Investment in infrastructure accounts for much of China's GDP - the country is said to have built the equivalent of Rome every two months in the past decade. And with such a large pool of labour, it is harder to put the brakes on when growth slows and supply outstrips demand.
"You have got seven to eight million people entering the workforce in China every single year, so you have to give them something to do in order to retain the legitimacy of the government," says Doran.
"Maybe 10 or 15 years ago they were doing things that made sense - roads, rail, power stations etc - but they have now got to the point where it's investment for investment's sake."
So which are the most striking of these white elephants?
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"We have spoken a lot about these ghost towns in Ireland and Spain recently [but China] is Ireland and Spain on steroids," says Kevin Doran, a senior investment fund manager at Brown Shipley in the UK.
ReplyDeleteInvestment in infrastructure accounts for much of China's GDP - the country is said to have built the equivalent of Rome every two months in the past decade. And with such a large pool of labour, it is harder to put the brakes on when growth slows and supply outstrips demand.
"You have got seven to eight million people entering the workforce in China every single year, so you have to give them something to do in order to retain the legitimacy of the government," says Doran.
"Maybe 10 or 15 years ago they were doing things that made sense - roads, rail, power stations etc - but they have now got to the point where it's investment for investment's sake."
So which are the most striking of these white elephants?