMc36 comments

One significant way where a free market economy has an advantage in efficient resource allocation over a planned economy is not the priority allocation of resources to successful enterprises/groups/economic niches (both styles can do that), but a rapid, ruthless deallocation of resources from unsuccessful enterprises, so they can then be used elsewhere. Planned economies could do that in theory, but this has always been their weak point in practice.

Bankruptcies are an important instrument for the overall health of the economy. Yes, there is a short term hurt during the reallocation. But if many companies are in trouble keeping afloat, then a few of them sinking will free up resources (workers, capital, materials, land/buildings) so those resources are cheaper for the remaining, slightly more successful companies, allowing them to come back above water.

How do you think is planned economy unable to direct this effect? Maybe random faults even out arbitrary bias that would be introduced by regulation. How is a government spending tons on military not partially a planned economy?

Would you offer up the military industrial complex as an example of a planned economy NOT wasting money on dead projects?

Planned economy might direct this effect, but they don't - if the system gives leaders an option to prolong the agony, then they invariably use it, and the system suffers from it.

For examples in planned economies, USSR had a lot of examples, and this article is another. For examples in otherwise-freemarket-but-not-in-this-case economies, see "too big to fail" situation with bank bailouts, and your own example on USA military industrial complex - where failed projects get propped up instead of allowing them to die as they should, thus in the end harming the long-run perspective in the whole sector.

I kind of lived through this effect with the decline of the British coal industry which was nationalised at the time. It became uncompetitive mostly because British coal was hard to get at compared to say open pit mining in Australia, so money was lost on each ton dug up. But the argument against closing it was the miners needed jobs, it was hard for them to switch to other work, sacking them would kill the economy in mining towns and so on. It was easier for the government to pay the losses from taxes on the general population who didn't complain very much, than to fire a bunch of miners who would complain very loudly. And who did of course when Thatcher eventually fired them.

With hindsight it would have been better for the industry to decline gradually than laying off everyone at once.

Planned economies are not inherently unable to direct said effect. They just have a harder time reallocating resources from failing enterprises because of the political nature of resource allocation.

Look at a large corporation like IBM some floundering business units persist for decades because of the internal political cost of ending them when economically it is the prudent thing to do.

This is NOT a sarcastic comment nor a defense of centrally planned economies: which country(s) has a free market economy post the 2008 financial crisis?

You could even argue (and I don't believe this is a bad thing) that the way the US government handled GM's default was very much a "planned economy" sort of move, which resulted not only in the successful exit from crisis for the new organization, but also the prevention of a cascading economic failure (EDIT: hundreds of thousands of jobs were at stake).

A completely free economy nor a planned economy are ideal; a mix of the two with proper leadership seems to be the path to success. (EDIT: Most importantly, those at the top must be genuine, honest, and transparent. Corruption is a poison in this case, and must be avoided at all costs. You must want success for the stakeholders.)

Yes, but who are the stakeholders? In the eyes of those at the top that is.

That's my point. I believe (and this is only my opinion, I could be wrong) that Obama truly believed the employees of GM and associated suppliers/entities were his stakeholders, and he acted to protect them (as well as the much larger economy surrounding GM as a whole).

How do you ensure "decent people" are always at the top? I don't know. I'm not a terribly big fan of Obama (drone strikes, supporting the NSA), but he's done an OK job. Now Elizabeth Warren and Rich Cordway (director of the Consumer Financial Protection Bureau)? They're kicking all sorts of ass for the general public.

Find good people. Put them in charge. Get out of their way.

Exactly...we hear "free market economy" "advantage in efficient resource allocation" talk when Wall Street demanded deregulation, and that Glass-Steagall be repealed. Then when the rentiers start going broke it becomes "too big to fail" and President Bush signing TARP into law. The same thing happened in the 1980s - Reagan deregulated the banks, rentiers made money, then the S&Ls went bankrupt and the taxpayer was on the hook for the bill.

Then we have the 1979 government bailout of Chrysler...the 2009 government bailout of Chrysler...this company seems to need a bailout every thirty years...with some of the same talking heads shouting how the banks need to be bailed out denouncing the "socialism" of bailing out Chrysler.

Of course there was the 1971 government bailout of Lockheed as well.

Every year the US government sends $500 million to Iowa in direct farm subsidies...Senators Jodi Ernst and Chuck Grassley are against "socialist" measures that tend to go more to big cities in other states, but of course hypocritically demand the government give corporate welfare to the farmers in their state. Texas gets $400 million a year in direct farm subsidies, with the same hypocrisy surrounding it. At least Democrats are honest about what they're doing.

