Six degrees of separation from reality

Tyler Cowen linked to a Christopher Balding post that made the following claim:

I find that implausible, and looked in his post for documentation.  He linked to a Tyler Durden post that never made any such claim.  Instead Durden claimed:

Beijing Alone Has 50% More Vacant Housing Than The US

And where did Durden get that information?  He linked to a google translation of a Beijing news report:

Beijing Public Security Bureau population administration division, said yesterday that have checked 725.5 million floating population information marked rental housing 1390000 3812000 check vacant houses.

Durden actually misquoted the google translation slightly, to make it seem less “gobblety-gook-like.”  I asked my wife to read the original Chinese text, and she couldn’t make heads or tails out if it–even in the original!  But we did establish that google mistranslated the original.  For instance the 725 million figure was actually 7.25 million in the Chinese version.  But what’s a factor of 100 between friends?  So you have one blogger citing another blogger who claims a third blogger made a claim he never made, and that third blogger’s actual claim involved misquoting a google translation, that was itself a mistranslation of the original.  And the original is incomprehensible to a native Chinese reader. And later Balding says only a fool would trust Chinese government data anyway.  So why does he cite it?

Update:  Commenter Philemon verifies that in China the term “vacant” includes apartments where no one was home when the surveyor happened to show up.

Beijing’s population has been soaring in recent years, and now tops 20 million.  Here is a Reuter’s article that describes the housing market:

They sleep in boxy rooms crammed into dingy low-rises and spend hours commuting to work on crowded buses as part of a trend of poorer white-collar workers being forced to the fringes of China’s wealthiest cities.

Some say these struggling college graduates who swarm out of their cramped accommodations and head to work in the urban sprawl each morning are reminiscent of worker insects in a colony. Not surprisingly, they are often referred to as China’s ant tribe.

The growing ranks of ‘worker ants’ poses a policy challenge for Beijing’s Communist Party leaders as high property prices and dim career prospects thwart the ambitions of many graduates for a comfortable middle-class lifestyle.

In Tangjialing, a dusty suburban Beijing village laced with dirt roads, college-educated software technician Kong Chao typifies the spartan existence of many such graduates.

“This is hard, but there’s no other way,” said Kong, 24, who is relatively fortunate as he has a toilet and cooking area in his cramped room and doesn’t have to share with other tenants.

Kong pays 550 yuan ($81) a month in rent, about 10 percent of his monthly wage. A similar room in a central area of Beijing would eat up most of his salary.

“You see what a crowded city Beijing is,” he said. “We younger people all come to seek work. But we can take it.”

Does China have too much housing?  Perhaps by some criteria.  But I don’t see any evidence in that google mistranslation to change my prior belief that China will need far more housing in the future.

Christopher Balding also has this to say:

When Scott Sumner asks “what do you want them to build more of?” and Lulu responds “that Scott can get a haircut for $4 or an ice cream cone for 50 cents shows how low productivity and wages are in China” demonstrates how far removed from reality both are.

.  .   .

Living in China I can attest first hand to the fact that China has easily the highest price level of any country I have visited in the past two years.  An ice cream cone for 50 cents?  Lulu obviously has spent too much time in Michigan and not in China. 

This is one of the most comical statements I have read in 3 years of blogging.  Balding must be in some sort of cocoon, like the Chaoyang district of Beijing where all the foreigners live, where they charge five times as much as in the real China.  He should get out more.  I just had (an admittedly basic) dinner in a nice hotel in Anhui for $2, including tax and tip.  And I was the one that had the 50 cent ice cream cone from a Beijing McDonalds, not Lulu.  Has he visited Switzerland?

If you priced China’s service sector at US prices it would be huge.  And it’s growing extremely fast, with stores, restaurants, hotels, hair salons, etc, opening up all over China.  But I suppose that’s also a “bubble” because it involves building, which is that awful “investment.”  I guess the investment-phobes want the Chinese to serve meals and cut hair out in the middle of the street, as they used to a few years ago.

