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New Yorker Magazine on Chinese Train Disaster and Government Corruption


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Wow, the sums of money mentioned in that NYT article are astonishing. This and the Russian oligarchs rise must be among the biggest money grabs in history.  I read this and can't help but think that a day will come when the music stops for the Chinese boom - per the rationale for Watsa's bet against China.

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Thought this was a great article giving color on the Chinese boom as seen through the too-fast development of it's modern rail network. Some stunning stories of corruption and graft!


Hmm what about looking at it the other way around.  (As Munger says... "Invert, always invert")


#1- China is a developing country.  And as far as developing countries go, it may be one of the best and go on to become the world's next superpower (um... maybe half a century from now?).

Their level of corruption might actually be going down.  They are moving from a terrible Communist system to a capitalist system.  (e.g. Communist countries tend to bad for human rights, terrible for the environment, inefficient economies, low standards of living, etc.)  They are arguably more capitalist than the US in many ways (e.g. low taxes, don't have excessive regulations, etc.).


#2- From what I understand of railroading

a- All poorly-managed/underfunded railroads usually end up having lethal accidents.  It happens in the US too... the Washington Metro is one example.  Here in Canada, the TTC and GO systems have had accidents before.  Though the TTC is probably one of the best managed systems out there and hasn't had a fatal subway accident in a long time.

b- Having safe, fool-proof signalling and switching systems is a very tough problem.

c- With faster rail, costs go up dramatically.  So China's high-speed rail may be an example of excess spending as their highest-speed rail is way ahead of the US (Maglev at 431km/h vs US/Acela average speed of 135km/h).  The US does overspend too... just not on ultra-high-speed rail.  Las Vegas has a bankrupt monorail, New York has an excessive amount of subway (which should probably have instead gone to maintenance), Portland's streetcar is having economic problems, etc.

d- There are tradeoffs between cost and safety.  The US has little high-speed rail due to onerous safety regulations that push up cost.  I guess in China the safety regulations are more lax than in the US... they may be pushing towards faster rail as symbols of nationalism and pride.  (This might mirror China's behaviour during the Olympics, where they shut down polluting industries for the duration of the Olympics.  This is uneconomic behaviour.)


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I have lived in asia for about 25 years and feel that the chinese boom is mainly driven by the demographic dividend. abundant young and cheap labor for factories. With that changing and a corrupt communist govt bent on preserving the status quo, i believe China will experience turbulent times.  However, Taiwan is interesting relative to China as its more free market driven economy (small government and large entrepreneurial base).

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