Jul 31, 2013

China's ingenious way to increase GDP. Construct buildings, and demolish them even before they are completed.

This 5-star hotel in Nancang city in China was blasted in 2010. This 13-year-old hotel left behind 40,000 tons of construction waste. 

Sometimes back, senior journalist M J Akbar had in one of his columns given us an excellent peep into the way economic growth is being perceived. He quoted the Russian Finance Minister, who in the wake of declining GDP in Russia, asked fellow Russians to at least start drinking more of Vodka, which in turn will increase the country's GDP !

At a time when India's GDP has slumped to a little over 5 per cent, we are told that we are not alone. China too has a lower GDP growth of about 7 per cent. Well, I don't want to go into the reasons for the slowdown in economic growth, but I remember in his bestseller Confessions of an Economic HitMan, author John Perkins had stated that one of the best ways to increase GDP is to destroy a city and then rebuild it.

I didn't realise that China had been literally following it. Perhaps that's the reason why China had a stupendously high GDP growth for several years.

At a time when Chinese GDP was in the range of 8 plus year after year, Tyler Durden came out with an amazing explanation for the continuously high GDP: "Ever wonder how China can endlessly generate goal-sleeked GDP of precisely 8.00001% year after year? Or how it can constantly find use for the massive and ever-larger surplus of warehoused commodities? Simple - never stop building. Which, apparently means blowing up empty building before they are even finished and rebuilding them. Rinse. Repeat.

In the article "China: Proudly Demolishing Buildings Before Completed In Pursuit of The Glorious Housing Bubble Perpetual Engine (here is the link: http://bit.ly/90EY1N) the author has provided us a snap shot of the Chinese methodology to increase GDP. The BBC later reported (July 13, 2012) that construction had dominated China's economy, accounting for 25 per cent of all economic activity and 15 per cent of all jobs. "Over the past decade, China is said to have built the equivalent of Rome every two months. As a result, ghost cities, as they are known, have sprung up across the country...Beijing alone is said to have nearly four million apartments standing empty"

What is therefore obvious is that GDP figures hide more than what it reveals. Unfortunately, planners, economists and senior journalists have often flaunted GDP figures as if it is the touchstone to development. #

Additional viewing: Here is the link to one of my talks (in Hindi) on what is this GDP. 


Siddhesh Joglekar said...

What is your point here?

Discrediting China growth story does not make India any better IMO. Still, on many other economic / social indicators China fares much better than India. We, India as a nation, should be moving away from the mentality of mocking others, to actually investing time on something constructive.

अमित भारतीय said...

after reading this article, I just recall ur words which had been delivered at IIMC- Remarkable Model of Development...

Cheri said...

This is great!

vanita said...

Nice example to prove why you can't judge a country's wellbeing by a few statistics.