Comment by corimaith
6 hours ago
There's nothing "obvious" in hindsight about the explosion in LLMs in 2023 and thus the increased energy demand, and the China certainly wasn't building for that.
It very much was overcapacity as a way to keep the construction and manufacturing employed even when most profitable opportunities have been realized. Of course, the long cost of that is involution and lack of nicer jobs as capital is malinvested into diminishing returns. The ironic thing is that idea of overcapacity itself is acknowledged by the CCP in their calls to end price wars and involution
I do think there’s is a very interesting dynamic in this meta argument; over the past 5 years or so, the “debunkers” have taken issue with “whistleblowers” arguments towards first zero covid, then local government debt, and now overcapacity and lack of consumer demand and “debunked” these as all being not an issue, only for the central government to turn around and end Zero Covid, rein in LGFV lending, and now the current crackdown on “disorderly competition” and mass dispersal of consumption vouchers. English Pro-China commentators don't appear to be well aligned with the actual views in China!
I have a feeling that this kind of efficiency/capacity analysis is similar to that joke about economist designing a human, instead of having two kidneys you have 5 people sharing one. I am a pro market guy for a lot of things, but what happens when you let the market operate something like basic infrastructure is everyone is shipping their shit/sewage in trucks and running a diesel power generator in their back yard.
Well first of all, that's not happening in America. The basic gist of this topic is that there suddenly a massive upsurge in energy demand, and existing networks trouble accommodating for it. Big deal, just build more power plants. The inability to build is the opposite of pro-market, it's literally NIMBYISM and government regulations causing that.
Second of all, when we talk about malinvestment, it's about opportunity cost. Right now, the job market is pretty bad in China, consumption is weak, and businesses are killing themselves in deflationary price wars. Chinese Gen Z don't want to work factory jobs either, but white collar jobs like the West, but many of the industries related to those were suppressed. And this is all because the government chose to overinvest in propping up their manufacturing and construction rather than increasing consumption and fostering their services. For you as a rich American you can admire their cheap goods and cities, but you're also not exposed to the reality of the extreme competition in that society.
There are four things increasing energy demand in the US at roughly the same rate, each very roughly about 1% per annum:
- increasing demand due to GDP & population growth - increasing demand due to the increased use of air conditioning due to global warming - increased demand due to EV's and other decarbonization efforts - increased demand from AI
Only one of those 4 things wasn't highly predictable. A robust build out for the first three would have gone a long way to covering the fourth. In the past increased demand was covered by increased efficiency in heating and lighting, but those gains are slowing, and Trump's gutting of regulations will reverse them.