It doesn’t have to be profitable. The accounting is a minor detail in a physical world.
seanmcdirmid•3h ago
If investors are involved and it’s just not public money, then either investors will take a hit, or the government has to bail them out, creating moral hazard. Eventually, either investors are broke or they are just haphazardly choosing projects because they know the government will cover their risk.
toomuchtodo•3h ago
Yeah, investors will take a hit but keep on investing, like every sovereign debt default before. Where else are you going to invest? There are only so many nations.
Similarly, do you think we’re going to pay off ~$36T in US debt? Of course not, there is no will to raise taxes and cut spending to achieve that, we’re going to extend and pretend forever (or at least until the music stops, whatever that looks like). The only difference is the US does it to maximize profits for the wealthy and keep the military apparatus running to project global power (at a cost of ~$820B/annually) while China does it to maximize their position as a global manufacturing engine and maintain domestic stability.
Profitability is irrelevant, focus on outcomes. “The purpose of the system is what it does.”
seanmcdirmid•3h ago
If you want money to be smart in your country, then providing incentive for investors to choose profitable projects is really important. Money in general is out to good use in China, but China has decided to follow the Japanese model on infrastructure projects, which leads to lots of under utilized capacity, which leads to its own opportunities for people to take advantage of but is a net drain on society (you can see that all over Tokyo).
The US has its own huge moral hazard problems, they aren’t very relevant to China’s, unless you are trying to claim America is at fault for bad investments in China? Or is this just a what aboutism?At any rate, I’m the last person to encourage China to follow the USA as a role model.
toomuchtodo•3h ago
What does smart money in the US look like? I don’t think the evidence shows that US investors allocate capital effectively, but I’m happy to be proven wrong. China is a leading high tech manufacturer proven to build at volume, what is the US getting for what is being invested? PE roll ups, car washes, healthcare monopolies, etc?
(accredited investor with access to non public offerings, so I have seen a lot of prospectus for US investment offerings)
seanmcdirmid•2h ago
Americans have mainly eschewed smart money for index funds, so you have a few fund managers deciding where the money should go, controlling maybe about 70% of the stock market money. Our infrastructure is basically at a standstill still where we throw lots of money at things for not very much results. Our tech investments still make lots of money and progress, but trump is trying to turn us from a high value tech economy into a lower value assembly economy, which is just way too dumb as it’s rhetoric opposite direction of what China is doing.
China is very different with its own successes and problems. It’s stock market still has way too much insider trading for it to be very useful for capital allocation, infrastructure is mostly government driven with the veil of private investment who bets are always going to made whole, and a property market that basically mimics Japan of the 1980s heading into the 1990s. Private investment in manufacturing and tech is where most of its success is at.
maxglute•2h ago
Economic profit should approach zero under perfect competition in the long run. PRC industrial policy compresses this process. Not just because it coordinates a lot of resources, but PRC scale also generates stupid amounts of players to throw into gauntlet. Harnessing scale is by design. Ending up with incredibly cost optimized players that then to displace incumbants in domestic and then export market is outcome.
toomuchtodo•4h ago
seanmcdirmid•3h ago
toomuchtodo•3h ago
Similarly, do you think we’re going to pay off ~$36T in US debt? Of course not, there is no will to raise taxes and cut spending to achieve that, we’re going to extend and pretend forever (or at least until the music stops, whatever that looks like). The only difference is the US does it to maximize profits for the wealthy and keep the military apparatus running to project global power (at a cost of ~$820B/annually) while China does it to maximize their position as a global manufacturing engine and maintain domestic stability.
Profitability is irrelevant, focus on outcomes. “The purpose of the system is what it does.”
seanmcdirmid•3h ago
The US has its own huge moral hazard problems, they aren’t very relevant to China’s, unless you are trying to claim America is at fault for bad investments in China? Or is this just a what aboutism?At any rate, I’m the last person to encourage China to follow the USA as a role model.
toomuchtodo•3h ago
(accredited investor with access to non public offerings, so I have seen a lot of prospectus for US investment offerings)
seanmcdirmid•2h ago
China is very different with its own successes and problems. It’s stock market still has way too much insider trading for it to be very useful for capital allocation, infrastructure is mostly government driven with the veil of private investment who bets are always going to made whole, and a property market that basically mimics Japan of the 1980s heading into the 1990s. Private investment in manufacturing and tech is where most of its success is at.