Chinese Economics Thread

ahojunk · Jul 8, 2016

There is a decrease in carbon dioxide emission and reduction in coal usage.
Looks like China is transitioning from manufacturing to services.
There is 20.9% growth in renewable energy - excellent!

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2016-07-08 06:17 | Xinhua |Editor: Gu Liping

China's energy consumption last year grew at its slowest pace since 1998 and its carbon dioxide emissions also posted a first negative growth in 17 years, according to an industry report released on Thursday.

Chinese energy consumption only grew 1.5 percent in 2015 year on year, the lowest growth in 17 years, while remaining the world's largest growth market for the 15th consecutive year, showed BP Statistical Review of World Energy, the global energy giant's annual report.

The world's largest energy consumer, producer and net importer saw its carbon dioxide emissions falling by 0.1 percent in 2015 year on year, with coal consumption dropping to 64 percent of primary energy consumption. China surpassed Germany and the United States to become the world's largest solar energy producer.

Meanwhile, China's coal output fell 2 percent year on year, while natural gas and oil output rose by 4.8 percent and 1.5 percent year on year.

Renewable energy has been growing fast in China. It grew 20.9 percent year on year in 2015, amounting to about 17 percent of the global total. Solar energy grew fastest, followed by nuclear energy and wind power, the report showed.

AndrewS · Jul 8, 2016

My Dutch radio station reported on an investigation in the success of take overs by Chinese and Western companies by three universities, two in the Netherlands and one in England. It concerns some 15 000 take overs in the period 2000 - 2008. They say that Chinese companies are more careful in selecting take over candidates, pay a lower premium over the stock exchange value and are more effective in governing the companies.
I remember that when Chinese companies started buying foreign companies around 2000 the expectation was that they would make many mistakes and be less successful because of their lack of experience.

That sounds plausible.

There is a diaspora of 60million+ Chinese who either studied or worked or grew up overseas in lots of different countries, both rich and poor.

That means there is a large, diverse and highly skilled talent pool which is familiar with local conditions in each country. I can think of lots of bi-lingual accountants, lawyers, directors and M&A bankers just in London alone.

So Chinese companies have the benefit of employing Chinese-speaking locals from the USA, UK, Singapore, Taiwan etc. In comparison, Japanese companies never had that advantage.

It means investment appraisals are made with the local market rates in mind, and are better managed as well.

Other factors may include the NRDC acting as a gatekeeper vetting takeover proposals. Plus Chinese companies are used to accommodating significant regional differences (language/religion/culture/climate/time zones) even in the internal Chinese market.

AndrewS · Jul 8, 2016

Bloomberg

China's $5 Trillion Opportunity

China’s labor productivity -- output per hour worked -- is at 15 percent to 30 percent of the average for countries in the Organization for Economic Cooperation and Development (aka the club of rich nations).
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The McKinsey China report, released last month, is the latest in a series of productivity studies that MGI, the consulting firm’s research arm, has been producing since the early 1990s. The first ones showed that German and Japanese manufacturers and service providers were on the whole far less productive than their U.S. counterparts. I remember these surprising results as an early sign that the Japanese economic miracle, already tarnished by a stock-market and real-estate crash, really was over. (The German economy didn’t exactly have a great 1990s either.)
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Yes, some Japanese companies were world beaters. Japanese firms were much more productive than U.S. ones in making cars, car parts, machine tools, consumer electronics and steel. But in industries where Japan hadn’t made an effort to become an export power, things were very different.
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Productivity gains have been the main driver of rising living standards in country after country. That was the case in Japan, too, but spectacular productivity growth in a few key industries in the 1970s and 1980s failed to spread to the rest of the economy and eventually slowed to a near halt even in those industries. In a
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, McKinsey found that “productivity growth has steadily eroded in almost every sector, including Japan’s signature advanced manufacturing industries.” Regulatory barriers that discourage competition, and struggling firms and divisions of large conglomerates that are “kept alive in the interest of stability” are dragging productivity down.
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Which brings us back to China. There are some companies here with productivity near rich-country levels, and many that lag dramatically. But the stars and the laggards aren’t concentrated in particular industries as in Japan. “In every sector there are leaders that achieve global competitiveness and yet there is also a long tail,” emailed Shanghai-based McKinsey senior partner and MGI director Jonathan Woetzel, who worked on both the China productivity report and the 2015 Japan one.
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Woetzel thinks this is a sign that China may find it easier to raise productivity than Japan did. All it will take is more companies emulating the industry leaders through digitization, globalization, lean production, automation -- and maybe even some things that don’t end in -ion.
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What could keep that from happening? Well, China’s banks have kept a lot of the productivity laggards in business by continuing to lend to them. And it’s China’s government that controls the biggest banks, as well as a lot of the low-productivity companies they lend to.
...
Chinese President Xi Jinping actually talked about reforming these state-owned enterprises this week. The
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kind of made it sound as if he’d been reading the McKinsey study:

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MGI China report

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MGI Japan report

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Qi_1528 · Jul 12, 2016

I just read an article Hendrik_2000 posted back in April about the Chinese housing market and why we haven't seen the bubble burst like we did in the U.S. in 2008. Here's a link for those who want to check it out:

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The question I have is, what is the government doing to address housing affordability? Further, what progress is being made to create more productive forms of investment which are relatively secure?

GreenestGDP · Jul 12, 2016

Qi_1528 said:
... ...

