Chinese Economics Thread

[kroko]

China´s PBOC governor warns of rising debt in china.

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[Blitzo]

EV trends in China seem to be continuing in the right direction.
Goal now should be to continue with EV infrastructure deployment as well as further shifting of the nation's energy production to renewables, and then eventually phasing out subsidies for EVs once the price and practicality of them are competitive with legacy vehicles.

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China’s Electric Cars Sales Boom To Continue, Sales To Double In 2016, China Minister States

Electric vehicle sales and production will double in China in 2016, according to recent reports. This refers of course to both all-electric vehicles (EVs) and also to plug-in hybrids (PHEVs).

This matches a similar claim

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in an interview with

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right after

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in the

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.

Given that over 300,000 electric vehicles were said to be sold in China in 2015, that means that sales are expected to top 600,000 in 2016. Well, that’s the prediction of the head of the country’s Ministry of Industry and Information Technology anyways — predictions and opinions may vary.

The ministry head, Miao Wei, was quoted making the prediction while attending the recent annual meeting of parliament. Miao also commented to reporters at the scene that the country needs to (and presumably will be) speeding up the installation of EV charging stations in the near future.

Comments concerning the need to improve electric vehicle capacity, lifespan, and reliability, were also made by the Ministry of Industry and Information Technology head.

 

[Yvrch]

China´s PBOC governor warns of rising debt in china.

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Here is the thing, too much savings are as bad as piling up debts, if not worse.
See Japan what too much savings can do to a nation, current account surpluses and capital outflows as savings go out overseas for better returns. Endless cycles of stimulus that keeps falling into negative areas.

China wants to boost consumption, so it's natural either current account or capital account must show deficit. When we saw capital flight last few quarters, everybody and their father screamed China was falling apart. Isn't that what people wants it in the first place? But minding how Sterling convertibility went south quickly when it was still a fairly new idea, China didn't want some pseudo Plazaesque stunt pulled on them, hence a nip in the bud.

Hence the importance of fully developed financial market and to get it right. Rumors have it that we'd see a single powerful regulator for all three markets in China later this year, no more turf wars and squabbles.

If you are following all equities, bonds, fx, commodities, you'd know how complicated debt market is even for the developed countries. Even more so for China but her fixation on convertibility said her reform on financial market is on a steady course and charging forward. In the meantime, more headlines of China falling apart.

 

[Jura The idiot]

one month ago
Feb 20, 2016

now I was just curious how the Shanghai Stock Exchange had been doing while this Thread was closed, so I post this chart:

pretty much within 2650-3000 range

now I briefly looked there again; it passed by 3000 most recently:

​

LOL! only now I noticed at the bottom of that chart the title of some article

Former CIA boss warns that a Trump-style trade policy is the road to "Weimar America"

Moderators, this wasn't intentional

 

[SamuraiBlue]

Here is the thing, too much savings are as bad as piling up debts, if not worse.
See Japan what too much savings can do to a nation, current account surpluses and capital outflows as savings go out overseas for better returns. Endless cycles of stimulus that keeps falling into negative areas.

Where in the world did you learn economy, at a casino?
Saving is net plus, debts are net minus. No matter how you look at things plus is always better.

I also don't understand what your talking about with this.
"Endless cycles of stimulus that keeps falling into negative areas."
Saving is done be individuals citizens and private corporations, stimulus is I believe you're talking about the government policies which has nothing to do with the other. Government stimulus is suppose to go to negative areas that is why they are called "STIMULUS". You don't need to stimulate places that are already doing well.

People in mainland china actually needs to save more since they have very little safety nets installed by the communist government so if they get sick that requires extensive treatment requiring to quit their present jobs then they are really in trouble with no universal health insurance and or unemployment insurance to cover them during those times.I also hear that social security/public pension plans are not provided so people need to find private plans.

 

[Blackstone]

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Confronted with a plunge in its stock markets last year, China's central bank swiftly reached out to the U.S. Federal Reserve, asking it to share its play book for dealing with Wall Street's "Black Monday" crash of 1987.

The request came in a July 27 email from a People's Bank of China official with a subject line: "Your urgent assistance is greatly appreciated!"

