| > Those are still an upfront cost on Anhui's treasury as it is counted as a liability, and a liability with limited ability to service due to the relatively weak municipal and provincial bonds market due to the ongoing LGFV crisis The same is true for tax credits and indirect subsidies. > Furthermore Ohio has a AAA credit rating score [2] meaning it can borrow at low-to-no interest, which doesn't really exist as an option at scale in most Chinese provinces. So did Unigroup when most of it's debt was issued and now assigned to Anhui's investment vehicle, so in fact for this transaction they may as well have a AAA rating. > Ohio only gave $0.6B - ie. 2.4% [0] (and even that was controversial [1]). The rest of the $7.4B came from the CHIPS Act. Ohio really did earmark 2 billion dollars for the fab, not 600 million. The existence of one grant for 600 million is not evidence against the other 1.4. https://www2.deloitte.com/us/en/pages/tax/articles/chips-act... > For example, Ohio has publicly announced more than $2 billion of state grants, credits, and incentives to construct a new semiconductor manufacturing plant in Ohio. >> And finally, this investment by Ohio generated jobs within Ohio. The Tsinghua Unigroup bag-holding isn't allocating Capex for Anhui, as most of Tsinghua Unigroup's assets are not in Anhui. > And my argument is that this leads to a "to big to fail" situation which is extremely risky at the provincial and local level because of the lack of fiscal fallback options for local and provincial governments in China as well as the fact that all that capital could have been better spent by provinces to uplift their population's living standards instead of essentially acting as a wealth transfer to much richer coastal provinces or the 3 provincial level cities. They are not too big to fail in the sense the word is commonly used. If they fail, the investment vehicle is bankrupt and Anhui doesn't incur any liabilities (remember that they can't issue bonds). Sure, and if Intel eventually leaves before Ohio makes money from the jobs, nothing is seen - this happens often. On the other hand if Unigroup is succesful, Anhui has equity. > Those tens of billions Anhui has spent not just on Tsinghua Unigroup in 2022, but the dozens of other similar ventures like JAC Group, Volkswagen China, etc could have been better spent on building it's human capital. For a government that should be the primary "decent outcome". The primary outcome of semiconductor investment is to prevent an external dependency that is already being exploited to cause a general slowdown on the economy which will affect everyone. > It's a middle-of-the-pack province in China with developmental indicators comparable to Ecuador, Cuba, and Peru and well behind Thailand's poorest region (Isaan). Think about how many more cars JAC could sell, how many more electric toilets RSD Group could sell, and how much more chicken 老乡鸡 could sell if Anhui's ytd median disposable income per capita was greater than $4,100 [3], and if Anhui's rural median disposable income per capita was greater than $2,500 [4]. No matter what speeches Chinese officials make, the truth is that China is not and cannot at this stage execute equal development in economic terms. The absolute medium-term priority of the Chinese government is to create high quality development in key cities in order to move up the value chain before it is too late. In the meantime, redistribution is the most efficient way to deal with less productive regions - it is simply not viable to invest in rural communities at the current stage of Chinese development. China is not a unique countries, many other countries have tried either strategy and it turns out that investment in less productive localities in the name of equality simply does not work for a dozen different reasons. If your understanding of either the CHIPS act or the Big Funds is that they are vehicles trying to uplift the median standard of life, there is no point having this discussion. It just isn't the purpose. The purpose is strategic, and cannot be understood using the same metrics as, say, countercyclical investment into medium businesses after a recession. |