China Fact of the Day

In the course of making the case that China’s property bubble is popping the FT notes:

In just two years, from 2011 to 2012, China produced more cement than the US did in the entire 20th century, according to historical data from the US Geological Survey and China’s National Bureau of Statistics.

Comments

Must be a unit error.

Yes, this seems to be an improbable statistic.

After perusing the numbers, it does appear that the current statistics released by China indicates that it's producing 25 times the amount of cement that the US does per year. So assuming that US production is currently roughly twice the mean production of the 20th century, this would make it plausible.

And I guess it shouldn't be that surprising. China is a planned economy. Once the government decides to go in a given direction, there are no market forces to brake the forward momentum.

True but I think people overestimate how much a government can overstimulate a sector.

Link is broken:
http://www.ft.com/cms/s/0/4f74c94a-da77-11e3-8273-00144feabdc0.html?siteedition=uk#ixzz31yvGDCYB

This statistic is credible -- first, in building, the US housing standard has been wood-framed, the Chinese concrete, second, for transportation, US roads are predominantly asphalt while Chinese use more concrete in their roads (and, more relevant to the early century, railroads used wooden ties, Chinese now using concrete ties and the maglev and other high-speed rail are massively concrete), finally the dam-building and runway in recent years in China has been done at an incredible pace.

You mean two years of Chinese production outpaced the U.S.'s entire production for a century? A century that just happened to include such construction projects as all airports in America, civil and military. Along with such minor things as Hoover Dam and co.

Certainly not completely impossible - China uses a lot more concrete in construction than the U.S. But I don't think that NYC's or Los Angeles's or Chicago's etc skyline were made up of wood framing, and neither were America's major port facilities. The same also applies to most foundations in the U.S., most definitely including bridges and factories.

So, some numbers are actually available at http://www.ficem.org/pres/THOMAS-ARMSTRONG-LA-INDUSTRIA-DEL-CEMENTO-EN-CIFRAS.pdf

And other searching found that peak American use in 2005 was over 100 million metric tons, and we are around at 70 million now. Chinese production is apparently over 2 billion metric tons in 2011. So for fun, using 70 million tons as a reasonable enough average between 1970 and 2000, the U.S. covers one year's Chinese production in 3 decades. That being a period when the U.S. did not construct much in the way of airports/an incontinental interstate highway system or dams (how much of America's extensive network of missile silos/bunkers was built after 1970 is hard to judge).

The number is not out of range, but still seems at least potentially skewed - to the tune of a few hundred million tons of concrete.

Compared to a human, a missile silo is huge. But it is just a speck on the map.

For every missile silo built of concrete, there are hundreds of thousands of structures built with wood.

An airport has a lot of horizontal concrete - less than you might guess by looking at its two dimensional footprint.

I'm wondering where the cement to make stadiums and varied infrastructure in Africa comes from.

Good point.

One of the more interesting facets of Western history is wood. Castles, for example, consumed entire forests to build even though we associate them with stone.

At the time of the colonization of the Americas, Europe had been largely deforested. America was literally an ocean of trees. It would be nearly equivalent of seeing a city with streets literally paved with gold.

This wood-centric building lasted for centuries. Even in a city like Chicago, vast stretches of urban residential landscape are built with wood, dwarfing the downtown concrete jungles.

The asphalt observation is really good too. Concrete roads last much longer but are much costlier and harder to repair than asphalt. Local roads and highways are built by cities and states that apparently have a shorter decision horizon. China, with its strong central government, can afford to take the longer view and prefer concrete. This is a fascinating comparison of public finance.

Re. roads it's also about total traffic expected. I think above a certain load factor concrete wins.

If you have a backcountry road with a few cars an hour no point pouring concrete. I think a large fraction of the US use case matches / matched this low use profile. Not in China.

Also, even in the US, isn't our highway / interstate system mostly concrete?

That concrete must have gone into all those major Chinese dams, right? http://marginalrevolution.com/marginalrevolution/2014/05/china-fact-of-the-day-17.html

It's good to know all those Chinese translations of Gladkov didn't go unread.

Unfortunately, cement and concrete are also a major source of carbon dioxide emissions.

http://blogs.ei.columbia.edu/2012/05/09/emissions-from-the-cement-industry/

Emits actual pollution too.

This reminds me of stories when the Montreal Olympic stadium was constructed. The concrete trucks would show up at the gate, be signed in for billing, then go through the site out another gate, then back in again. The same load would be billed multiple times. That would never happen in China.

What the hell is this bullshit ?

China embarked on the largest urbanization in human history. And they still live in cramped apartments.

Only a moron would view it as a bubble. Or a racist. Did I just include everybody ?

You don't need to call everyone a moron or a racist. Just put a few thousand dollars in equity in one the developers mentioned in the article and you'll shut everyone up.

Yes, Daniel, your position is opposite just about everybody, though given that most Chinese also believe it to be a bubble, makes it hard to characterize the position as "racist". But sure, if you want to think everyone else is a moron, then I'd invite you to put your money where your mouth is, and buy in.

Certainly there are vast tracts of empty apartments in the luxury complexes, so plenty of inventory available. Most of my friends compounds have a 20-40% occupancy rate; I was lucky/smart enough to find an older, more developed one, so I have neighbours.

By the way, the problem is, none of the housing is affordable to the masses who live in the cramped apartments, but also much of it is so badly built it'll fall apart before the prices drop far enough. Oh, I forgot, I'm a racist moron, so obviously the facts don't really matter...

In the Chinese context this might be a bubble currently, yes, and the original developers / promoters might lose their shirts. But with that many people & an urbanizing population all it means is you wait for a few years & everything is full.

An overly optimistic projection was made, but unlike the Spanish housing bubbles for example, I'm betting the Chinese complexes & infrastructure will see target utilization levels eventually. It's only a matter of waiting for a few years.

How do you tell if it's a bubble? Are most housing sales coming from speculators in China buying up properties to resale at higher prices?

My daughter had a Chinese visiting professor as a roommate last year. This woman was 30, married, and a successful English professor in China, with a husband who is a famous (in China) poet-laureate. They live in some generic city in China, in--by their standards--a very large apartment, with 2 bedrooms, eat-in kitchen, and living room.

What most amazed the scholar and her visiting husband were not our large cars, huge portions of food, or clear Florida skies, but instead, our CHEAP real estate prices. She said the cost of a very nice small 2BR/1BA condo in SRQ, Florida, @ $150K would be over a million dollars in her home city, and of lesser quality.

So I want to know: who is buying all that overpriced real estate in China?

In China interest rates on saving are below the inflation rate. Basically people are having their bank accounts gradually and officially robbed. As a result, people do things such as invest in real estate in the hope of having some assets that will stiff be worth something in their old age. How smart this is in a country with a one child policy, I don't know, but I see why they do it.

Interestingly, this is why the governments change in focus from utility scale solar farms to point of use rooftop solar should be a great success. Chinese households can get a far better return from putting solar panels on their roofs than they can get from putting money in a bank.

+1 You will always have an asset bubble of one class of asset when only one class of asset can be purchased as a saving vehicle.

Gold! Forget real state, everyone should buy gold!.............Sorry for the interruption, I must back to 2009 :)

They've already done that and are stlll doing that. And as soon as China transitions to a more developed state where people can actually put money in the bank and not have it lose value the bottom is going to fall out of gold market. (Or even sooner if Mr T decides to sell his old jewelery.)

It's not just gold, jade is popular as well. Jewelry in general also, I would imagine.

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