In a message to a senior Fed staffer, the PBOC's New York-based chief representative for the Americas, Song Xiangyan, pointed to the day's 8.5 percent drop in Chinese stocks and said "my Governor would like to draw from your good experience."

It is not known whether the PBOC had contacted the Fed to deal with previous incidents of market turmoil. The Chinese central bank and the Fed had no comment when reached by Reuters.

In a Reuters analysis last year, Fed insiders, former Fed employees and economists said that there was no official hotline between the PBOC and the Fed and that the Chinese were often reluctant to engage at international meetings.

The Chinese market crash triggered steep declines across global financial markets and within a few hours the Fed sent China's central bank a trove of publicly-available documents detailing the U.S. central bank's actions in 1987.

Fed policymakers started a two-day policy meeting the next day and took note of China’s stock sell-off, according the meeting’s minutes. Several said a Chinese economic slowdown could weigh on America.

Financial market contagion from China was one of the reasons cited by the Fed in September when it put off a rate hike that many analysts had expected, a sign of how important China has become both as an industrial powerhouse and as a financial market.

NO SECRETS

The messages, which Reuters obtained through an Freedom of Information Act request, show how alarmed Beijing has become over the deepening financial turmoil and offer a rare insight into one of the least understood major central banks.

The exchanges also show that while the two central banks have a collegial relationship, they might not share secrets even during a crisis.

"Could you please inform us ASAP about the major measures you took at the time," Song asked the director of the Fed's International Finance Division, Steven Kamin in the July 27 email.

The message registered in Kamin's account just after 11 a.m. in Washington. Kamin quickly replied from his Blackberry: "We'll try to get you something soon."

What followed five hours later was a 259-word summary of how the Fed worked to calm markets and prevent a recession after the S&P 500 stock index tumbled 20 percent on Oct. 19, 1987.

Kamin also sent notes to guide PBOC officials through the many dozens of pages of Fed transcripts, statements and reports that were attached to the email.

All of the attached documents had long been available on the Fed's website and it is unclear if they played a role in shaping Beijing's actions.

Kamin's documents detail how the Fed began issuing statements the day after the market crash, known as Black Monday, pledging to supply markets with plenty of cash so they could function.

By the time Song wrote to Kamin, China had spent a month fighting a stock market slide and many of the actions taken by the PBOC and other Chinese authorities shared the contours of the Fed's 1987 game plan.

DESPERATE MEASURES

The July 27 plunge in the Shanghai Composite Index was the biggest one-day fall since 2007 and by then the market had lost nearly a third of its value over six weeks.

China's central bank had already cut interest rates on June 27 in similar fashion to the Fed's swift move to ease short-term rates in 1987.

Song told Kamin the PBOC was particularly interested in the details of the Fed's use of repurchase agreements to temporarily inject cash into the U.S. banking system in 1987.

The PBOC had increased cash injections in June and ramped up repurchase agreements in August as stocks continued to slide. The PBOC also eased policy on Aug. 11 by allowing a 2 percent devaluation in the yuan currency. (Graphic:

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)

As Song and Kamin exchanged messages on July 27 and 28, other Chinese authorities were busy trying to contain the crash.

China's securities regulator said on July 27 it was prepared to buy shares to stabilize the stock market and that authorities would deal severely with anyone making "malicious" bets that stocks would fall.

In 1987, the Fed contacted banks directly and encouraged them to meet "legitimate funding needs" of their customers, according to Kamin's email to Song.

In addition to its pledges and cajoling, the U.S. central bank in 1987 eased collateral restrictions on Wall Street and tried to calm markets by intervening in trading earlier than normal. The U.S. economy continued to grow, eventually entering recession in 1990.

The central bank in Beijing does not have as free a hand to conduct policy as does the Fed, which answers to the U.S. Congress but operates independently from the administration.

The PBOC governor Zhou Xiaochuan implements policies ultimately decided by political leaders in Beijing and lacks the authority to lead debate or shed light on decision-making.

China's vice finance minister told Reuters last year Chinese supervisors needed to learn from countries like the United States.

Premier Li Keqiang said last month China's regulators did not respond sufficiently but China had fended off systemic risks.

