Conservative Donnybrook

It looks like China might have a lot more to worry about soon than the possibility of Google pulling up stakes and leaving in a snit. Conventional wisdom is that China’s fiscal and monetary stimulus program has worked — See this Dec. 11 New York Times story:

Data released by China on Friday provided fresh evidence that the nation’s economic recovery was gaining momentum, helped by government stimulus measures and lending by state-run banks over the last year.

China’s authorities were quick to prime the economy in the wake of last year’s global financial crisis, and gross domestic product is forecast to grow more than 8 percent this year — vastly more than in the United States, Europe or Japan — despite a sharp decline in exports.

This supposed success story has led various commentators to point to China as an example of effective centrally-planned economy-goosing. So you see, it isn’t Keynesianism’s fault. We just aren’t doing Keynesianism right!

But China might not be such a model of enlightened state-directed capitalism, after all. Massive government spending, aggressive monetary stimulus, turbocharged bank lending, surging asset prices, skyrocketing real estate values — it gives one a sense of deja vu, and this story doesn’t end well. The massive real estate overbuilding is particularly alarming–shades of Dubai? Heck, shades of us?

Mish has been sounding the alarm on real estate overbuilding since February, more recently commenting:

Problems in China continue to mount. Money supply is growing rampantly out of control, property prices are in a bubble, exports are weak, commodity speculation is pervasive, and GDP growth is more of a mirage than real.

The video Mish links to is worth watching:

The MSM has been catching on, too — see here and here for NY Times and Wash Post pieces which both air mounting worries about troubles on the horizon.

Tim Swanson of Mises.org warned of Chinese asset bubbles over at the Mises blog back in July, revising his earlier, more sanguine pronouncements on the subject.

It’s true that despite the problems the Chinese economy faces, they’ve still got a ton of advantages vis-à-vis us. To wit, they don’t have a crushing private debt burden. We do. They have a sky-high savings rate. We don’t. They make stuff. We don’t. And unlike us, they don’t have massive government deficits financed by foreigners (in our case, that would be… the Chinese).

I guess the question is, is all this enough to save them from their economy from hyperactive government meddling? To put it another way, what advantage does China have that Japan did not have in 1991 at the outset of its “lost decade”(s) of deflation and anemic growth? That’s not a hypothetical question — what am I missing?

What immediately comes to mind is that China has a massive, cheap, productive, and relatively young workforce, a pretty good asset if you’re the workshop of the world. Is that enough to save them from the fate of the rest of the world’s bubble-blowers?