I don't want to bring up the debate about deflation, how much is there and what caused it in China. I assumed this was posted before, I'm just checking that our member @doggydogdo isn't the author of this article right?
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Chinese Economics Thread
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I don't want to bring up the debate about deflation, how much is there and what caused it in China. I assumed this was posted before, I'm just checking that our member @doggydogdo isn't the author of this article right?
A growth of 5% per year is quite impressive. 5% per year from 2022, when the consequences of the Covid lockdown began to be overcome, is very difficult for China: it is a race for survival with the US (+2.8% for 2024) and the EU market (+0.8% for 2024) - the most important thing in this race is to prove to investors and the population (also investors) that, despite all the disadvantages, the Chinese economy is growing two to three times faster than its main competitors.
What 5% of GDP in 2025 means for China is an increase from $18.8 trillion to $19.74 trillion by the end of the year. That is, it will far exceed the GDP of war-torn Europe and will begin to approach the GDP of the United States (more than $27 trillion).
An increase of $1 trillion means that China will grow by the same size as Turkey's economy in one year, i.e. twice the size of Vietnam's economy.
The source of growth remains premium foreign markets and cost reductions resulting from the introduction of innovations. These two areas will be subject to turbulence: foreign markets, tariffs, innovation and the US technology blockade. This is why the word “about” was used in the description of the growth indicator; about 4.8% and even 4.6%.
There is a lack of effective demand, which is particularly evident in the slowdown of consumers. Some companies are experiencing problems in carrying out production and commercial activities, and problems with late payments are still serious. The population is under pressure to find jobs and increase income.
China will continue to follow the path of increasing record debt levels and widening budget deficits – however, if these measures do not help in the fight against Trump's protectionism and investment blockade, which may be strengthened by the EU blockade and the development crisis – a correction towards a military mobilization economy may occur.
Big if true.
Means China will pass the 40T mark this year. First nation in history to achieve this landmark.
We are getting close and closer to the EU and US combined. And this is with 0 GDP juicing through data manipulation and inflation.
There are rumors that EUV machines have already begun testing, and will be publicly unveiled later this year. The economy is not anymore about just sheer size, but also rapidly becoming the undisputed no1 in advancement in all fields. With 2024 and 2023 being the "year of the autos", hopefully, 2025 and 2026 will be the year of GPUs and CPUs.
It's funny this desperate search to talk about deflation. Although everything they say deflation does to the economy as a negative consequence, this in no way changes the benefits of deflation.
It is the country that lived with deflation:
Worse than the shocking discovery that consumers like to see prices falling (who would have thought that?!), is the twisted reasoning of that economist in the penultimate paragraph who said that price deflation is "corrosive" and would bring disaster to the Japanese economy.
First of all, all of Japan's problems do not come from price deflation, but from the government's ignorant fiscal policy, which in a foolish and futile attempt to combat price deflation, went around spending on useless things, destroying savings and indebting the country to the pornographic level of 200% of GDP.
If it had not done this, the price deflation scenario would continue, but with one considerable difference: the economy would be based on a mountain of capital and not on a mountain of debt.
This fiscal policy was undoubtedly one of the main causes of Japan's low economic growth -- for a people who save a lot, one would expect more robust annual growth rates. However, since the government uses up all these savings to finance its deficits, investments are compromised, since there are no surplus funds to finance them. And this hampers growth.
If the government reduced its spending to the point of eliminating its budget deficit (in nominal terms), it would no longer need to borrow money to close its budget. In other words, it would no longer need to rely on citizens' savings. This would make more funds available to be lent to the private sector, both to businesses and consumers. The savings that the government would have absorbed by selling bonds would now be available to be used more profitably by entrepreneurs and consumers.
Another flaw in the economist's reasoning: if prices are falling for everyone, then, as a matter of logic, they must be falling for the government too. Therefore, it makes no sense to conclude that the government will be deprived of revenue and will not even be able to finance its loans. It just needs to reduce its payroll and cut expenses, to be more efficient.
However, the economist comes to the terrifying conclusion that the government’s difficulty in collecting more taxes will be the real obstacle to Japan’s future economic growth.
Contrary to what traditional economists think, who confuse falling prices with economic recession, the fact is that there is nothing bad about price deflation in and of itself. Quite the contrary: falling prices are the natural result of a growing market economy and prudent money management. If the quantity of products increases, but the money supply remains relatively unchanged, then the natural result will be a fall in prices, to the benefit of savers and consumers. This happened during the second half of the 19th century in the United States, still under the classical gold standard.
