Decoupling, actually I think that in many ways in industrial policy in general, China can act “monolithically”. Also note that the Chinese operators in many cases lease their networks; they don’t own them outright. The actual owner of the network is another, more shadowy entity.

Essentially the return on capital of any project depends on the opportunity cost of that capital which is what we encapsulate in the discount rate for that project. China is going to lose a lot of that money through inflation if it just leaves it there; the opportunity cost for spending it is very low, therefore the threshold for investing it is too. Money is cheap in China!

I am openly ignorant of the finer details of economics but pose the following thoughts –
1. The population of Europe is around 591 million, the population of China is around 1.31 billion (Wolfram Alpha). Given that China’s population is 2.2 times that of Europe, and they are trying very hard to rapidly become a (if not the) leading world economy then this sort of spend does not look so silly. I grant you that their wealth distribution is ridiculously skewed and that vast (major proportion) numbers of the population still live in agrarian poverty but the Chinese are doing all they can to move their economy through 100 years of development in as short as time as possible. One way to do this is to spend on core infrastructure required for the 21st Century, and IT and the ‘knowledge economy’ that goes with it is critical for a move away from manufacturing to higher value added competitiveness.

2. My comments above make me think of the opening up of the US, and the building of railroads. Sure – possibly far too many were built; many companies went bust, but that infrastructure risk and leap was critical for opening up frontiers and provided an infrastructure that still exists today.

3. The Chinese are ‘in a hurry’ because their economy that has garnered some considerable wealth from the folly of the West and they know they need to pull themselves up by the bootstraps to ensure that this no flash in the pan. In my view, they know they are in a very precarious position, and need basic infrastructures of health, education, roads, social security and technology etc because their people have tasted success and like it.

4. IMHO – Issues like the promotion of clean energy, and of high tech infrastructure – all of which are being promoted in the West, makes eminent sense, because, unlike the in the West, you do not have to rip out or replace old infrastructures – you just leap frog to the newest one – which is far cheaper.

5. Currently China appears to be very pragmatic, which constantly surprises me, but we have yet to see how the Chinese population or their masters deal with this transition as it gathers pace. Paraphrasing the reputed Chinese proverb – “We live in interesting times”!

There’s no hard law on this. Over-investment is over-investment, and a bubble is a bubble. One case may see more efficient use of capital within a narrow range, but in the end you’ve still got a bubble. Besides, your comment seems more to be a swipe at America’s use of capital, and it’s hardly the case that China is not in the process of creating its own real estate bubble (or numerous other bubbles) with its policies, or that the Chinese are not in myriad other ways throwing money at people – individuals and groups of individuals – who are in reality drains on a market economy.

Hence your insight on the current trade by the Chinese is essentially based on the latent assumption that all this stuff ( 3G, coal an copper inventories at highest levels ever, solar power) will be used up by the domestic Chinese demand: So we are back to June 2008 , with oil above $100, and people with wild eyes looking at China.

A final point to make is the assumption that “China” is one monolithic thing out there.
But think of this : If the 3G network stays underutilised for 2, 3 or even 10 years, while the $ collapses , how will the reserve manager that “avoided ” the $ collapse and therefore benefited in terms of money and prestige pay the 3G investor that will have suffered horrible returns for all these years?
Moreover, how you convince ex ante the 3G investor to built this super duper network just to hedge the risk that the $ collapses.
I don’t think that anybody , even a Chinese semi-state entity makes investment decisions in such a way.

Expected Chinese demand drives investment , and investors have to gauge if this demand will materialise and if profits will be made.

LY you make my point. But there are other benefits to the Brewster’s Trillion gambit too, notably a reversal of the trade imbalance as you buy up equipment from overseas (see yorks above on who is actually benefitting).

Cell phones and internet access have entered the category of economic need. Technology road maps and standards for the next decade indicate a long life for 3G UMTS WCDMA and LTE. While this level of ramp-up is overkill, this is a better use of money than causing stock and real estate bubbles or paying financial industry bonuses.

You could view China’s accumulation of natural resources as a push for national greatness or independence at least. But one could also view it as a preparation for a coming global inflation they know to be inevitable. After all, commodities and real assets are very good inflation hedges.

Inflation and devaluation are not accounting gimmicks, but you may not be referring to that, Alan. Can you elaborate?

Is Baruch AKA Tom Friedman?