"... China is a grotesque economic aberration that bears no relationship to prior economic history or any conventional economic models – not even to the export-mercantilism model originally developed by Japan, and which has now proven itself wholly unsustainable. Instead, China is a nation that has gone mad building, speculating, and borrowing on the back of a credit bubble so monumental (and dangerously unstable) that its implications are resolutely ignored by observers deluded by the notion that China embodies a unique economic model called “red capitalism.”
But when a nation’s debt outstanding explodes from $1 trillion to $25 trillion in 14 years, that’s not capitalism, even if it’s red. What it represents is monetary madness driven by the state
... during the two-year period 2011-2012, which was the peak of China’s much praised “aggressive” stimulus response to the Great Recession in the Developed Markets world, China consumed more cement than did the United States during the entire 20th century!"
http://www.testosteronepit.com/home/2014/5/14/why-china-will-implode-its-a-monumental-building-aberration.html
I largely agree with this except for this statement:
"What it represents is monetary madness driven by the state"This is certainly one of, if not the largest, bubble in the history of capitalism but China has only facilitated, not driven the bubble. This bubble, like all bubbles before, is driven by the insatiable demand that capital has for high ROI investments. The race by capital to Asia, China but also Korea, Taiwan, Indonesia, Vietnam etc., was caused by a paucity of investment opportunities in the developed world. Beginning post WWII and accelerating after nations moved to floating exchange rates (triggered by the U.S. going off the gold standard in 1971). Capital was unshackled and now free to roam the planet.
All bubbles, driven by this flow of capital, behave the same. They inflate, often rapidly, and then they burst. The bursting is generally proportional to the rapidity of the prior inflation. While they behave the same, the impact is dependent on the nature of the bubble. Some bubbles involve an industrial sector. The high tech bubble that resulted in the dot.com bust was just such a bubble. When this bubble collapsed, the impact was felt on those areas of the world economy that were driven by the bubble. Silicon Valley got hurt in addition to other high tech areas such as Boston. NASDAQ was decimated and it took a decade to recover.
The bursting of the housing industry bubble, again driven by capital, has decimated the U.S. housing industry. Despite rosy forecasts by the industry, housing will never achieve its former glory. Other nations, most notably in Europe also saw a dramatic drop in prices and activity.
Other bubbles are more regional in nature. Japan embarked on a remarkable period of growth, post WWII. This accelerated to dizzying levels until it burst in the mid 80's. While the Japanese government certainly directed and facilitated much of this development through economic policy, the engine was the capital made available by developed nations. Post bubble, due in part to Japan's failure to accept the financial damage, they have suffered persistent low growth.
China's bubble is also regional although, with 1.3 billion people, it is a huge region. The overbuilding is not merely housing, but industry as well. They have far more production capacity than needed across all kinds of industries. Popping this bubble will have a disastrous effect on the real economy in China. The only impact on the rest of the world will be via financial institutions.