Chinese Economics Thread

You can control interest.

It is not possible to control independently the inflation, taxation rate (including the efficiency of collection) and the interest rate . Increasing the controlled variables decrease the freedom for the others, and if too many variable controlled then the last few is completely out of control.

This is the problem of the Chinese management, they can't capital flow , exchange rate and monetary policy ( interest rate) at the same time.

https://en.wikipedia.org/wiki/Impossible_trinity

 

That does not sound like something specifically for the Chinese economy or management; that sounds like a general economic dilemma for everyone.

 

now I read
Huawei to develop Harmony ecosystem to help industry break US domination
Source:Global Times Published: 2019/8/11 18:48:40
http://www.globaltimes.cn/content/1161064.shtml

 

Oh, yeah.


But these impossible trinities are connect together like the calculation of a truss support.


USA have flexible exchange rate and free capital flow, so has full and complete control above the monetary policy.

China has fixed exchange rate and capital control, so have no control above the monetary policy.
Actually , the extremely limited flexibility that China has in monetary policy balanced by the leaky capital control. : D


As side effect the Chinese monetary policy controlled by the FED, due to the capital control and fixed exchange rate.

Interesting, isn't it ?

 

But note that China still has fiscal policy and also other levers to influence demand/supply in the economy.

Eg. Launching an anti-corruption campaign to reduce demand in the domestic economy.

 

now I read this
Commentary: RMB exchange rate reform progress makes U.S. claim just a farce
Xinhua| 2019-08-11 16:59:50 http://www.xinhuanet.com/english/2019-08/11/c_138300873.htm

 

sorry i posted protected content

https://www.ft.com/content/4f5cb6de-ba91-11e9-96bd-8e884d3ea203

 

A good op/ed by Yasheng Huang not exactly member China fan club He is the guy who wrote Tortoise and Hare extolling India success https://www.thehindubusinessline.com/2004/01/07/stories/2004010700030800.htm Oh that is another thing
https://www.nytimes.com/2019/08/09/opinion/china-trade-huawei.html

Trump Has Succeeded. Now Lots of Chinese People Are Buying Huawei Phones.
America goes after Huawei, and Chinese consumers rally to buy from the company.

By Yasheng Huang

Mr. Huang teaches international management at M.I.T.


Image
Smartphones at a Huawei retail store in Beijing.CreditCreditFred Dufour/Agence France-Presse — Getty Images
阅读简体中文版閱讀繁體中文版
BEIJING — Earlier this week the Chinese government aggressively devalued its currency — the clearest sign yet that it is hunkering down for a protracted fight with the United States over trade.

Currency devaluation is the mother of all retaliations. The move, designed to help offset the Trump administration’s tariffs against China, could goad America into a currency war, and that would rattle the global economy more than any trade war. It also carries significant risks for China, including capital flight and inflation.

Yet the Chinese government seems confident that it can weather these side effects. Why? Because its entrenched position has won over the Chinese public. It has managed the public relations feat of casting the trade war with America as a war not on China, but on China’s people. President Trump’s maximum-pressure tactics has stiffened the resolve of the Chinese government and made it harder to win concessions from it.

When his administration first imposed tariffs on Chinese goods in March 2018, reactions in China were muted. Some Chinese liberals even viewed Mr. Trump as something of a savior, who might force China to open up and reform its economy.

arrested Meng Wanzhou, Huawei’s chief financial officer and a daughter of the company’s founder. The origins of the United States’ Huawei investigation predate the Trump administration: Career officials at the Justice Department were exploring cases against Huawei as early as 2010, under President Barack Obama. But it was Mr. Trump who escalated the Huawei affair, turning a discrete legal case into the showpiece of his broader trade war.

And yet, much as there was a bipartisan consensus in the United States about getting tough on China, there now seems to be a consensus among both liberals and ultranationalists in China that America is trying to undermine the welfare of the Chinese nation itself. To this perception, Chinese consumers have responded by buying Huawei’s phones in huge quantities — even though Ren Zhengfei, the company’s founder, himself has discouraged consumers from thinking that buying its products is a patriotic act.