Just asking ... ...

Are you one of those majority americans who borrow to the tilt ( always exceeding Credit Limit -- push over by Interest payment alone, and using multiple other Credit Cards to pay for the monthly minimum payment -- just to survive for another month ) ??

Well, here in PRC, almost everybody pay full payment by cash.
People in PRC hate borrowing, like they hate rats.

N00813 · Jul 12, 2016

Frankly, I would think they might not lower prices of housing in Tier 1 cities e.g. Shanghai. If the government wants to diversify some industries towards Tier 2 cities, which I think they are going for:
High costs of living in Tier 1 cities combined with lower costs in Tier 2 cities incentivizes rural to-be-workers to go to Tier 2 cities;
Lower tax/regulatory regimes in Tier 2 cities incentivizes firms to go to those Tier 2 cities and provide jobs for the workers (already?) there.

The trick is to time it so that the workers and the businesses both arrive at the same time, so there is no long-term unemployment.

Qi_1528 · Jul 13, 2016

@GreenestGDP

I don't see how that's relevant. I'm well aware of the painfully high level of private debt in Western countries, and it worries me. I don't want to see China make the same type of mistakes we did. Most of China's private debt is held by corporations, but that can still be a big problem for a globally connected economy, when the world economy is lethargic.

I'm Australian by the way, and the only debt I have is student debt, which I had no choice in accumulating.

N00813 said:
Frankly, I would think they might not lower prices of housing in Tier 1 cities e.g. Shanghai. If the government wants to diversify some industries towards Tier 2 cities, which I think they are going for:
High costs of living in Tier 1 cities combined with lower costs in Tier 2 cities incentivizes rural to-be-workers to go to Tier 2 cities;
Lower tax/regulatory regimes in Tier 2 cities incentivizes firms to go to those Tier 2 cities and provide jobs for the workers (already?) there.

The trick is to time it so that the workers and the businesses both arrive at the same time, so there is no long-term unemployment.

I have a friend who lives in Jinan. I'm told the local government says it's a tier 2 city, but the locals claim it's really still a tier 3, at least so far as infrastructure is concerned. The housing prices there (including for rents) are getting too far out of the reach of average workers. There are ways people can cope, like getting several people to share one place, but it must be pretty tough for families with only one or two incomes. I can't see how a migrant from rural areas would be able to get by.

I imagine prices would be better in tier 3 and 4 cities, but wages will be lower too. My country has this exact problem with housing prices being out of reach, and investors dominating the market. In our case, it's because idiotic government policy encourages it, even though much more productive alternatives exist. Chinese investors don't have any (relatively) safe alternatives, and this needs to be addressed.

Hendrik_2000 · Jul 14, 2016

The great re balance of Chinese economy show tangible result.Less dependent on export and consumption account for larger percentage of growth The numbers look good . So the doom and gloom prophet eat your heart out!

Consumption accounts for 73.4 percent of China first-half GDP growth: stats bureau

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34 minutes ago

BEIJING (Reuters) - Final consumption accounted for 73.4 percent of China's first-half economic growth, the statistics bureau said on Friday.

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Reuters

Capital formation contributed 37 percent of growth, while net exports were a -10.4 percent drag on growth, the National Bureau of Statistics said.

The data show China's efforts to rebalance its economy towards consumption appear to be showing results. In 2015, consumption accounted for 66.4 percent of economic growth.

Final consumption accounted for 84.7 percent of growth in the first quarter, though first-quarter consumption data is often higher than full-year as trade and investment slow due to a long holiday and consumer spending increase.

Exports have been a drag on the economy for some time as shipments have declined on weak external demand.

While China's economy shows signs of stabilization, uncertainties in the global economy are increasing due to Britain's vote to leave the European Union, the statistics bureau said.

The stats bureau added that China's survey-based unemployment rate in 31 major cities is currently around 5.0 percent.

China's economy grew 6.7 percent in the second quarter from a year earlier, steady from the first quarter and slightly better than expected as the government stepped up efforts to stabilize growth in the world's second-largest economy.

(Reporting by Kevin Yao and Winni Zhou; Writing by Elias Glenn; Editing by Kim Coghill)

Blackstone · Jul 15, 2016

Hendrik_2000 said:
The great re balance of Chinese economy show tangible result.Less dependent on export and consumption account for larger percentage of growth The numbers look good . So the doom and gloom prophet eat your heart out!

Consumption accounts for 73.4 percent of China first-half GDP growth: stats bureau

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Problem is, debt is growing even faster than GDP and that's not what it takes to rebalance China's economy. When we see debt growth below healthy GDP growth, then we could say China is on a good path to economic rebalance and reform.

Hendrik_2000 · Jul 15, 2016

Blackstone said:
Problem is, debt is growing even faster than GDP and that's not what it takes to rebalance China's economy. When we see debt growth below healthy GDP growth, then we could say China is on a good path to economic rebalance and reform.

As long as the economy still grow the debt will sort it out by themselves.
China doesn't use the loan for consumption like South America. But built housing, road, infrastructure etc So it is investment for the future. Anyway the government can clean the loan if she wanted.

I have been following the Chinese economy since you weren't born maybe. And not once are the critic right. Just check the economist archives they sound like broken record

Don't listen to so called expert Their advice is not always right remember the Asian financial crisis. Malaysia and China defy the IMF recommendation. They both suffer less then the one following the IMF

Chinese Economics Thread

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