Is China a big bubble?
Posted April 1, 2010on:
What a difference eighteen years have made.
Eighteen years ago, I was awarded a scholarship to study mathematics in the U.S. The China I left behind was very different from the China of today:
- Then there was no private ownership of automobiles; now China boasts the world’s largest car market.
- Then there was no private ownership of houses; now there is little public housing left.
- Then China had a grand total of 28 kilometers (17 miles) of expressway; now China’s expressway network is second only to the U.S.
- Then there was no high-speed train service to speak of; now China has the fastest high-speed train service in the world covering the equivalent distance of New York to Chicago in three hours.
- Then China’s economy was the 13th largest; now it is the second largest.
As I visit China, on the one hand, I can’t help but marvel at the changes, especially the speed of change. On the other hand, I am truly puzzled about how this could all have happened under a communist government.
Consider these facts:
- China does not allow the free flow of information.
- China has weak protection of private property rights.
- China does not have much of a legal system to speak off.
If you read economics 101, these are the preconditions of economic development. Either the economic principles that we in the West are familiar with are not true, or China is really the mother of all bubbles that is waiting to burst.
What do you think? Leave your comment here.