China’s gradually building a modern high income economy.  Because they are still part communist, they are doing so clumsily, and with lots of resource mis-allocation.  But the glass is still half full, and the water level is gradually rising.

PS.  The snark was aimed at Balding, who’s an expert on “how far removed from reality” Yichuan and I are.  Apologies if Tyler Cowen got caught in the crossfire.


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36 Responses to “Six degrees of separation from reality”

  1. Gravatar of Steve Steve
    28. August 2012 at 19:30

    So you just discovered that Zero Hedge (Tyler Durden) is completely full of $#!+??? That’s been widely known for a long time.

    Still, I give you credit for your impressive forensics, and tracking down the number of people willing to eat that stuff.

    FWIW, I can have an admitted basic dinner at McDonald’s USA for $2. So I guess it depends on what you consider basic.

  2. Gravatar of Steve Steve
    28. August 2012 at 19:33

    What I should have said is that Zero hedge is a mouthpiece for anonymous hedge funds operating under the pseudonym Tyler Durden.

  3. Gravatar of Philemon Philemon
    28. August 2012 at 19:35

    This other article has more: http://house.focus.cn/news/2012-06-06/2047168.html

    Turns out that people expressed doubts about the figure reported earlier and a couple of days later, the PSB was reported to have clarified that the 3.812 figure is not final because of the difficulties involved in arriving at the true number. Furthermore, many units marked as vacant will be reclassified as occupied in the subsequent survey! One survey officer apparently told the reporter that when if the occupants were not around when the surveyors show up, the apartment will be tentatively marked as “vacant” and only later reverified. Another official confessed that the very category of a vacant unit has not been properly defined. The article closed with some market analyst basically saying that the estimated number of vacant units is probably too high, and that it seems improbable that there are close to 4 million vacant units (which will amount to nearly 30% of the total units). The estimated number of rental units (the earlier reported 1.39 million units) seems too low, which suggests that at least some of the so called vacant units are actually rental units. He closed with the observation that, nonetheless, Beijing does appear to have a higher number of vacant units, etc.

  4. Gravatar of ChargerCarl ChargerCarl
    28. August 2012 at 19:45

    I like Tyler Cowen, but he has a tendency to peddle a lot of crap on his blog.

    I’m not sure why he wants to believe in ABCT so bad. Maybe to fit in with his friends at GMU?

  5. Gravatar of Rien Huizer Rien Huizer
    28. August 2012 at 20:11

    Far more entertaining than US monetary policy. Another little gem.

  6. Gravatar of Saturos Saturos
    28. August 2012 at 20:50

    How much Chinese do you know, Scott? And what’s the strategy with your daughter, how much will she learn? Will she be able to make the same kind of visits to China as you are? (Will she want to?)

    Chargercarl, he doesn’t believe ABCT, he’s famous for rebutting it actually. This is just him being “pluralist” again (his idea of intellectual virtue). Hence the name, “Austro-Chinese”; now he can get away with anything. (Kind of like economists saying “we need balance” before arguing for any kind of govt. intervention)

  7. Gravatar of Saturos Saturos
    28. August 2012 at 20:53

    I’d just like to be able to eat at an Indian McDonalds without being unable to finish my meal due to all the beggars outside looking on longingly with their faces pressed against the window. So China is doing something right.

  8. Gravatar of Benjamin Cole Benjamin Cole
    28. August 2012 at 20:57

    I love the blogosphere, which I contend has actually elevated many debates, including the local favorite, monetary policy.

    But, yes, you have to cheek sources on everything, and twice.

  9. Gravatar of Yichuan Yichuan
    28. August 2012 at 21:12

    I can confirm the ice cream statistics.

    McDonalds soft serve cone: 3 yuan
    McFlurry: 11, 12 yuan depending on the toppings

    Now if you go to the neighborhood Häagen-Dazs, a scoop of ice cream will set you back about 28 yuan, which is not that bad if you think in terms of USD, but is nonetheless quite a chunk of change in terms of PPP.

