Chinese Economics Thread

taxiya

Brigadier
Registered Member
Incorrect. We have an example. Japan.

Japan has experienced 27 years of a long term declining trendline in GDP and monetary velocity. What eventually happens is that the economy suffocates slowly over time, rather than experiencing a quick shock that is recovered from in a few years.

Bad debts must be cleared. Japan won't clear the bad loans from the 80's and it is destroying their growth.

The USA is experiencing the same thing.

China will experience it as well.

Maths cannot be denied or bargained with.
Though unsustainable debt has a negative and even suffocating effect on economy, it's far from clear on how it plays out in case of China, it all depends on how China handles it.

Japans economy decline is not really because of debt if one looks from a higher ground. japan had a way higher GDP (size of economy) relative to its size of land and population. If we assume all human beings are equally smart in both technology and organizing and planning, then Japan has been over lucky to reach the height it reached, in other words it has reached where it doesn't belong to, now it is only returning to its right position in the world. I am not celebrating their decline but merely saying the limitation of human capability vs. Natural laws. The fact of their past achievement is a favorable environment created after WWII, but now is disappearing.

The USA is another story, overstretch of ambitions, primarily military over spending. But even without that, the right position of its economy position should be much lower than today considering it's population size. Its current position is the result of the favorite environment mentioned above.

The one thing that differentiate China from USA is China is not going to over stretch herself with military to expand influence.

Good examples of my thought is Great Britain (oversized in 19th and early 20th century), Qing China (right sized), China in most of 20th century (under sized) and all other one-time empires.

My premises is based on human-being's capacity over a long period (hundreds of years at least), regardless ideology which itself is a way of social organizing, a part of human capacity. So one can save the breath of bringing in some superior ideologies to the argument. (a point not aiming to you)
 
Last edited:

AndrewS

Brigadier
Registered Member
There are lots of problems but I think things in China will be alright.

A Chinese debt crisis would mostly be an internal affair that is well within the financial capacity of the government.

And the studies show that in the long-run, productivity growth ends up as higher wages for workers. And higher wages are what will make China a wealthy country.

So the key thing is to reduce the importance of inefficient SOEs in the economy, and let the more innovative and efficient private sector grow into new industries and displace those old SOEs so they just don't matter so much anymore.

And a big part of that is moving up the technology ladder, and we can see that R&D spending is at an exceptionally high level for what is still a developing country. Furthermore, the trend is still upwards towards a further increase to US/German levels by around 2025.

I'm not too worried about the population issue in China, as we've seen the same issue in Japan over the past 20 years.

However, the big difference is that there have been big advances in processing power and machine learning/vision/sensors - which makes all sorts of jobs now replaceable by cheap robots.

So what matters is having the technological expertise and resources to design/manufacture/utilise all these robots to drive economic productivity and growth.

Examples that we already see today include driverless cars/trucks already on the roads, or industrial robots replacing unskilled manufacturing labour, or the chatbots replacing call-centre workers, drones replacing deliverymen or the robot noodle chefs in restaurants.

All countries are going to be affected by these changes whether they like it or not. But China has a plan for this and a good chance of being at the global forefront of these new industries.
 

solarz

Brigadier
China's demographic problems are vastly exaggerated by the western media.

The one-child family planning policy came into mandatory effect in the 80's. It was relaxed in the 2000's and changed to two-children in 2015.

This means that the last generation of multiple children families were actually born in the late 70's and early 80's. The two-kids generation will enter the work force in late 2020's, well before the retirement age of the post-70's.
 

Janiz

Senior Member
This means that the last generation of multiple children families were actually born in the late 70's and early 80's. The two-kids generation will enter the work force in late 2020's, well before the retirement age of the post-70's.
The main question is whether Chinese middle class citizens will want to have more than one child together. Western Europe and fellow Asian countries (Japan, South Korea, Singapore, and what's more Taiwan which consists of basicly the same people - Chinese) show clearly that more money in the society doesn't equal to more children in the families. It's contrary to expectations in reality.
 

solarz

Brigadier
The main question is whether Chinese middle class citizens will want to have more than one child together. Western Europe and fellow Asian countries (Japan, South Korea, Singapore, and what's more Taiwan which consists of basicly the same people - Chinese) show clearly that more money in the society doesn't equal to more children in the families. It's contrary to expectations in reality.

Again, that has been vastly exaggerated by western media. Canada has had a 1.6 birth rate since at least the 70's, and we haven't seen any doomsday scenarios in the media.

China's middle class comprise 68% of its urban population, which in turn is 55% of the total population. 68% * 55% = 37%. They are pretty much the only class of Chinese who might be affected by the voluntary birth rate reduction phenomenon. Any reduction there will be amply offset by the increase in other segments of society. A relaxation of family planning policy means more than just upping the count of kids by one. It also means a more relaxed enforcement and affordable consequences, which in turn means families that want to have more kids can more easily do so.
 

AndrewS

Brigadier
Registered Member
From what I recall of the surveys, many parents would like to have a second child but are primarily put off by the high cost of housing, education, childcare, work hours etc.

So bringing down housing prices is probably one of the most effective ways of doing this, as it will feed into all the other factors just listed.

Remember that a 2bed 100m2 apartment in China should cost less than $50K to build, so the rent or mortgage payment would only be $200 per month. 3beds would be somewhat more expensive.

