Trade War with China

Ultra said:

NO.


8 is serious debt trap and 23 are in danger of falling into it. That's 1 in 3 that China scammed into giving up their sovereignty.

You can argue they are irresponsible with their own finance or they are all illiterates who can't read their contract....
But the fact remains - now China is being perceived as PREDATORY. You only need to look at various leaders like Malaysia's PM, the greeks, even Pakistan now threatening to abandoning their contract. Now that's a lot of people in those nations now that think of China in very negative light. You can build as many Confucius Institutes as you want but it will not counter those negative perception. The net effect will be people stop trading with China.

As for your second paragraph, I think you misunderstood. I never call infrastructure investment short-sighted.
What I refer to as "short-sighted" is Chinese leadership's current predatory practice of structuring the loan so poor nations cannot service them without giving up their sovereignty. That's short sighted and create massive amount of negative perception and burning away all the good wills and along with it bridges (of friendship).

They should have structure the loans so these poor nation will be able to service them. Not falling into debt trap.

And even just 1 nation that falls into debt trap out of 72 is already too high. Let along 23.

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Like I said, you need to wake up to the realities of business. There is no such thing as predatory business. You either agree to the terms or you don't. Nobody forces anybody else. Just walk away if you don't like them. These are countries and world leaders entering into these deals, not children. They must take responsibility for their promises. China cannot act like their father and always save them from their own mistakes. When they entered into a deal, they were given a plan, how much money for what part of construction. All they had to do was follow it. If they are in debt, it is because they have mismanaged the plan, something that the vast majority of the 72 nations did not do. Every business offer is an opportunity, not a threat.

Of course there are complaints. There are people who complain to the bank that they can't handle their own debt that they accumulated. The US wants to lead the complaints because of its rivalry with China. Indebted nations complain because they will say anything to get out of the responsibility of paying for their bills. I've seen it all in real life, people screaming at bank managers that they can't make payments because they have kids and their car broke down. It's not the bank's fault. At the end of the day, if Chase made a mistake, they will do whatever is needed to make things right. But if you're standing in Chase yelling that you can't pay for the stuff that you bought, that's where they draw the line and tell you your threats to close your account don't scare anybody. Pay your bills and honor your own commitments. They were given to you as an opportunity that you took, not a liability forced onto you. Same for people, same for countries.

1 out of 72 is too much? Haha What imaginary world do you live in where everyone is responsible with money and develops properly? Because in the real world, out of 72 countries, a good portion would be in debt anyway regardless of loans or business or anything. They just can't handle themselves. 23 seems about right, even though there is no definition of "almost" in a debt trap. That's like saying I "almost" bought a car LOL

On a curious note, what exact policy or loan did you consider predatory, and how would you revise it to make it fair? I'm very curious what a person who thinks that "if you get into debt, it's your bank's fault" calls a fair deal.

Now that we're in the new year (2019) China's updated income tax law will start to take effect which should give a boost to the economy and help it weather the effects of the trade war:

China’s income tax reforms, which came into effect on 1 January, offers some relief for the country’s low and middle-income earners, but takes a tough stance on foreign workers and high-income groups.

China’s individual income tax reforms, which came into effect on 1 January, are expected to have wider implications abroad as a more stringent definition of «resident» is being used, and more scrutiny is placed on high-income groups, Bloomberg

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.
Bloomberg noted that personal wealth is estimated to have reached $24 trillion in 2018, with $1 trillion held abroad. As such, tax authorities are expected to keep a closer watch on asset and investment holdings.

The slate of tax reforms, which allow for deductions in areas such as housing, education, health care and aged care, aims to provide relief from the rising costs faced by low and middle-income earners, ostensibly to increase consumer spending in response to the ongoing U.S.-China trade war.

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As for the property tax, analysts have predicted it might come out in 2019 or 2020. Once that tax law is in place, it'll give the govt another source of funding so they don't need to keep pumping credit into the economy:

• UBS has said property tax law could be passed as soon as 2019

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Further down the road, China is preparing to introduce a property tax law that could go into effect as soon as 2020. Though the tax rate and the details remain unclear, the prospects of the tax has caused people with multiple apartments to worry and made properties a less desirable investment tool, EY’s Mi said.

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Anlsvrthng said:

That would cause immediate collapse of house prices, with a full stop of new housing construction , bank problems and the elimination of the best part of wealth of middle class.

They will try to control the situation, keep the status quo and stay in the middle income trap.
No one will introduce anything that create unpredictable outcome. There is not enough flexibility for that in the Chinese economy/political culture.

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You'd be surprised at the ability of countries that you don't understand, most notably China.

What is your definition of middle income trap? Because normal people define that as having income stagnate in the middle bracket due to lack of innovative capability. Someone has already demonstrated to you that Chinese income is rising nearly 10% yearly and Chinese innovation bites at the heels of formerly confident Western countries. For you to still think that China might be in a middle income trap indicates to me that you are once again confused on definition. You maybe think that any country that is middle income is automatically in a middle income trap. That is the only way you would think that China is included. But for one to truly be in a middle income trap, a country must have been stagnated with mid-level income for decades unable to raise it. For a country like China, that was very recently among the world's poorest in terms of income to suddenly rise to mid-level and continue rising, it is clearly not trapped, but passing through. Similarly, if a man has been 4 feet tall for 10 years, he's likely a midget, but is he's 4 feet tall and growing 2 inches a month, you have a growing boy. It is because you don't understand China and don't understand economics that you can get the two confused.