  10. Gravatar of ChargerCarl ChargerCarl
    28. August 2012 at 22:26

    Saturos, I’m probably being unfair to Tyler, but I see these “Austro-Chinese” posts almost every day on there and I can’t help but think that it’s a kind of tacit endorsement of the view.

    I’d really like to hear what he has to say on it though.

  11. Gravatar of ssumner ssumner
    28. August 2012 at 23:10

    Obviously there is a bit of truth regarding ABCT and China, but I think lots of people overdo it.

    Thanks Philemon, I’ll add an update.

    Steve, I had a fried egg, two large meat-stuffed “bao” rolls. Pickled cabbage. Pickled mixed vegetables. A slice of watermellon and a small plate of lychee. For 13 yuan which is 2 dollars. In a “4 star hotel” (which admittedly doesn’t mean much in China.)

    Saturos, My daughter speaks Chinese fluently, and likes China. She’s with me now. I just know a few words, and can’t even pronouce my wife’s name (which is two letters long.)

  12. Gravatar of Saturos Saturos
    29. August 2012 at 00:01

    “and can’t even pronouce my wife’s name”

    Those pesky intonations. Do you use her Chinese name (and butcher it) or does she have a Western name that you use (like Chinese people often get)?

    “I had a fried egg…”

    Yes, but how good was it??

    “My daughter speaks Chinese fluently”

    yep, she’s gonna be as smart as you are.

    Yichuan, who on earth orders a McFlurry? What is the ratio of its price to that of horseshit? McLovin’ it my @$$.

    Sorry, that came out too aggressive. But seriously…

    “I’d really like to hear what he has to say on it though.”

    ChargerCarl, he’d probably just give you an evasive non-answer whilst sounding brilliantly clever the way he does (and is).

  13. Gravatar of Six Degrees of Separation from a Chinese Reality in Cozy Waltham, MA | Balding's World Six Degrees of Separation from a Chinese Reality in Cozy Waltham, MA | Balding's World
    29. August 2012 at 01:44

    […] today it came to my attention that the renowned Sinologist Scott Sumner has taken issue with my characterization of the Chinese economy.  To rebut my arguments, he uses such technical and economically robust analysis as “this is one […]

  14. Gravatar of Saturos Saturos
    29. August 2012 at 03:43

    This looks important: http://econlog.econlib.org/archives/2012/08/household_incom.html

  15. Gravatar of Saturos Saturos
    29. August 2012 at 03:44

    “The study shows that real median household income declined more during the current recovery than it did during the recent recession.”

  16. Gravatar of W. Peden W. Peden
    29. August 2012 at 04:02

    “When is a recovery not a recovery? ….

  17. Gravatar of Morgan Warstler Morgan Warstler
    29. August 2012 at 04:17

    Let’s get down to brass tacks man…

    How much is a fake Birkin Bag?

  18. Gravatar of Morgan Warstler Morgan Warstler
    29. August 2012 at 04:36

    News of the day:

    Sumner is publicly hoping he will need to dedicate his textbook to me…

    http://economistsforromney.com/

    Scott, own up, who contacted you, and how close to Romney is the guy who told you they expected to see NDGP like policy out of the Romney Fed?

    I think I’m going to go with,

    “To Morgan, Economists are but players on the stage.”

  19. Gravatar of Major_Freedom Major_Freedom
    29. August 2012 at 04:41

    Australia’s SBS Dateline did a documentary in 2010 about the empty apartments and entire ghost cities. They quote analysts as having estimated there are around 64 million empty apartments:

    http://www.youtube.com/watch?v=pbDeS_mXMnM

    Al Jazeera also did a report:

    http://www.youtube.com/watch?v=0h7V3Twb-Qk

    And the BBC:

    http://www.bbc.co.uk/news/magazine-19049254

    Google “China ghost cities”

    ———————-

    I think a lot of people in the western world, particularly economists and political philosophy intellectuals who in their zeal are somewhat enamored with big powerful central planning centers, and their fascination with “the Chinese dragon”, are underestimating the extent of malinvestment across China.

