Part 2 of Local Politics & FDI
/[7/20, 10:32] Meta AI: Gunabalan Musings and Travails China is now sitting on roughly 4.5 trillion in excess savings after the property slowdown. The usual western commentary goes straight to ghost cities and says they built too much. That misses the point. The intervention was deliberate. National house prices have come down to affordable levels. The glut was never in Beijing, Shanghai, Shenzhen or Guangzhou where the jobs are. Those urban cores have not deflated and likely will not, because that is where productivity and wages are concentrated. What deflated was the speculative building in third and fourth tier cities that relied on land sales to fund local governments. That model needed to end. The savings did not come from nowhere. They are the result of two decades of state-backed production, export surpluses and capital deepening. Factories became more automated, logistics became tighter, and real wages rose. Productivity gains turned into savings because household...
