China Has A Debt Problem Three Times Larger Than Evergrande | Economics Explained

"If you run the ministry of hammers, every problem starts looking like a nail". I don't know why... but I really love this statement...

When the borrower owes the lender trillions of dollars, the borrower doesn’t have a problem, the lender does.

I would rather have a country lose $850 billion on an ambitious domestic infrastructure project rather than wasting $2 trillion on fighting cavemen in Afghanistan

Public infrastructure doesn’t need to make direct profit, it also improves profitability and efficiency of the country as a whole. Imagine if we expected all the roads to be profitable with little tolls everywhere. And yet they exist and no one worries about profit.

When Japan started its very first Shinkansen, it was a massive loss and people criticized nobody wanted a train that fast. Half a century later, look how it turned out now.

There’s one thing people keep skipping when they talk about this: the positive externalities of high-speed rail. Many governments choose to operate unprofitable rail lines, because the total value to the economy is higher than the cost…the economy benefits from that additional week of work that a worker used to spend riding busses, now that it only takes a day or two for the same trip on high-speed rail, and it’s easier to send someone to check on an new factory, so issues are more likely to be found, and it’s easier to decide to build one in an area where labor is cheaper, if you know you can get there fast to do the needed supervision and find issues the people on-site may be overlooking. So, the losses to the Chinese economy as a whole from high-speed rail are smaller than they appear when you look just at the losses by the high-speed rail company itself, and I’d really like to see an economics channel acknowledge the existence of externalities , and that the question of whether high-speed rail is losing China money is more complicated than just whether the high-speed rail operator is losing money. The system may well be overbuilt, but unless we first examine the externalities, we can’t actually say how big the losses really are to the economy of China.

I am always surprised when channels like this are looking into rail systems profit only by selling tickets. But c'mon, - what about the regions which are getting more developers better than ever before? What about money which are getting attracted to those more rural areas? People are moving, money are moving. Even if you cannot get your money back from the tickets, -you will always get them back with the taxes. Railway will always be there and despite it's gonna change many owners or will go through multiple restructurations, - it still will be there.

lol, it's amazing how certain people (generalized as americans) forgot what "investment" means nowadays, they forgot how their infrastructure was once built to nowhere too, just like their railways and country wide routes, it takes time for it to come to fruition.

8:40 - factual error: There is no way that billboard is in mainland China :)

As someone who works at the company that maintains the dutch railways I think you're missing out on a few very important points: Railways shouldn't be counted upon as being profitable, the transport they provide (if they are well placed etc.) weighs far heavier then ticket sales ever could. The benefits of being able to transport non car owning citizens all across the country at high speed is incredibly important for a technologically developping country. Also maintaining railways is far more complex then extually building one. It requires keeping tracks of a meriad of different properties that differ from every piece of metal, cable and cart. Though I doubt that China looked far enough ahead to see these problems comming which is why the amount of time and money that has to be reinvested in the project will be far larger then they expected in the long run.

Another thing to account for is how much traffic HSR could displace, both on the roads and in the air. Anything which can reduce the time wasted in traffic jam and flight delays should be tried.