Then of course we have the net neutrality debates, with the backers of the AT&T/Verizon monopolists saying "get the government hands off the Internet". This is a laugh to people like me (and some others here I'm sure), who remember the days of ARPAnet and NSFnet and sri-nic.arpa and nic.ddn.mil and so forth.

Some people act like Red Guard students are still marching through Peking, throwing portraits of the Buddha in bonfires during a Smash the Four Olds campaign. In the modern day, the economy of the PRC does not operate all that differently than that of the US or Germany or some other country in terms of a "free market". The only different for the PRC is its economy has been booming since the 1980s much more than these other economies. Since 1990, every year the PRC's economy has grown 7% or more. That this might slow down for this quarter is what is eliciting surprise. Looking at the US economic downturns after 2000, and after 2008, it seems incredible that so many American pundits point to a slow quarter in the PRC's growth as signs of how they've been heading in the wrong direction all along etc. 7-14% economic growth every year since 1990 looks pretty good to me.

Reading it reminded me of the articles in the same tone that were written against Argentina, also asking for more misery for the people here. They were wrong. Argentina recovered from e 2001 crisis by kicking the IMF out of the country. The IMF uses this kind of discourse to oppress countries. I hope China's government will be wise enough to not let the IMF bankrupt them.

Argentina didn't recover by kicking the IMF out. Their growth over that time is almost identical to Chile and Brazil. It began at the exact same time all economies began expanding, including Colombia, Peru, and Ecuador as well. The expansion was a macro effect, not something Argentina did.

Worse, Argentina's GDP has hardly moved in 20 years on an inflation adjusted basis. Their debt is soaring faster than during the 2001-02 crisis. [1] Last year their economy had 40% to 60% inflation [2], and is in dire condition. I'd say Argentina is doing a fine job of bankrupting itself. I'm just wondering who they're going to blame this time. [3]

[1] http://www.bloomberg.com/news/articles/2015-06-01/argentina-...

[2] http://www.bloomberg.com/news/articles/2015-03-07/argentina-...

[3] http://www.bloomberg.com/news/features/2015-07-17/-no-why-ar...

This article from The Economist a while back [1] gives what seems to be a pretty good rundown of Argentina's rather sad economic and political history.

[1] http://www.economist.com/news/briefing/21596582-one-hundred-...

China isn't dependent on external creditors. Greece would be a better comparison.

If one wishes to participate in global trade then unfortunately there isn't much a country can do once it has borrowed money in a foreign currency. Germany just finished paying off debt dating back to World War I reparations last year. Greece, Argentina may have a hundred years to go before they are back to "normal."

China is more in a situation where they have let things get far out of balance. It is hard to sympathize. Irreversible environmental destruction on a massive scale has occurred across the world trying to rush the delivery of raw material so that China could construct infrastructure rapidly. Much of this may not have even been built in a quality that will last for a long time.

Fast growth always creates imbalances -- whether you are a country or a private company. China now has to decide how they will re-balance. For now they are making the decisions for themselves, however as a participant in global trade the actions of many other countries will provide constraints.

Wow, yet another anti-China article from NYT. I can't get over the volume and frequency. Things look pretty good on the ground here!

Yes, if you get all your news from xinhua then it definitely looks much more negative. But NYT is great if you want to know more than what the government wants you to know; the government doesn't block NYT because they are wrong!

The fact that the person above wrote in English and is on this site means they are likely an expat/ABC. Thus your accusation that they get all their news from xinhua is a laughable ad hominid.

>>The fact that the person above wrote in English and is on this site means they are likely an expat/ABC.

That's one possibility. They can also be a Chinese national who is fluent in English. I don't know if you're aware but there are many such people.

seanmc accused contigenics of "only getting their news from xinhua". This is on intellectual par with responding to a slightly liberal argument by saying "stop watching fox news". I merely speculated on contigenics nationality to point out the that he/she likely does not only watch xinhua.

I stand by my speculation, but it is not central to the point I was trying to make. The point I was trying to make is "Let's not dismiss every pro China comment as CPC shilling".

It is obvious that contigenics is in China, they admitted that in their post; you were only calling out nationality, but that isn't even relevant. If they don't have a VPN, like I don't, where else are they getting news from? NYT is blocked, WSJ is blocked, BBC is blocked. You don't have to tell me to "stop reading NYT" because I can't! So your whole argument makes an assumption that is not even technically correct. So what argument are you making here? That all news sites are freely available for browsing in the PRC? Because if that's the case, well, we obviously live in different worlds.

You aren't addressing what contigenics said. You are just filling in whatever you wish they had said and attacking that. This is called a straw-man argument. Let's look again at the source material:

"Wow, yet another anti-China article from NYT. I can't get over the volume and frequency. Things look pretty good on the ground here!"