As for the property tax, analysts have predicted it might come out in 2019 or 2020. Once that tax law is in place, it'll give the govt another source of funding so they don't need to keep pumping credit into the economy:

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I was thinking of something else. This is what I meant:

Once that tax law is in place, it'll give the govt another source of revenue to promote economic development*

Chinese local governments presently have issues funding schools and transportation maintenance because their main income comes from licenses for new housing construction. If you add a property tax you will not only stabilize their income revenue stream during recessions but it also means their local government can push for stricter building codes and pay for proper infrastructure maintenance. These are severe problems in current China.

The Chinese government only needs to charge property tax in the urban areas. People living in the countryside do not have the same level of amenities so they are not likely to be taxed. The USA has property tax. I don't know why some people think the sky will fall in China if they introduce it there. As long as it is made reasonable to prevent rampant speculation I think it will provide positive benefits and stabilize the government's income stream.

The other alternative, a value added tax or sales tax, makes little sense in China. You want to increase the level of consumer purchases to make the Chinese economy less reliant on exports. So what you want to do is to increase income taxes, corporate taxes, property taxes, and inheritance taxes while making them progressive. i.e. you have smaller rates for startup companies with less employees, and increase the rate as company size is larger. You increase income taxes according to earned income with multiple tax brackets. You severely increase inheritance taxes.

According to the links posted by @zealotaiur485 the Chinese government is also moving towards taxing Chinese citizens on worldwide income not just Chinese income. This is likely a good idea. It is similar to the US tax regime. Given the globalization trends in the Chinese economy it means it will bring more income into China but it will require the cooperation of the other countries.

Equation said:

You'd be surprised at the ability of countries that you don't understand, most notably China.

What is your definition of middle income trap? Because normal people define that as having income stagnate in the middle bracket due to lack of innovative capability. Someone has already demonstrated to you that Chinese income is rising nearly 10% yearly and Chinese innovation bites at the heels of formerly confident Western countries. For you to still think that China might be in a middle income trap indicates to me that you are once again confused on definition. You maybe think that any country that is middle income is automatically in a middle income trap. That is the only way you would think that China is included. But for one to truly be in a middle income trap, a country must have been stagnated with mid-level income for decades unable to raise it. For a country like China, that was very recently among the world's poorest in terms of income to suddenly rise to mid-level and continue rising, it is clearly not trapped, but passing through. Similarly, if a man has been 4 feet tall for 10 years, he's likely a midget, but is he's 4 feet tall and growing 2 inches a month, you have a growing boy. It is because you don't understand China and don't understand economics that you can get the two confused.

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Equation said:

Because normal people define that as having income stagnate in the middle bracket

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This is observed fact.

Equation said:

due to lack of innovative capability.

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This is unproven theory, with lack of capability to make forward looking predictions.

And up to this point the main argument of everyone was that the SIZE of china make its special : P.

Equation said:

Chinese income is rising nearly 10%

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@Jura was so kind to help with the calculations, and by that the consumer spending +saving - debt on a YoY bases negative.
So, there is no income increase compared to GDP.

Make it clear : it simply means China organic growth rate is way lower than the one that we observed.

Equation said:

For a country like China, that was very recently among the world's poorest in terms of income to suddenly rise to mid-level and continue rising, it is clearly not trapped, but passing through.

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You simply put a close fitting line onto a few data point ,and call it as theory.

gelgoog said:

So what you want to do is to increase income taxes, corporate taxes, property taxes, and inheritance taxes while making them progressive. i.e. you have smaller rates for startup companies with less employees, and increase the rate as company size is larger. You increase income taxes according to earned income with multiple tax brackets. You severely increase inheritance taxes.

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How the property market with 20% vacancy rate can stay alive with any % level of property taxes?

even 1%/year of tax can cause the collapse of the housing market.

I saw a few country where they introduced property taxes, but that was only same negligible, not indexed tax, with no relations with the property value.

Anlsvrthng said:

...


@Jura was so kind to help with the calculations, and ...

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Anlsvrthng
don't try to troll me!

what's happened was you posted baloney
#9691 Anlsvrthng, Dec 20, 2018

Anlsvrthng said:

Consumer spending = income-saving+loans ______Agree?

Saving rate falling , consumer debt increasing YOY 4.somtehing% ._______Agree?
Inflation : 2.5% , GDP growth 6.5% __ __Agree?
Spending growth-loans growth+saving growth = income growth(decrease)____Agree?
9%-(debt growth 4.4%)+(saving growth negative saving growth -)= close to 0 income growth _____Agree? ->this is the critical part.

Have you ever had to solve process/machine/material/quality/business problems using statistical tools ever?

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which I called out to see your stream of irrationality (originally your numbers weren't even of the same unit etc.),

and to see your pathetic attempts at 'winning' that ended with you resorting to
#9749 Anlsvrthng, Dec 23, 2018
"(82.7122e12*0.444-74.3585e12*0.388)/1e8=8.8731*1e4=88 731"
while the correct result is 78731 meaning your one-trillion-Yuan trick pulled to 'support' the trash you posted

Anlsvrthng said:

IT can be calculated like this, but in this case the debt data is not compatible any more with the saving data.

You calculated with the 17GDP*17saving-16GDP*16saving, but the debt was calculated like (debt change from 16 to 17) * 17GDP.

To have compatible debt number it needs to be calculated like 17GDP*17debt-16GDP*16debt.
(82.7122e12*0.444-74.3585e12*0.388)/1e8=8.8731*1e4=88 731

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(it is more precise way to calculate , but more time consuming as well)

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of course
Anlsvrthng
give me a sign if you want to me to report you for trolling right away

I don't know where to put this but since the news anchor asked about whether this has anything to do with the trade tension, I'll just put it here.

What is happening now with 5g tech, as well slowly with smartphones is likely to extend in the near future to hardware (CPUs, memory) and to electric cars. Then airplanes, once c929 is ready. None of those are likely to be sold to US aligned countries. Security concern pretext will be dropped by then, and it will be a matter of pure sanctions and economy-protection.