According to Stephen Roach (Morgan Stanley) [cited in Is China's Economy Speeding Off the Rails?]
Investment in fixed assets like factories and the rail network accounted for more than 95 percent of China’s 7.7 percent growth in the first three quarters of 2009 and made up 45 percent of gross domestic product, which is higher than any major economy in history, according to Stephen Roach, chairman of Morgan Stanley Asia.
Without a surge in consumer spending and with export growth stalled, investment must rise even further to stoke growth, he said in a Dec. 18 speech in Beijing.
“These are ridiculous, unsustainable numbers for any economy,” Mr. Roach said.Ninety-five percent of growth is a very large component of growth and although China does have large reserves, eventually growth must come from elsewhere. While these assets will eventually produce benefits - one hopes - they will not be affordable for a large percentage of the population.
China may be hit with a slowdown next year as the impact of the investment-led expansion wears off and shipments to the United States, the traditional external source of growth, fail to pick up, Mr. Roach said in an October report. He did not specify how much he thought growth might slow.
Some economists say the high-speed network is symbolic of a stimulus program that places too much emphasis on infrastructure spending and not enough on raising living standards. The average urban Chinese worker made 28,898 renminbi last year, a tenth of the $39,653 average wage in the United States, according data from the U.S. and Chinese governments.
Most Chinese rail travelers will not pay the premium to ride on the fast trains, Zhao Jian, a professor of economics at Beijing Jiaotong University, said in a September interview on Chinese television.
A second-class one-way ticket for the half-hour Beijing-Tianjin trip costs 58 renminbi, about three-quarters of the workers’ average daily pay. A so-called hard-seat ticket on a slower train, which covers the distance in two hours, sells for 11 renminbi.
Passenger reluctance means revenue from the high-speed lines will not be enough to service the debt if railway expansion continues at its current pace, Mr. Zhao said in the TV interview. The Ministry of Railways has 383 billion renminbi in bonds outstanding
“If America had its subprime crisis, in China we have a railroad-debt crisis, or you could call it a government-debt crisis,” Mr. Zhao said in the TV interview.