I am a Canadian that has spent over a decade in Canada and the US and over a decade in China (as I spend roughly half of my year in either of the two). This video is clearly done by someone who has never taken (or taken maybe one or two times) the Chinese highspeed rail. This is because the entire video is done with information that is found from news outlets or third party data, but for a lot of the infrastructure, YOU HAVE TO TAKE IT TO TRULY UNDERSTAND IT. An example of this is if I tell you that the New York Public transit faces a $2.5 billion budget deficit, you would think that the transportation department spent a lot of money on infrastructure such as subway and thus is under huge debt. Yet if you are a New Yorker, you know exactly how horrible the subway and MTA services are. The Chinese highspeed rail makes traveling so convenient that I rarely go by plane. I will give you an example: From Shanghai to Beijing, it takes 2 hours and 20 minutes to go by plane. However, going by plane means you have to be at the airport at least 1 hour before, and afterwards, about 1 hour after the plane lands to get your luggage and go out of the airport. This adds to roughly 4 hours and 30 minutes, and this ignores the fact that most planes take off at least 30 minutes later than their scheduled time (and when there is bad weather, this could mean hours). For highspeed rail, it literally takes me less than 8 minutes after getting to the station before boarding, and the same for getting off. This is because the safety checks is no where near as strict as that of for air travel (many fluids and things such as batteries are not restricted). And the entire duration is 4 hours and 50 minutes. Furthermore, the seats are wider and it is also much more comfortable when you don't have cabin pressure. So nowadays in China, travel between the major cities have all resorted to highspeed rail rather than air travel. And I have not yet mentioned the fact that the ticket price is less than a third of the price for plane tickets. There are actually many more reasons from the perspective of the government why developing the rail is so important. 1. All aircrafts are designed by companies from US and Europe, which means that these forms of transport are dependent upon good political relations. By building the railway, this makes China much less dependent on Boeing and Airbus, where each plane has to be imported from abroad. 2. Building trails is infrastructure which allows for jobs and for the "less profitable" routes mentioned in this video, they were built to stimulate the economies in second-tier and third-tier cities. I love how the capitalist point of view is always only about "profit" and "money".

If all you’re thinking about is profit from the railway itself then this analysis makes some sense but as someone who has traveled across China by rail before and after the high speed rail was finished I think you can’t underestimate the important external benefits they give to a city’s economy and social life.

Infrastructure is a public service. The public as a whole pays for it through taxes. It is OK to have losses as long as the economic output of the country as a whole benefits from this service.

Train station built, new town created. Capital flow in, businesses settled in, jobs created, factories built......these have far more impact than train tickets

Two things I think you've missed. First, in the both the US and Australia, there exist free-to-use roads. It's quite reasonable for railways to be similarly subsidised, because they are a policy vehicle. Indeed, it's an obvious distortion to subsidise road and not rail. Second, it is not the no-brainer you seem to imagine to use passenger lines for freight. Canada and the US have few truly viable passenger routes, not because the demand does not (at least in principle—I'm setting aside cultural factors since they are in large part a consequence of earlier policy) exist, but because of a supply problem: if your lines are filled with massive freight trains running at 30 MPH / 50 km/hr, there is no longer any opportunity to run passenger services that are competitive with buses, let alone aircraft. And, to be blunt, that's how the bus companies, car manufacturers and airlines like it. And then there's track maintenance. You've already noted that this is a financial burden, but freight trains are a lot heavier than passenger trains, and passenger train derailments typically (not always—there have been some truly horrifying incidents with flammable cargo) have far higher costs than freight, owing to both higher speeds and the fact that the trains are packed with fragile and irreplaceable humans.

Who says railways have to be profitable? The value they provide is in economic opportunity to the places they connect. Roads cost nothing to use, yet are expensive to maintain. Most of them are funded through taxes. But nobody is suggesting to close down roads because they are not profitable. That's not their purpose. Same applies to railways.

is there any chance you would do a video comparison on the economics of Japan's highspeed rail? I think about the efficiency of Japan's infrastructure maintenance often. Like that sinkhole they fixed in 2 days a few years ago.

The analysis in this video is highly simplistic. High speed rail is rarely "profitable" in conventional financial terms. Instead, there are a number of direct economic benefits including travel time savings, improved reliability and modal shift from cars/air travel that have environmental benefits. These benefits can be quantified but do not appear in the revenues of transit authorities. Additional benefits include improvements in economic productivity through the expansion of labour markets and agglomeration (cities/people being closer together). What matters is whether the totality of economic benefits outweigh the construction and operating costs. It is clear that the first few phases of high speed rail (not just connecting the core cities but even the 2nd tier cities) achieved many of these benefits given the sheer size and scale of the populations being connected. However, subsequent phases have built high speed rail lines to very far flung areas in the West and it is obvious the economic rationale for these schemes are flawed.

The only problem with the infrastructure bill is that a good portion of that money will inevitably go 'missing'.