We can see in the UK and USA that whilst some cities have very high property prices, the vast majority of people live and work in areas where housing costs are way closer to the actual build cost.

So the solution?

Create more jobs along transportation routes where land and construction costs are much lower - mainly in the interior. This part is well underway.

Plus move local government funding away from land sales to a property tax system, so the government gets more revenue when people become homeowners rather than from higher land prices. But this reform is not going as well.
 

taxiya

Brigadier
Registered Member
Just a reminder to the doomsday advocates, China has had a very bad time of debt crisis (if not worse than today) in the late 1990s during Zhu Rongji's premiership, the infamous "triangle debts". China survived it, I don't think today's situation is anything close.

The key is that human economy will be there for ever so long the earth doesn't explode. The one who survives (therefore the winner) is not someone without debt, but rather the one who has the least debt problem (not necessarily the least debt either). In other words, the one sits at the bottom dies (first), the rest lives and so on.

Now look at who is at the debt bottom.

A side note in case someone brings up Greece, Greece as a part of EU is not at the bottom.
 
Last edited:

AndrewS

Brigadier
Registered Member
The problem with Greece is that it doesn't have control over its currency.

That doesn't apply to either China or Japan.

Plus both China and Japan are large net exporters and also have very high levels of assets that the government could sell.

Debt isn't necessarily a bad thing, as long as it generates a net positive result at the end of the day. But it's when you have excessive debt-funded investments like in the steel industry that it becomes a problem.
 

AndrewS

Brigadier
Registered Member
China Wants to Set Prices for the World's Commodities

China has put the world’s traditional financial centers on notice that it wants to develop its raw material markets as hubs for setting prices, seeking to marry the country’s commercial heft with a much greater say in determining how much commodities cost.

“We’re facing a chance of a lifetime to become a global pricing center for commodities,” Fang Xinghai, vice chairman of the China Securities Regulatory Commission, said at the Shanghai Futures Exchange’s annual conference in the city on Wednesday. “On the way to realize this goal, we’ll see very intense competition. We have the advantage of trading size and economic growth, but our legislation is still not sound and we lack enough talent.”

Read more
Please, Log in or Register to view URLs content!
 

Brumby

Major
Japans economy decline is not really because of debt if one looks from a higher ground. japan had a way higher GDP (size of economy) relative to its size of land and population.
Japan's economic malaise in the last 20 or so years are extensively commented and studied over that period. Your version is rather unique. Do you have any published economic analysis that supports it?

China's demographic problems are vastly exaggerated by the western media.

The one-child family planning policy came into mandatory effect in the 80's. It was relaxed in the 2000's and changed to two-children in 2015.

This means that the last generation of multiple children families were actually born in the late 70's and early 80's. The two-kids generation will enter the work force in late 2020's, well before the retirement age of the post-70's.
The issue is really about an aging population, the trend and how it would possibly impact the future economy. In the 1980s, the proportion of the working-age population (fifteen to sixty-four years) was more than 73 per cent of the overall population. Currently at about 68 per cent, the working-age population is expected to decline to about 65 per cent in 2020, and 60 per cent in 2035. It is expected that by 2015 the absolute size of the labour force will begin to shrink as more people leave than enter the workforce (World Bank, China 2030, p. 8.).

The significance of these numbers become apparent when one compares the proportion of working-age people with formal retirees. When China embarked on reforms in 1979, there were about seven working-age persons to every retirement-age one. Today, the ratio is about 5.5 to 1. Current projections suggest that by 2035 there will be barely more than two working persons for every retiree. In other words, the old-age dependency ratio will be more than double over the next two decades ( World Bank, China 2030).

The age profile of the working population also matters as workers are at their most productive and innovative from their late twenties to their mid-forties. This has been the basis for China’s ‘demographic dividend’, the massive productivity generated by the combination of declining fertility levels and a mass of young workers entering the workforce with relatively light familial responsibilities or burdens. In fact, one study estimates that the effects of a favourable working-age population alone accounted for between 15-25 per cent of per capita GDP growth in China from 1980-2010, and that this advantage is all but exhausted (Feng Wang, ‘Racing Towards the Precipice’, China Economic Quarterly, June 2012).

Such trends cannot be arrested or reversed easily even with the recent change to the one child policy. China’s aging population is largely the result of an increase in average lifespan, which has increased from under sixty-five years in 1980 to the current seventy-five years. Fertility rates have also declined, from 2.63 children per woman in 1980 to about 1.5 in 2011. Wealthier cities such as Shanghai which has a reported fertility rate of only 0.6, the lowest of any major city in the world, provide evidence that emerging Chinese middle classes, like Western counterparts, are choosing lifestyle and career opportunities over larger families.

Just a reminder to the doomsday advocates, China has had a very bad time of debt crisis (if not worse than today) in the late 1990s during Zhu Rongji's premiership, the infamous "triangle debts". China survived it, I don't think today's situation is anything close.
Do you have any economic analysis that supports such a position?


The problem with Greece is that it doesn't have control over its currency.

That doesn't apply to either China or Japan.

Plus both China and Japan are large net exporters and also have very high levels of assets that the government could sell.
Do you have any empirical evidence to support your argument?
 
Top