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Friday, June 24, 2011

CHINA SLOPPING IN THE MUD



The drought that dried up southern China for five months has been replaced with torrential rain and floods that have killed 175 people and caused 292,000 others to be evacuated. Some 4.4. million people have been affected. The public is blaming the Three Gorges Dam for the severity of a variety of agricultural and environmental problems, yet the country has four more hydroelectric projects in the works. China is struggling, and financial prophets have declared that China's economy is heading for a hard landing. 

The Three Gorges hydroelectric dam spans the Yangtze River in China's Hubei province. The massive structure is just under 1.5 miles - 7,661 feet (2,335 m) - in length and 131 feet (40 m) in width at the top. It has been the pride of the Chinese government since it was completed in 2008. As the worst drought in half a century tortured southern provinces along the Yangtze during the past five months, the dam became the focus of anger for those desperate for water. Those provinces now drown under torrential rains and flooding, and the dam is once again being held responsible. With 1.4-1.8 million residents displaced so that Three Gorges could be built, along with its being blamed for recent earthquakes, landslides,and pollution, the dam is catching a lot of heat. 

"The dam operators lack experience in managing the water flow," said Yang Fuqiang, a senior adviser on climate and energy at the Natural Resources Defense Council, according to ClimateWire. "They waited for too long until the drought impact reached extremes. And when they finally released water, the natural connection between the river and surrounding lakes was already broken, making it difficult to refill the lakes." 

China's State Council recently reported on a variety of "urgent problems" with the dam, including a heightened risk for landslides and earthquakes, as well as damage to the ecology of the Yangtze. Despite these issues, China is in various stages of building four additional hydroelectric projects on the Jinsha River. 

China has been zealous in its infrastructure construction, though. Nobody can argue it hasn't. 

Nouriel Roubini, the economist who has been repeatedly credited with predicting the global financial crisis, spoke bleakly about China's financial future at a conference in Singapore early last week. 

"There is a meaningful probability of a hard landing in China after 2013," he said. 

Roubini pointed to certain factors that have historically harmed economies. China has been focusing too much on drawing investment into state run projects and too little on helping its own people spend money. It's pumped billions of dollars into unnecessary infrastructure projects that its people don't even use, and it has squashed out private investment. 

"I was recently in Shanghai and I took their high-speed train to Hangzhou," said Roubini. "The brand new high-speed train is half-empty and the brand new station is three-quarters empty. Parallel to that train line, there is a also a new highway that looked three-quarters empty. Next to the train station is also the new local airport of Shanghai and you can fly to Hangzhou," he said. "There is no rationale for a country at that level of economic development to have not just duplication but triplication of those infrastructure projects." 

Nick Ferguson, with FinanceAsia.com, wrote Tuesday that China's financial quagmire became obvious at the end of May when the Chinese government announced it would spend up to $450 billion "to bail out thousands of local government investment vehicles - which have kept the economy alive for the past two years by bankrolling countless infrastructure projects...all of which are little used." 

The infrastructure projects cause upsets, too, because they displace people. When the Three Gorges Dam was built and the land behind it flooded, 13 cities, 140 towns and 1,350 villages were submerged under the water. Between 1.4 and 1.8 million people were forced to move. The new hydroelectric projects will displace millions more. 

The dam's operators haven't done a good job of controlling drought or flooding, either. Obviously. This month's flooding has destroyed at least 8,400 houses in just Zhejiang province alone, as well as 422,550 acres of farmland already hit hard by the droughts. Food prices, especially for vegetables, promise to shoot up due to the destruction. People still need to eat. 

China has long been good at scrambling to stay on its feet.  Its accountants can wiggle to make the numbers work, and the country still holds hope for foreign investors.  China may somehow keep itself upright, but it has certainly got itself onto some sloppy, muddy ground. 


KHOUSE

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