U.S. central bankers say their relative transparency helps their effectiveness and legitimacy, but open records laws also make Fed officials cautious about their communications, much of which must be made public when requested. Fed Vice Chairman Stanley Fischer has said transparency makes it harder for policymakers to have informal discussions.

Kamin pointed out in his email that everything he was sending was publicly available.

"I hope this is helpful," he said.

 

[taxiya]

So what is the solution? The one road one belt initiative backed up by the newly created AIIB
.....

It's a brilliant strategy the more you think about it. China would effectively be corning much of that new market it is creating, since all the transport links lead to China first and foremost. That's going to immediately give its firms a cost and response time advantage that other foreign competitors would find hard to compete with and not break any trade rules.

very well said.
I want to compliment that, China is consciously moving herself up to the value chain and also consciously leaving the low value jobs gradually to the countries along the road and belt that she is building. To move up the chain, wages have to grow together with workers skill, and China have to leave the low tech Labour intensive work sooner or later. By connecting countries through the initiatives and making sure the outflow of Labour intensive jobs stay in the connected countries, China is building a new (or parallel) economical eco-system with her sitting in the center and top. This is a conscious and coordinated planned act.

This is very different from the earlier labor work moving from west to Asia in the 70s to 2000s. That moving was driven by capitals, meaning the capital masters got rich, but left the low tech low skill workers at home without any means to find a new job. The western governments were forced to take over that burden. The only thing they could do was to handout social welfare money by borrowing. This led to the downfall.

Why China may have a good chance of not going that way? Because

1. The state owns a big portion of the capital unlike the west, so the out flow can be planned and smoothened.

2. The state has the power to direct part of the capital gains for training of the low skilled workers to find a new job in the changed world, that is not possible in the west. It is non of the capital's responsibility there and the state there simply has no money for it because its budget is decided by the capital masters who have no interest in helping their countrymen in time of change. After all as Karl Max said, Capital has no motherland. I'd add that Capital has no mother, father, brother and sister.

3. The Chinese state (through SOEs) can direct and coordinate the investment into projects and foreign regions to serve a planned purpose, the belt and road. Many private enterprises will follow because the foundation has been laid by the state, it is cheaper and safer for them to work along side than go somewhere else. That is not going to happen in any other part of the world.

The road ahead is going to be bumpy for sure, but there is something unique of China's way of thinking and action. Believe it or not, it will at least make a difference from the western experience, and I am confident that the difference will be a better one for China.

Regarding the original article, it is just something for a laugh. The author and the likes are playing the game of "competing to the lowest", something like "I am bad? Don't just stare at me. I am telling you he is even worse.". A ploy of scaring investors to move money to finance their own debt mountains, and hope to even trick the Chinese to dump money to their debt black hole. A similar trick was played in 2009/2010 asking China to save EU's debt countries, the line went like "for China to continue export to EU, China must give money to EU so they can spend on Chinese products". I was thinking, WTF? Why can one just pay up the debt and stop spending money one don't have? That was the most astonishingly twisted perverse I have ever heard in my life from "respected" press or professionals, though I have heard that from childhood bullies.

 

[AndrewS]

Chinese tourism spending leaps 53% in a year
Steve Johnson

Economic slowdown fails to dent travel surge, but Hong Kong, Macau and Korea see revenues fall

Chinese consumers fuelled a travel and tourism boom last year, despite the country’s economic slowdown.

Chinese tourists spent $215bn outside mainland China in 2015, according to figures released on Monday by the World Travel & Tourism Council, a 53 per cent rise from the $140bn spent in 2014.

Read more

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[Yvrch]

Where in the world did you learn economy, at a casino?
Saving is net plus, debts are net minus. No matter how you look at things plus is always better.

I'll make it easier for you to understand in a very simple form why too much savings are as bad as rising debts.

