Chinese Economics Thread

[Overbom]

I don't disagree with you from the 35k ft view level, but you should be clear eyed in understanding the cost of said transition is born by average people. Most importantly, not disregard the immense economic cost of transition in terms of how it impacts everything else.

Just because building empty apartment complexes that will never be filled is 'fake growth' doesn't mean that the migrant workers mixing concrete don't have families to feed.

Whether you like it or not, more people are interested in their own livelihoods than they are for nation building at their expense, and there is a significant political cost Xi has to bear for engineering this necessary transition.

Of course. Every transition is painful which is why it is always resisted by entrenched interests. Mind you, even ordinary people can be counted as entrenched interests sometimes!

However CPC and Xi specifically have the luxury to look long term. Yes, the transition will cost a lot for many people but Xi isn't blind.

Along with this, the private tutor reform is significant. If it works, then education costs would decrease by a huge amount. So, take from one pocket, give to another pocket.

Its a game of give and take. Xi "takes" away the real estate, Xi "gives" reduced educational costs and reduced housing costs. As long as he can keep going with similar style "exchanges" then I don't see why he would fail.
Reforming such a big economy is bound to create losers but overall, the profit will be more.

Btw house prices are also a huge sink for Chinese incomes, the transition will reduce these cost. As you can see, real estate must be crushed in order for China to develop and grow healthily

 

[Temstar]

I don't disagree with you from the 35k ft view level, but you should be clear eyed in understanding the cost of said transition is born by average people. Most importantly, not disregard the immense economic cost of transition in terms of how it impacts everything else.

Just because building empty apartment complexes that will never be filled is 'fake growth' doesn't mean that the migrant workers mixing concrete don't have families to feed.

Whether you like it or not, more people are interested in their own livelihoods than they are for nation building at their expense, and there is a significant political cost Xi has to bear for engineering this necessary transition.

There was a lot of cost when Deng/Jiang did the economic reform, closed all those SOE and made all those workers unemployed too. I had several members in the extended family affected by it. Yet in the end if was a good thing for China when the economy started growing rapidly. Those family members of mine who lost their iron bowl when their SOE shutdown ended up going into business for themselves and became much more wealthy. Had there not being this impetus forced upon them to change they may still be stuck in average paying 9-5 SOE jobs.

 

[vincent]

Just want to add expensive real estate is a form of wealth transfer from the young to the old, a form of ”eating the young”. Definitely not good for the society and bad for population growth (good luck trying to find a wife in Shanghai without owning an apartment)

 

[Overbom]

Real estate has been siphoning funds from the rest of the economy for far too long. Why should people pay a million for a small flat in Shanghai for example?

Imagine if that million was instead saved and then invested in different portfolios. You could have long term safe funds, tech indexes, finance, Green (Solar, Wind), hi-tech (robotics, IC), tech etc.

So instead of investing the money where the whole society is benefitting from, people spend their huge amount of money in overpriced houses. Long overdue that something happened to correct that.

And lets not even mention how demographics are affected by this

 

[ZeEa5KPul]

I don't disagree with you from the 35k ft view level, but you should be clear eyed in understanding the cost of said transition is born by average people. Most importantly, not disregard the immense economic cost of transition in terms of how it impacts everything else.

Just because building empty apartment complexes that will never be filled is 'fake growth' doesn't mean that the migrant workers mixing concrete don't have families to feed.

Whether you like it or not, more people are interested in their own livelihoods than they are for nation building at their expense, and there is a significant political cost Xi has to bear for engineering this necessary transition.

At the end of the day, people have to be useful. The guy mixing concrete for residential blocks had better find something else to do if he wants to keep his family fed. No economy - socialist, capitalist, communist, whatever - will prosper by engaging in useless activities because some people depend on it.

And what political cost is Xi paying, pray tell? Whining in Western propaganda outfits? I'd love to pay the "costs" he's paying: unchallenged political authority and the highest office in the land for as long as he wants it.

 

[FairAndUnbiased]

I don't disagree with you from the 35k ft view level, but you should be clear eyed in understanding the cost of said transition is born by average people. Most importantly, not disregard the immense economic cost of transition in terms of how it impacts everything else.

Just because building empty apartment complexes that will never be filled is 'fake growth' doesn't mean that the migrant workers mixing concrete don't have families to feed.

Whether you like it or not, more people are interested in their own livelihoods than they are for nation building at their expense, and there is a significant political cost Xi has to bear for engineering this necessary transition.

why do the migrant workers mixing cement need to keep mixing them for residential properties? cement is used nowhere else?

this is the same argument that pro Trump economists use when justifying subsidizing zombie GM and Ford plants - that the autoworkers have nothing else to do. But they can't operate machine tools elsewhere? They can't drive a forklift somewhere else? They can't move with the plant? What it actually means is that they don't want to give up their cushy seniority and benefits.

 

[zgx09t]

China's ages old dream of modernity must pass through three different but interlocking processes of industrialization, urbanization, and financialization. All three would have uneven progress compared to each other, thus effecting each other's functions and bottlenecks, but for sure all three processes would not go smooth and easy, as evidenced by the horrible pollution and environmental degradation earlier in the opening up, property market excesses, and financial horror stories that would make one just shake one's head in disbelief. The process is always messy, not just China alone, as history would attest to it. As you could see and notice, China is moving up in industrialization process by getting into more high tech and advanced manufacturing, likewise for property market reforms, and opening up her financial sector to overseas investment to stimulate and emulate best practices that fit in China context. So all that's happening currently is just part of growing up and growing rich. So take a deep breath and look forward to 2049 and let's celebrate the golden week.

 

[Jiang ZeminFanboy]

So it seems real estate is going back on the table. More and more policies are introduced to help the recovery in real estate. Sept is - 25%, compared to - 45% for ytd.

https://twitter.com/i/web/status/1576139649717633029

https://twitter.com/i/web/status/1576141148724203522

 

[Minm]

The real estate industry doesn't have to be destroyed. The idea that house prices always go up and that an apartment is the best possible investment needs to be destroyed. It started with Evergrande 2 years ago. By now, most people should have got the message that real estate is not risk free and prepayment for an unfinished property is risky. Maybe a little bit more pain to reinforce the message would be good, as long as it doesn't cause an actual crisis

But of course the developers can't be allowed to all go bankrupt. That would cause prices to jump as supply disappears.

 

[Overbom]

So it seems real estate is going back on the table. More and more policies are introduced to help the recovery in real estate. Sept is - 25%, compared to - 45% for ytd.

Is not back to the table. We just need to slow down real estate collapse. Too fast and it could create systemic risks for the Chinese economy. For example -45% YTD decline is absolutely dangerous. Even -25% is stretching things. IMO the "safe" level is annual -10/15% decrease of sales.

-45% and next thing you know you could have a collapse of local government property taxes. So better to try slow down the decline