Chinese Economics Thread

[fishrubber99]

Pretty bad numbers for April overall:
Retail sales just 0.2% YoY increase

New loans issued negative YoY

Fixed Asset Investment is again negative YoY.


China needs a HUGE stimulus right now. The more the central government delays, the worse it's going to be.

Fixed asset investment slowing is actually deliberate government policy, given that they

1. Are engaging in an anti-involution campaign right now and are restricting credit expansion for certain industries (which is why manufacturing investment has fallen)
2. Not wanting to reinflate the property bubble as they move the economy to new growth drivers

The only way you can have meaningful inflation that doesn't result in economic stagnation is if you perform supply side reform while also stimulating the demand side to absorb excess capacity. China is doing the former but doesn't want to heavily (or in broad strokes) perform the latter because they believe targeted measures where credit and stimulus is given conditionally (like giving money to parents with kids or rebates to people who want to trade in certain appliances and consumer goods) are more effective when it comes to clearing excess inventory and not straining local government budgets since local governments are the ones responsible for giving out stimulus.

And the third factor is the Iran war, obviously that will cause China's economy to take a hit that will only get worse the longer this war drags on, but every economy on the planet is experiencing this. Businesses are less likely to take on additional credit and expand if their fuel or petroleum product costs increase by 20% in a single month.

And the final thing you need to understand is that this is a single month's statistics, Q1 growth came at the target 5% growth rate. China's policymakers don't believe that straining finances to achieve growth beyond the goal that they've established is worthwhile. If economic growth actually takes a sustained hit from this then they will recalibrate their policy.

 

[Jiang ZeminFanboy]

Or maybe make a policy of raising a minimum wage every year by 500-1000 RMB for the next 5 years because the current minimum wage is a joke especially in 1st and 2nd tier cities.

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[magmunta]

Why is the government resisting a stimulus so much. Inflation is very low, there's a currency appreciation pressure, and the currency is undervalued by a lot.

Everything points to a need of a massive monetary and fiscal stimulus directed towards the major problems China is facing: births and tech.

Delaying this stimulus can lead to a bake-in of lower growth and missed potential.

Excessive austerity, and conservative fiscal and monetary policy are not good. It's like a patient getting tachycardia, and you are waiting there for the patient to recover by itself, instead of giving emergency defibrillation.

The stimulus would indebt the government even more. And the government can't afford that anymore. CCP would have already done that if it was appropriate. Stimulus would raise inflation which will in turn increase bond yields and make debt servicing even harder. I believe market correction attempts by CCP through large scale government stimulus are over. Of course, I am not china expert and could be wrong easily.

 

[gk1713]

Or maybe make a policy of raising a minimum wage every year by 500-1000 RMB for the next 5 years because the current minimum wage is a joke especially in 1st and 2nd tier cities.

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In Chinese academic discussions and judicial practice, the minimum wage plays only a limited role in protecting workers in the labor market, but it is the key income benchmark in compensation cases. For example, in traffic accident disputes, when the deceased had no stable income or could not prove actual earnings, courts often use the local minimum wage as the income standard and calculate death compensation based on a 20‑year period, effectively turning the minimum wage into the core tool for resolving the problem of unverifiable income.
This practical judicial function keeps minimum wages deliberately low across regions — preventing a broad rise in compensation levels, containing institutional costs for governments, businesses, and insurers, and aligning the standard with its role as the baseline floor in damage awards.

 

[PopularScience]

Or maybe make a policy of raising a minimum wage every year by 500-1000 RMB for the next 5 years because the current minimum wage is a joke especially in 1st and 2nd tier cities.

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Minimum wage is there to protect the handicappe/disabled workers, not to rise the income of average worker.

 

[TOKYO DRIFT ABC]

Regardless, China is clearly pushing ahead with moving its manufacturing sector up the value chain, but the government must know that this alone is not enough. Without addressing two deep-rooted structural problems, persistently high household savings rates and the excessive concentration of household wealth in property, domestic consumer demand will never grow enough to absorb the value being created by a more sophisticated manufacturing base.