Income = C + S


Output = Income
Saving = Investment

Output = C + I

That's cutting it down to the bare-bone simplest form.
A single first person view of the world.You work, you produce, you consume and then you die.
In Neo-classical sense, I = S always as market's invincible hand is supposed to guide them to net out to zero. Always.
In reality it's not. That's why we have recessions and all forms of malaise.
If the market balances out every time, we'll all be living in a paradise. Not so.
When you saved too much, that would show up as inventory in the current period. That oversaved dollar in your pocket, if someone else don't use it, wouldn't show up in the following period or in periods thereafter in the national income stream.
It disappeared from the income stream.
A dollar saved and not invested, otherwise not having it plowed back into the national income stream, is lost. That's the dollar nobody gets.
Your economy shrinks by one dollar. Multiply this and you get the idea.

So here comes your Abe's three arrows and Kuroda's bazooka.
As it was mentioned before because in real life I is not equal to S, that's where your government, or central bank, is required to come in to push the equation to higher level which was otherwise perterd out at lower level, a smaller GDI.
Government borrows your savings and converts them to investment aka deficit spending. But would they be able to scoop up all household and corporate savings? Hell no.
They can transfer savings across sectors only so much.

If you want to discuss the finer details of GDP or GNI accounting, it'll be my pleasure but I don't want to bore you to death here but I guess
most likely I'd as well be talking to a wall judging by the quality of your reply.

I also don't understand what your talking about with this.
"Endless cycles of stimulus that keeps falling into negative areas."
Saving is done be individuals citizens and private corporations, stimulus is I believe you're talking about the government policies which has nothing to do with the other. Government stimulus is suppose to go to negative areas that is why they are called "STIMULUS". You don't need to stimulate places that are already doing well.

People in mainland china actually needs to save more since they have very little safety nets installed by the communist government so if they get sick that requires extensive treatment requiring to quit their present jobs then they are really in trouble with no universal health insurance and or unemployment insurance to cover them during those times.I also hear that social security/public pension plans are not provided so people need to find private plans.

I can see the tortured confusion going on in there.
What's there not to understand. I was referring to Kuroda's bazooka that dipped into the negative. That was a shock Friday that reverberated across all market watchers. Kuroda and his monetary easing aka stimulus aka QE. As it turns out we're all Keynesian if and when we do fall in bad times since the great depression.

Saving is also done by governments, it's called budget surplus.

Mind you Kuroda San's good works are separate from those of Abe San. If your tortured confusion implies somehow BoJ and Abe's administration are one the same, not so.
No one, bar none, wants the collusion of BoJ and GoJ, that would be bad for everyone, even though it appears that Kuroda is bidding what Abe asks. Again if you want to discuss monetary and fiscal policies, that'd be for another time.

The thing about the negative rate is it switches the roles of lenders and borrowers - the very fact of who pays who. It skews the market incentives and forces banks' hand to lend no matter whether there are profitable investment opportunities or not. Japanese business seems to not see enough profitable investment opportunities going around. This kind of implicit forced lending from BoJ is like a version of Chinese bank loans to SOE's, throwing good money after the bad ones. Before long, Japan would have another round of bad debts piling up, just like their previous balance sheet crisis.

Obviously, Japan is finding her way to beautiful de-leveraging, so is EU as of now.
But you would need a right mix of growth , inflation and belt tightening in order to have it work.

Negative rates for now would allow the Japanese government to avoid the heavy lifting, the necessary structural changes, Abe's not-yet-seen third arrow. At least in China's case, painful but necessary structural changes are coming along. Plans are in the works to shed a few million people in steel, cement, chemicals, glass, coal etc. Lay-offs in China are good news in disguise. They are doing the structural changes and pushing reforms forward. FFS China laid off 30-40 millions before her entry into WTO. Again that was another case of beautiful de-leveraging, China outgrew her debt problems of 90's. China currently has a lot of investment opportunities, cleaing up the environment that 2008 stimulus left behind, urbanization,IT infrastructure, aerospace, biotechnology, the list goes on. So China will have her beautiful deleveraging agian.

Mr Zhou just hold off his bazooka.

 

[antiterror13]

Yvrch, your theory of "saving" is #bad# is only true if you put all your saving (cash) under your pillow or bed, so the fund is idle and nobody else could utilise it.

But in modern time now, most of saving is in deposit or some kind of investment forms ... hence the capital is not idle and fully utilised by others

SamuraiBlue is correct!