  20. Gravatar of Saturos Saturos
    29. August 2012 at 07:08

    Wait – Major Freedom, you’re actually an Australian, aren’t you? Judging by the timing of your posts? And I can’t imagine anyone else would watch Dateline. I can just visualize you yelling at the TV monitor when George Negus comes on (or used to, anyway).

  21. Gravatar of Saturos Saturos
    29. August 2012 at 07:12

    Scott, Christopher Balding has another post rebutting what you say at the end of your post (he’s got nothing on the start, though). He has a table of price conversions and anything. Will you or Lulu respond?

  22. Gravatar of Adam Adam
    29. August 2012 at 08:21

    Even in the fancier parts of China, which is mostly where I went, Balding’s statement only makes sense if he doesn’t travel much. Has he been to Denmark? How about just cities like Paris, Vienna, Manhattan, etc.?

    I could find prices similar to some of those places, as long as I stayed in or around my luxury hotel, but you didn’t have to wander to far to find local neighborhoods with local prices.

  23. Gravatar of Adam Adam
    29. August 2012 at 08:41

    Saturos – It’s rather strange that Prof. Balding went into his “local” Carrefour to find grocery prices. I wonder how many average Chinese do their grocery shopping at the French megachain? And I wonder how prices there compare to prices at small local groceries? (I really don’t know).

    Then I also wonder which of the five Shenzhen Carrefour stores he went to. I don’t know Shenzhen that well, but if it was the one in the Futian district, there are dealers for Lamborghini, Porchse, Astin Martin, Lexus and several other luxury car brands within a three block radius of that store. Does that sound like a “normal” neighborhood to you? I’m betting the one next to the Kempinski hotel in Nanshan district isn’t exactly in an average neighborhood either.

    Prof. Balding is surely right that he doesn’t live in an “expat” area. In my week in Shenzhen, I think I may have seen four or five other Caucasians. It wasn’t the abundance of Westerners that made the area obviously extraordinary.

    What made that clear was getting out of the city center. Visit the parts of the area where the people who work in the factories live. Heck, just wander into the neighborhood to the northwest of the shopping center with the indoor ice rink and tell me the locals are paying the same prices.

  24. Gravatar of Major_Freedom Major_Freedom
    29. August 2012 at 08:48

    Wait – Major Freedom, you’re actually an Australian, aren’t you?

    I am actually just able to access to Youtube.

  25. Gravatar of Saturos Saturos
    29. August 2012 at 08:52

    So you’re Singaporean? You gotta be somewhere in these timezones, with those posting hours. Speaking of which, I’m off to bed. Good night!

  26. Gravatar of Major_Freedom Major_Freedom
    29. August 2012 at 08:56

    So you’re Singaporean?

    You’re getting closer. That’s all I will say.

  27. Gravatar of Morgan Warstler Morgan Warstler
    29. August 2012 at 10:55

    I’m calling Benji as MF sock-puppet!

    MF, want me to see if I can find you?

  28. Gravatar of ChargerCarl ChargerCarl
    29. August 2012 at 11:30

    I think MF is British.

  29. Gravatar of Bryan Willman Bryan Willman
    29. August 2012 at 17:47

    Given that there are organizations devoted to estimating the utilization of US housing, and they sometimes disagree with one another, why should we be surprized that it’s hard to sort out anywhere else, especially a large place with sometimes problematic data gathering anyway?

    When a native speaker (in any language) reads a report (in any language) and goes “what???” that usually means (a) the authors of the report don’t know, or (b) they think they do know but don’t want to tell you. This is universal, not peculiar to China.

  30. Gravatar of Saturos Saturos
    29. August 2012 at 22:07

    You’re getting closer. That’s all I will say.

    Hello Johannesburg?

  31. Gravatar of Mark A. Sadowski Mark A. Sadowski
    30. August 2012 at 12:13

    Scott,
    Christopher Balding has a response.

    http://www.baldingsworld.com/2012/08/29/six-degrees-of-separation-from-a-chinese-reality-in-cozy-waltham-ma/

    Interestingly he no longer cites the ever infallible Tyler Durden as his research source for the Beijing apartment vacancy data. Now he cites a two year old China Daily article and Bloomberg, the latter of which is circular, since it also cites the China Daily. (Slaps head on forehead.)

