Regarding claims that China is overbuilt:
Yes, there is some infrastructure in the wrong place; Ordos, or the Binhai area of Tianjin. But for the most part it’s where it should be:
1. The subways are under the huge, densely populated cities, where they should be.
2. The high speed rail mostly connects big cities.
3. The larger ports and airports are mostly near the bigger cities.
4. The motorways mostly connect highly populated areas in eastern China.
5. The housing is mostly being built in the cities that are receiving massive rural to urban migration.
And remember, if China ever becomes developed it will need far more housing, subways, airports, roads, rail, water systems, power, etc, etc, than it has now.
China’s in a sweet spot where the inefficient SOEs [state owned enterprises] don’t do all that bad—building big things.
But, he does go on to say that China should move away from the SOE model, thereby punching a hippie.
So we’ve got Krugman claiming China is about to collapse, and Sumner saying all is well. They should make a bet! Then, when one of them loses, I will run victory laps saying, “See?! The people who think we need more Aggregate Demand need to revise their failed model in light of this horrible prediction.”
(In case you’re new around these parts, I’m just kidding. Try this.)