Falling prices and rising living standards, both generated by higher productivity, are exactly the two things that every economy should strive for. Japan – mainly due to the entrepreneurial and disciplined culture of its people – had great potential to achieve this arrangement in a sustainable way. But it will not succeed precisely because of its government, which, following the advice of Keynesian economists, has become deeply indebted and, as a result, has been sucking up a large part of the economy's capital, which inhibits more productive investments.
As the report showed quite inadvertently, Japanese families and companies have adapted to the environment of price deflation. Contrary to theory, both thrive in this scenario.
Price deflation and a higher standard of living are completely interconnected factors, and the former should never be condemned by sensible people.
There is nothing "corrosive" about deflation, as the economist said. But there is everything corrosive about a government that spends, goes into debt and leaves a country's economy with a debt that is simply twice the size of its GDP.
It is the country that lived with deflation:
The reporter gathers all the correct facts and, in the end, reaches the wrong conclusion.
Worse than the shocking discovery that consumers like to see prices falling (who would have thought that?!), is the twisted reasoning of that economist in the penultimate paragraph who said that price deflation is "corrosive" and would bring disaster to the Japanese economy.
First of all, all of Japan's problems do not come from price deflation, but from the government's ignorant fiscal policy, which in a foolish and futile attempt to combat price deflation, went around spending on useless things, destroying savings and indebting the country to the pornographic level of 200% of GDP.
If it had not done this, the price deflation scenario would continue, but with one considerable difference: the economy would be based on a mountain of capital and not on a mountain of debt.
This fiscal policy was undoubtedly one of the main causes of Japan's low economic growth -- for a people who save a lot, one would expect more robust annual growth rates. However, since the government uses up all these savings to finance its deficits, investments are compromised, since there are no surplus funds to finance them. And this hampers growth.
If the government reduced its spending to the point of eliminating its budget deficit (in nominal terms), it would no longer need to borrow money to close its budget. In other words, it would no longer need to rely on citizens' savings. This would make more funds available to be lent to the private sector, both to businesses and consumers. The savings that the government would have absorbed by selling bonds would now be available to be used more profitably by entrepreneurs and consumers.
Another flaw in the economist's reasoning: if prices are falling for everyone, then, as a matter of logic, they must be falling for the government too. Therefore, it makes no sense to conclude that the government will be deprived of revenue and will not even be able to finance its loans. It just needs to reduce its payroll and cut expenses, to be more efficient.
However, the economist comes to the terrifying conclusion that the government’s difficulty in collecting more taxes will be the real obstacle to Japan’s future economic growth.
Contrary to what traditional economists think, who confuse falling prices with economic recession, the fact is that there is nothing bad about price deflation in and of itself. Quite the contrary: falling prices are the natural result of a growing market economy and prudent money management. If the quantity of products increases, but the money supply remains relatively unchanged, then the natural result will be a fall in prices, to the benefit of savers and consumers. This happened during the second half of the 19th century in the United States, still under the classical gold standard.
Falling prices and rising living standards, both generated by higher productivity, are exactly the two things that every economy should strive for. Japan – mainly due to the entrepreneurial and disciplined culture of its people – had great potential to achieve this arrangement in a sustainable way. But it will not succeed precisely because of its government, which, following the advice of Keynesian economists, has become deeply indebted and, as a result, has been sucking up a large part of the economy's capital, which inhibits more productive investments.
As the report showed quite inadvertently, Japanese families and companies have adapted to the environment of price deflation. Contrary to theory, both thrive in this scenario.
Price deflation and a higher standard of living are completely interconnected factors, and the former should never be condemned by sensible people.
There is nothing "corrosive" about deflation, as the economist said. But there is everything corrosive about a government that spends, goes into debt and leaves a country's economy with a debt that is simply twice the size of its GDP.
falling price is the market's way to show, people can make new shit cheaper than before
Abundance and a significant increase in productivity. For example China still buy oil and gas from Iran and Russia, that gives China an abundance of cheap energy, from Russia and even Ukraine they get cheap food, despite having a massive domestic agricultural production. China is also leading the world in automation which has lead to a massive increase in productivity.
2024 Global smart wearable market. Xiaomi and Huawei climbing big time
Great question. There is a misconception that all deflation is alike. Here's the counterfactual to think about - assuming productivity and efficiency improvements were continuous in China through the past 40 years - how come we were only in deflation for a small portions of that period?
Meaning, 'efficiency gains' can happen without deflation, and that efficiency gain is one of many drivers for deflation. That was never the issue.
Area man thinks he knows deflation better than Yi Gang and Pan Gongsheng. The real 懂王. 你说的对
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Has China been experiencing deflation since COVID? I mean if the economy is still growing, isn't it not that bad?
Has China been experiencing deflation since COVID? I mean if the economy is still growing, isn't it not that bad?
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