Huawei’s sales increased by 23 percent in the first six months of this year compared with the same period in 2018, despite an economic slowdown in China and sanctions from the United States. According to the research firm Canalys, the number of mobile phones that Huawei shipped in China increased by 31 percent in the second quarter of this year compared with the second quarter of last year.

 

(cont)
But this rally is a show of support for Huawei specifically. Other Chinese companies have fared badly in China. The shipments of Oppo, a domestic rival of Huawei’s, declined by 18 percent over the same period; those of Vivo, another Huawei competitor, by 19 percent; and those of Xiaomi, also a competitor, by 20 percent. (In comparison, Apple’s shipments declined by only 14 percent.) Chinese consumers, in other words, appear to have rallied around the one Chinese company that America has pointedly targeted rather than around Chinese companies in general.

Americans may think of Huawei as a pawn or willing partner of the Chinese government, but in the eyes of many Chinese people the company symbolizes high-tech and entrepreneurship — and success in the face of political adversity.

Huawei was never a darling of the Chinese government’s industrial policy, and plenty of state-owned companies that were, like Great Dragon and Shenzhen Electronic Group, haven’t made it onto Mr. Trump’s blacklist. It is Huawei, not those other companies, that pioneered 5-G technology, the next generation of wireless networks that the United States sees as a national security risk.

Huawei succeeded despite, not because of, the Chinese government’s industrial policies. It is a genuinely private company, owned by its employees. In the 1990s, when the authorities strictly regulated and restricted population mobility, Huawei had trouble obtaining residency permits for staff members in Shenzhen.

Huawei went to Europe to get away from China’s skewed business environment, and it has become China’s top technology firm because it learned to thrive in brutally competitive international markets. No Chinese company can operate without government support, of course, and in 2004 Huawei received credit from the China Development Bank to expand into developing countries. But it earned recognition from the Chinese government only after passing the market test.

Going hard on Huawei was the wrong way for the United States to confront China over its grievances — even if many of them are entirely valid.

Huawei did commit intellectual property theft, but it is also investing heavily in research and development. According to the European Union’s Industrial R&D Investment Scoreboard, in 2019 Huawei ranks fifth in the world in R&D spending, ahead of Apple (which is seventh). Some 45 percent of its employees are working on R&D. By Chinese standards, the company is collaborative: While it has developed its own operating system, it has also kept using Google’s, Android. Its supply contracts with American companies amount to some $11 billion a year. It counts many foreign citizens on its staff, including at senior levels. And so — supreme irony — the Chinese who celebrate Huawei seem to do so precisely because it stands for values that should resonate with Americans, too: a can-do attitude, independent outlook and openness to the world.

One early misstep of the Trump administration concerns ZTE, another Chinese telecom company. In the spring of 2018, the United States Commerce Department prohibited American companies from selling critical chips to ZTE. But the Trump administration later reversed that decision — bringing ZTE back from the brink of bankruptcy.

Unlike Huawei, ZTE is a state-owned company subsidized by the Chinese government and, apparently, garners little love from the Chinese public. It also is a weaker company than Huawei and, therefore, more vulnerable to being derailed. Targeting ZTE first would have also allowed the United States to keep bolder measures in reserve and escalate matters by confronting Huawei later if that proved necessary.

to blacklist the company, seeking the extradition of Ms. Meng. On Wednesday, it issued a rule limiting business between United States government agencies and Huawei, as well as other Chinese companies (this time, including ZTE).


Yet such maximum-pressure tactics have delivered no meaningful results — other than undermining the good will of the Chinese public and its liberals toward America. The United States should de-escalate tensions and help China come back to the negotiating table by decoupling the Huawei issue from its broader trade concerns.

