Since I’ve been in China, a number of you have written me and asked me how “conditions on the ground” are looking for a Chinese hard or soft landing. But in fact visual inspection of the country does not answer this question in any simple way.
I recall being in Madrid in 2011 with Yana and seeing everything slow and all the people looking depressed; it was obvious that the country was in a deep recession. But a comparable inference cannot be made from looking around China.
There is a visual feature of China which is incontestable, namely the country has a lot more buildings and structures than it is currently using. If you take the train through the countryside, or out West, this is especially noticeable. But does it have to be bad or fatal news? Well, no.
At the very least it is possible that migration from the countryside will fill and validate those structures and other apparent over-extensions of capital investment. Under both the optimistic and pessimistic views, China today evidences some extreme in-the-moment overcapacity. That is what you would expect from a rapidly growing economy — “build for the glorious future!”, but it is also what you would expect from a rapidly malinvesting economy.
(By the way, those who have never visited often think that China is “crowded.” But relative to facilities, the country is quite undercrowded; for instance it is easy enough to dispense with dinner reservations most of the time.)
How long will this excess capacity last? How much time will the Chinese future need to “catch up” to this infrastructure? Will that validation come too late? We all may have opinions (or not), but the visuals themselves do not tell any specific tale.
So to a China pessimist and a China optimist, the world looks more or less the same. For now.