No one said anything about the availability of news sources. Contigenics simply pointed out that the article in discussion is incongruous with what you are likely to see on the ground in China. He/she further points out that NYT seems to publish a disproportionate number of negative stories on China (which may also be of dubious veracity). Therefore it is worth entertaining the possibility that the NYT might be full of shit. This possibility is independent of whatever qualm you wish to raise with regards to CPC journalism policy.

Where do you think contingenics is getting their information if not from the local press?

> Therefore it is worth entertaining the possibility that the NYT might be full of shit.

Irrelevant: we have no way of knowing, it's blocked. So whatever we want to say about CPC vs, NYT journalism is irrelevant, we are only getting the former. Unless you have a VPN, you are vastly uninformed - it is quite simple!

You just don't seem to get that, at all. Contigenics made an observation from China, where news sources are very limited because of the CPC. It is not from a position of open access to knowledge. You refuse to acknowledge that aggressive censorship exists in the PRC, but it is a verifiable fact. Come visit China and try to access NYT. Or buy a newspaper in the airport with blacked out articles.

Censorship taints all discussions about Chinese vs. Western press, it is there, everyone know it is there, and it can't be ignored or brushed off as some silliness. I've been here for 8 years and that just becomes more and more true; only the apologists think otherwise.

>Unless you have a VPN, you are vastly uninformed

>If they don't have a VPN, like I don't

Modus Ponens you are uninformed.

> I've been here for 8 years and that just becomes more and more true

See, you are doing exactly what contigenics did. You are trying to inform me about China by appealing to your personal experience within China. But by your logic I should be able to simply dismiss you because you don't have access to all news sources and are thus uninformed.

I'm not comparing Chinese press and Western press. I am pointing out that people within China (like you, me and Contigenics) add value to the conversation in spite of censorship by telling us what things are actually like on the ground. If you did read NYT and WSJ et al, you might believe that the sky was falling in China. I know when I look on the streets of Shanghai, I see a people absorbed in their new found consumerist appetite rushing to buy the most fashionable knock-off status symbol and post their moments on wechat. The sky is not falling anytime soon. Perhaps things are different for you?

The original comment was: NYT is way too negative, all they do is say bad things about china; on the ground (in China), everything looks perfectly fine.

My reply: if all you read is xinhua, you wouldn't see it. Western press provides us with information, even negative information, in uncertain times. That is all good.

Your reply: westerner performing an ad hominem by calling parent a Xinhua wumao shill; you should be ashamed of yourself!

So please excuse me if I took offense.

I do read western press...at work where I can. But I feel like I'm in a bubble starved for information since the Chinese press is so biased and unreliable, which isn't great in these very uncertain times. NYT provides valuable information, mostly solid reporting (this article isn't even controversial at all, even by Chinese standards), information that tells me if I should make a dash for the bank and convert my RMB savings into dollars and get it out of the country!

We won't know that the sky has fallen until it hits the ground. For now, we are stuck reading tea leafs to figure out what will happen next. We live in interesting times.

It's evening in China right now, I assume everyone in the USA is still asleep. Why would parent not be in china, there are plenty of Chinese in China who speak English well enough, I work with them. Of course, the poster could be in Europe, but what does it matter?

Compare say china daily (an English version of xinhua mostly) to NYT, and you'll see a vast difference on bias and reporting standards, where NYT is vastly more professional than the shill Chinese press. So taken like that, why would parent think NYT was lying unless they had something else to compare it to; i.e. the CPC's word that the economy is fine and nothing is wrong?

There are plenty of problems in the Chinese economy...why not report them?

Here's a quick (terse) summary of what happened up-thread:

"I'm physically in China and I find that the NYT reports on China often don't match the reality that I see." "Shut up xinhua shill"

Comparing the quality of xinhua and NYT is completely tangential to the point I was trying to make. I'm not saying we can't or shouldn't have a serious discussion about China. I am saying that such a conversation is not happening here. I expect better than this HN.

I see. Let me view that NYT report right now. Oh, wait, I can't, for some reason NYT is blocked here. Well, I can check out china daily at least.

How does the contigenics 'see' the lack of zombie factories? Are they flying in a helicopter to fact-check the NYT? I think not.

quite frankly, xinhua and nyt are both full of shit.

"where NYT is vastly more professional than the shill Chinese press."

Pfffft...

Do you think it's a conspiracy?

Sounds like the US oil industry. Many wells that should be shut down as uneconomical at current oil prices are still producing. This is to service an estimated $150 billion in loans from banks and hedge funds.

Just because it's uneconomical to drill a well at a given price doesn't mean it's not profitable at the margin to keep pumping from it, given that the drilling is a sunk cost.

So basically they need to invest in the economy they cannot plan for consumer..

the only similar case Germany during WWII 250% or more debt over GDP but GDP was not expanding due sole effort on military building

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