A trade war — which now risks spiraling into a currency war — is no easy thing to win. And it requires a more grounded understanding of Chinese reality than Mr. Trump has displayed so far.

Yasheng Huang is a professor of international management at the Sloan School of Management at the Massachusetts Institute of Technology.

The Times is committed to publishing a diversity of letters to the editor. We’d like to hear what you think about this or any of our articles. Here are some tips. And here’s our email:[email protected].

Follow The New York Times Opinion section on Facebook, Twitter (@NYTopinion) andInstagram.

 

China trade war data belie Donald Trump’s bragging
James Kynge 12 hours ago

If President Donald Trump’s tweets are taken at face value, the US-China trade war is a “beautiful thing” combating Beijing’s sharp practises while helping to attract “massive amounts of money” into the US. However, key data tell the opposite story.

Mr Trump threatened to impose a 10 per cent tariff on an additional $300bn of Chinese exports to the US from September 1. Washington also formally designated Beijing a “currency manipulator”.

But Beijing shows little sign of buckling. Hua Chunying, Beijing’s foreign ministry spokesperson, called Washington “irresponsible” over its approach to negotiations, noting: “The Chinese economy grew by 6.2 per cent in the second quarter of this year, while for the US the number is 2.1 per cent.”

One reason for Beijing’s defiance is that China’s economy is not hurting as badly as many in Beijing feared, analysts said.

“One year into the trade war, the casualty numbers are in,” said Shan Weijian, chairman and chief executive of PAG, an investment firm. “And by these numbers, the United States is not winning.”

Between July 2018, when the US first imposed its tariffs, to the end of June this year, US exports to China slumped by $33bn, or 21 per cent of the total. In contrast, Chinese exports to the US grew by $4bn, or 1 per cent, according to Mr Shan.

All of this has created the exact outcome Mr Trump was determined to avoid. Far from contracting, the China trade surplus with the US lambasted by Mr Trump as “out of control” has swollen to even greater proportions.

In this year’s first seven months, the surplus stood at $168bn in China’s favour.

The first reason for this is that the US consumers are loath to switch away from Chinese-made goods, particularly those manufactured by US companies such as Apple that have outsourced production to China, Mr Shan says. The surplus also suggests that US manufacturers in China have been slow to return home.

Meanwhile, China is preferring US competitors. While the average tariff Beijing imposes on US goods has risen by 12.4 percentage points since May last year, the average tariff it applies to Europe, Japan and elsewhere has decreased, according to research by Chad Brown, Euijin Jung and Eva Zhang at the Peterson Institute.

“While Trump shows other countries nothing but his tariff stick, China has been offering carrots,” the US think-tank said. “Beijing has repeatedly cut its duties on imports from America’s commercial rivals, including Canada, Japan and Germany.”

Nevertheless, the trade war is not just about trade. A broader type of economic decoupling that embraces security and competition concerns is also under way.

Among the actions taken was a ban issued this week on US government agencies from the Pentagon to Nasa against buying equipment from Huawei, the world’s largest telecoms equipment company. The ban also covers ZTE, a telecoms company; Hikvision and Dahua, manufacturers of surveillance cameras; and Hytera, which produces two-way radios.

These measures are affecting the companies concerned in the US market. Less obvious, though, is the ability of US sanctions to have the type of global influence that will force Chinese companies to toe Washington’s line.

The business of Huawei, for instance, has been virtually shut down in the US, but it is leading the race to install base stations for 5G telecoms, the next generation of superfast connectivity, around the world.

Huawei has also managed — in spite of being included on the prohibitive US “entity list” in May — to gain global market share for its smartphones in the second quarter of this year. It posted a near one percentage point increase in share, compared with a decline for Apple in the same period.

Most of the increase came from rapid sales in China, where Huawei rode a patriotic backlash against American sanctions on the company.

None of these signals are conclusive. Competition between the US and China appears set to run for years to come. But so far, it is not the “beautiful thing” Mr Trump has described.