Bulldozers Fight: Two Companies Competing for Business

**kellyhound** · #1 ● 04-19-2016, 04:07 PM

On Saturday, in the northern Chinese city of Hebei, a brawl between competing construction crews escalated into a literal bulldozer fight, footage of which has spread widely online.

It's really something to watch. At one point, one bulldozer rams into another one and knocks it over, and then a third bulldozer comes and tries to pick up its fallen comrade. It's like something out of a Transformers movie.

Thankfully, there have been no reports of injuries so far. The fight was sparked by "two companies competing for business."

China's construction sector is experiencing historically low growth, forcing weakened construction companies to compete pretty intensely for the remaining contracts.

This broader trend of competition between construction firms for an increasingly tight market is a symptom of an economic challenge facing China known as the transition problem.

China experienced nearly miraculous rates of economic growth beginning in the 1980s, which has slowed in recent years. It did that first by exporting a lot of cheap goods, and then by investing in its own economy, which means building things like roads and bridges.

This worked for a time — but it's no longer delivering as it once was.

"The problem with China's balance is that you run out of things to invest in," Damien Ma, an expert on China's economy at the Paulson Institute, told me last year.

"There are only so many roads and bridges you can invest in before that entire sector gets saturated and it becomes less productive to put your money there."

Instead, China needs to divert resources away from industries such as the construction sector and toward a more sustainable growth model focused on domestic consumption: people purchasing goods and services.

But that hasn't happened yet — owing to several factors, one of which is the entrenched political power of interest groups in the Chinese economy that profit from the investment-driven growth model.

If China doesn't make the transition soon, according to Ma, the country could be looking at a long-term future of stagnant economic growth — a bad situation for a country accustomed to rapid expansions in wealth.

So right now, a lot of Chinese economic activity is existing firms trying to capture status quo projects in a way that's ultimately a waste of China's considerable resources.