Chinese Economics Thread


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Here is a good piece on dual circulation by CSIS. Keep in mind they are a DC think tank. But I think their work on analyzing dual circulation is pretty fair:

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My general feeling is that the supply side reforms to restructure the economy to produce for domestic consumption as opposed for export, will be easier than boosting domestic demand which requires higher income/productivity increases at an individual level. Its easy to retool factories to produce products for the domestic market, but if the workers in that factory cannot afford the products the factory produces then that's a problem.

If someone who has more knowledge in economics can chime in that would be great. @Gatekeeper ?
One can't really argue against this policy. A shift to be less dependent on foreign (especially US suppliers) is a good thing. It's basically risk management, and as we have seen US are not the champions of free market it held itself to be. It is no stranger or averse to using it's dominance to impose it's will on others to get it's way.

To emulate the German model is also a very sound strategy. The Germans, after all it's the powerhouse of Europe.

Supply side management similar to the UK's in the noughties sounds good too. After all, governments tend to have more control over the supply side than demand side. Especially when authorities have difficulties in tax collecting to rein in spending, or the abilities to encourage consumption of the "correct" goods. Most countries only tends to use demand management to boost consumption.

In China's case, I don't think they are at a level that needs encouraging consumers to spend more. In the West, this consumption lead to indebtinesss over time, which is why the West is in an awful state when shocks like covid 19 taking a shock to the economic system.


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China, Once Germany’s Partner in Growth, Turns Into a Rival
‘China is not a developing country, not at all. It’s an established, top-notch manufacturing country’

An informal partnership that kept Germany’s economy tethered to China’s for decades is unraveling, threatening Berlin’s—and Europe’s—post-pandemic recovery
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The relationship that saw Germany provide China with the machines to power its economy helped the German economy recover rapidly after the financial crisis. But German business leaders say
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as China turns from partner to rival.
Germany should see its
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shrink by between 5.8% and 7.1% this year according to German public- and private-sector economists—better than most other Western economies but much worse than China’s expected 2.5% growth.

While Germany’s exporters are benefiting from a
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, they aren’t getting the lift from China that they did a decade ago. In July, German exports were up from June but still 11% lower from a year earlier. China’s exports have exceeded last year’s levels for two months.

This divergence, economists and German business leaders say, is partly the result of Beijing’s strategy to encourage manufacturers to produce more sophisticated machinery that is more competitive with high-end German capital goods that were previously unmatched.

For many German exporters, this doesn’t just mean that selling in China is becoming more difficult. It also means Chinese companies are popping up more as rivals elsewhere. One firm that is feeling the pain is Herrenknecht AG.

For 15 years after the turn of the century, the maker of high-end tunnel borers—multistory factories that lay wires and concrete as they dig into the earth—became a mainstay of infrastructure projects across Asia, snaking beneath metropolises from Beijing to Shanghai.

The family-owned company’s revenue rose almost sevenfold between 2000 and 2015, to around €1.3 billion—or the equivalent of about $1.5 billion—with up to a fifth made in China, creating thousands of jobs at its manufacturing facilities in southwest Germany.

Over the past four years, though, Herrenknecht’s annual sales have fallen by about 5%. China’s large construction firms have developed their own borers and don’t need to buy its machines, the company says. A major rival in the large-machine market, Ohio-based Robbins Co., recently merged with China’s Northern Heavy Industries Group.

“Chinese companies are ever more competitive in international markets, offering abnormally low prices,” said Achim Kuehn, a Herrenknecht spokesman. “It’s surprising for Europe how quickly they have come.”

This year could mark a tipping point in Germany’s relationship with China, its largest trading partner and a longtime focal point of its global diplomacy.

For almost two decades, China needed German industrial robots, factory equipment and vehicles to become the world’s foremost consumer goods manufacturer. German companies took double-digit sales growth to China for granted. For a few years early in the century, this helped Germany become the world’s largest exporter of goods, ahead of both China and the U.S. It also allowed Germany to hold on to its manufacturing jobs even as swaths of industry in the U.S. and elsewhere migrated to China.

Now, Chinese companies are supplying wind turbines in France, buses in Norway, power grids in Poland and advanced industrial machinery across the world. In Sweden’s capital, a Chinese group recently secured a contract to dig three tunnels for the Stockholm metro.

In key segments of advanced manufacturing, including infrastructure equipment, China has closed the gap with German firms, said Karl Haeusgen, chairman of HAWE Hydraulik SE, which says it has seen more competition from China for its hydraulic valves and pumps used in wind turbines and machines.

“China is not a developing country, not at all. It’s an established, top-notch manufacturing country,” Mr. Haeusgen said.

