Joe Leahy

So the subsidies are huge, and also they set these targets, these growth targets, so the local officials need to meet those targets.

So they're investing in production.

If you produce in a certain area, that local government collects some of that value-added tax.

So that's another incentive for local governments to set up production and not close it down.

So you have all of this weird sort of nexus between local government, central government.

Central government sets the targets, pumps money in through local government bonds.

Local governments take this money, follow their production targets, and then they set up this production capacity and then don't let it shut down.

even if it's not making money.

So Michael Pettis calls Chinese companies competitive, but not necessarily efficient.

The very big Chinese companies do have a Communist Party representative on the board.

So if the party says, OK, we need you to do something for us, or the MSS, the Ministry of State Security, says we need you to do something for us, they have to do it.

Yeah, I mean, it is enormous.

And I was just looking before, I think China has production capacity for solar panels that's double global demand at the moment.

So this system, this is what it does.

It's very good at producing, at actually producing production capacity, if you like.

Where are they putting the other half of the panels?

Is there like a gigantic warehouse in central China full of unused solar panels?

I think that's what I...

One of those ghost cities.

Yeah.