The root cause of the high savings rate is the weakness of the social safety net. As long as people are anxious about retirement, healthcare, and education costs, they will keep saving rather than spending. As for the over-reliance on property, falling home prices hit household finances directly and dampen the willingness to spend, which undercuts whatever consumption stimulus the government tries to roll out.

Nowhere is this gap between supply and demand more visible than in the auto industry. Manufacturers have been cutting prices well below any sustainable level of profitability, yet sales keep stagnating. Price cuts alone can no longer generate real demand. Producers are getting worn down while consumers wait for the next round of discounts, a pattern reminiscent of the deflationary trap Japan fell into in the 90s.

There is no sustainable way out without lifting demand at a structural level, and Beijing must know it. Whether China can actually bring its supply-side and demand-side reforms into alignment is the defining question for the long-term health of its economy, and when Xi Jinping talks about transitioning to high-quality growth, this is what it ultimately comes down to.

 

[GiantCanofWater]

People lost a lot of money with the property bubble pop. They need an alternative to housing to put their money in like bonds or stocks but the Chinese stock market isn't very impressive compared to western markets and both have risks of government intervention that don't make people feel safe investing in it. I've heard people just send their money to HK and invest in foreign markets, one of many ways to get your money out of China. Current global instability and economic downturn also doesn't help. There will have to be reforms to make the bond/stock market more investor-friendly or develop another way of securing/building wealth. People who know more about economics please correct me if I'm wrong.

 

[Moonscape]

At some point, people run out of things to buy that they think will meaningfully improve their life. Example: Most people who want cars already have a car. The marginal benefit from no car to car is way bigger than old car to new car, so new car sales will slow down. Same applies for many other types of goods.

Similar story with consumables and services. People can only consume so much, and population aging isn't going to help things on the demand front.

It'll be fascinating to see how the CPC handles this. For literally millennia, the primary problem faced by the Chinese government was "too many people and not enough food," and that sort of civilizational trauma makes it harder to handle problems caused by the reverse. The Chinese bureaucratic mindset is very much against "helicopter money" and similar forms of welfare because 吃苦 is the national sport.

AI is only going to worsen this. China's massive practical application of AI is going to scale the supply side massively.

Maybe China will be forced to implement some sort of post-market economic system within our lifetimes. "From each according to their ability [very little because AGI can do everything], to each according to their need [lots of free stuff because AGI makes it all so fast]." Maybe?

 

[Temstar]

At some point, people run out of things to buy that they think will meaningfully improve their life. Example: Most people who want cars already have a car. The marginal benefit from no car to car is way bigger than old car to new car, so new car sales will slow down. Same applies for many other types of goods.

Similar story with consumables and services. People can only consume so much, and population aging isn't going to help things on the demand front.

It'll be fascinating to see how the CPC handles this. For literally millennia, the primary problem faced by the Chinese government was "too many people and not enough food," and that sort of civilizational trauma makes it harder to handle problems caused by the reverse. The Chinese bureaucratic mindset is very much against "helicopter money" and similar forms of welfare because 吃苦 is the national sport.

AI is only going to worsen this. China's massive practical application of AI is going to scale the supply side massively.

Maybe China will be forced to implement some sort of post-market economic system within our lifetimes. "From each according to their ability [very little because AGI can do everything], to each according to their need [lots of free stuff because AGI makes it all so fast]." Maybe?

Isn't that exactly the end goal of communism? Post-scarcity society? To quote an early socialist who's name escapes me at the moment "communism is the ability to turn the ocean into orange juice".

Obviously you wouldn't want to actually do that so brakes have to be in place to prevent such nonsensical request in a post-scarcity society, but you can see the ideas being imagined back then becoming closer and closer.

 

[Moonscape]

Isn't that exactly the end goal of communism? Post-scarcity society? To quote an early socialist who's name escapes me at the moment "communism is the ability to turn the ocean into orange juice".

But yes.