    On casual inspection it looks to me like he got caught with his pants down, and rather than back down and pull them back up he’s digging in his heels (and tripping over his underdrawers in the process).

  32. Gravatar of Nick Nick
    30. August 2012 at 18:28

    This perhaps neutral site gives a line by line comparison, some huge variations but overall US prices shown as 40-50% higher than Chinese

    http://www.numbeo.com/cost-of-living/compare_countries_result.jsp?country1=China&country2=United+States

  33. Gravatar of Sean Sean
    30. August 2012 at 22:05

    Balding has a reply to you: http://www.baldingsworld.com/2012/08/29/six-degrees-of-separation-from-a-chinese-reality-in-cozy-waltham-ma/

    He quotes prices that he found from upscale Carrefour and other supermarkets in rich Wudaokou as representative of the prices most Chinese find. The man has no concept of the life he is living. It’s like Patrick Chovanec quoting KFC prices from a local mall has his “inflation index”. If every US economist lived in the Upper East side of NY and only shopped at organic boutiques, I’m sure we’d be constantly told how everything is unsustainable.

    Compare his list to the one the gov’t releases weekly: http://www.stats.gov.cn/tjsj/qtsj/dzcszyspjg/t20120824_402830290.htm . These prices are posted at most wet-markets to ensure that people aren’t too shocked by prices, and also to make sure no one is cheated too much. Haggling is of course natural, but this maintains a range.

    First, note that milk isn’t listed: It’s not consumed by most Chinese. I don’t understand how Balding thinks he’s adapted the list for Chinese tastes and has milk at the top. Second, there is no comparison of “organic,” it’s a brand-name produce in China essentially. Again, it just shows his ignorance. For what’s left, his rice is 2x the listed price (he’s buying it pre-packaged rather then filing his own bag), and his pork is over 2x the listed price. He’s shopping at the equivalent of Trader Joe’s and Whole Foods, not even aware of the cheaper options.

    As someone who has been in China for 10 years to his 3, and has lived in tier-2 cities compared to his WuDaoKou bubble, I declare this man is one of the sheltered ex-pats that live for years in Beijing and Shanghai and are completely unaware of their true surroundings.

  34. Gravatar of TheMoneyIllusion » Was money easy or tight during the Great Depression? TheMoneyIllusion » Was money easy or tight during the Great Depression?
    31. August 2012 at 06:39

    […] And with a few exceptions (such as dairy) the prices in China are lower.  Commenters “Nick” and “Sean” provide the […]

  35. Gravatar of Prices in China Prices in China
    31. August 2012 at 11:29

    […] Sumner referring to the price statement: This is one of the most comical statements I have read in 3 years of blogging.  Balding must be in some sort of cocoon, like the Chaoyang district of Beijing where all the foreigners live, where they charge five times as much as in the real China.  He should get out more.  I just had (an admittedly basic) dinner in a nice hotel in Anhui for $2, including tax and tip.  And I was the one that had the 50 cent ice cream cone from a Beijing McDonalds, not Lulu.  Has he visited Switzerland? […]

  36. Gravatar of Bradley Gardner Bradley Gardner
    31. August 2012 at 11:53

    I won’t criticize the numerous questionable points in his post that have already been criticized, but I do want to point out that he extensively misstates statistics.

    He took disposable income numbers (which is different from income), called it per-capita GDP, and compared it to Waltham, MA’s Household income numbers. Waltham’s individual income is US$31,585. Per capita GDP, in Beijing is between US$12,477 and US$14,034 depending on what population statistics you use. The average income in Beijing was US$8,812, which it should be accented was averaged over a municipality half the size of Belgium. The Chaoyang district, which has disposable income levels around Rmb38,000 a year (annualizing 1H 2012 stats), and the Fengtai district which has disposable income levels of Rmb 24,835 (2011). Real estate sales are mostly occurring in the urban area of Beijing.

    All my sources are up on my blog.

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