Because the government has managed to control the coronavirus’s spread and due to its policies to support the economy, Chinese exporters are now grabbing a larger share of global exports while other countries remain hamstrung by the pandemic.

“It’s only a matter of time until Chinese firms are number one,” said Ulrich Ackermann, managing director for foreign trade at the VDMA Mechanical Engineering Industry Association.


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Germany’s share of world trade in mechanical engineering goods—a sector that employs about 1.3 million Germans—shrank to 16.1% from 19.2% in the decade through 2018, while China’s share rose to 13.5% from 8.5% over the period, according to VDMA data.

China has since continued to expand its share of global markets most relevant to German engineering firms, such as infrastructure, according to a study published last month by Baker McKenzie, a law firm.

In December, a Chinese engineering group, CRRC Tangshan Co., won a €50 million contract to build 18 trains for Metro do Porto, the light-rail network in Portugal’s second-largest city. It was the first train-building contract for a Chinese company in the European Union, beating out
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AG of Germany, among others. Officials thought the trains seemed sturdy and looked almost Italian by design, according to a person familiar with the decision.

Jorge Morgado, a spokesman for Metro do Porto said the Chinese bid won based on factors including price, technical quality and design, and came in at €6.5 million less than Metro do Porto’s initial estimate to buy the trains.

Stefan Brandl, chief executive of ebm-papst Group, which builds electric motors and fans used in cars and household devices, said the new reality dawned on him three years ago, when he noticed an increase in the quality of competing products from China.

China remains the company’s second most important market after Germany, but the company’s Chinese sales had stagnated for months even before the pandemic kicked in, after previously growing regularly at double-digit levels, he said.

At large trade fairs that are starting to reopen around Germany, Chinese companies had until recently shown up with small, old-fashioned stands, said Tim Loeschner, a German who is general manager of NGC Europe, the local unit of
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Co. Now, he says, “you can’t tell the difference between many Chinese and German manufacturers.”

Chinese exhibitors at the Hannover industry trade fair, one of the world’s largest trade shows for investment goods, made up almost a fifth of the total last year compared with 13.6% in 2015, according to the organizers.

In 2019, German exports to China rose at their weakest pace since 2015, according to government figures. Even as the Chinese economy now rebounds from its coronavirus trough, German firms aren’t benefiting as much as they did after the 2008 financial crisis, said ebm-papst’s Mr. Brandl. He expects his company’s Chinese sales to decline by 3% to 4% this year and only return to their precrisis level next year.

Germany’s midsized engineering companies, often family-owned and bank-financed, are facing off against giant state-funded Chinese companies that benefit from vast economies of scale and produce everything in-house, said Sebastian Bauer, managing director of Bauer Maschinen GmbH, an industrial equipment manufacturer based in Bavaria.

“Industrial machines are not a luxury good. Customers are interested in both quality and price,” said Mr. Bauer.

Even Germany’s storied auto industry is under siege. China’s
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Ltd., known as CATL, is now the world’s largest producer of batteries for electric vehicles. CATL is building a battery factory in Germany that will be about three times the size of
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Inc.’s Gigafactory, to supply European car makers.

Meanwhile Germany’s Bosch GmbH, the world’s largest automotive supplier, has said it wouldn’t build batteries for electric cars, even though its business in combustion-engine components is fading. Instead, it said it was cooperating with CATL to build batteries.

Analysts estimate that batteries account for about 40% of the cost of an electric car. The German government estimated in a report last year that nearly half the country’s 870,000 auto jobs could vanish with the switch to electric vehicles.

Last year, Bogestra AG, which operates in the cities of Bochum and Gelsenkirchen in the Ruhr Valley—Germany’s rust belt—became the first public transit company to order electric buses from China. The 20 buses from BYD Auto Co. will join older buses from Mercedes-Benz and Czech manufacturer Solaris Bus & Coach SA. A Bogestra spokesman said the company’s decision to go with BYD was based on the sales price, the cost of operating the vehicles and quality.

Many German executives still see China as their largest market. Yet in private, they say they are running out of patience with bureaucratic obstacles, forced technology transfers, subsidies and assorted protectionist barriers long seen as the price for accessing the market. Some are calling for Berlin to mimic President Trump’s tough approach to Beijing.

“U.S. aggressiveness is useful because it means Germany can take positions that would have looked aggressive two years ago but now look reasonable,” said Jeromin Zettelmeyer, a former senior German economics ministry official who is now deputy director for strategy at the International Monetary Fund in Washington.

German officials have recently signaled a more assertive diplomatic stance toward China. They say the nation will switch its focus toward Asian democracies including Japan and South Korea, amid disputes with China over issues ranging from fair access to its market to human rights.

Norbert Röttgen, a political ally of Chancellor Angela Merkel who chairs Parliament’s foreign affairs committee, said China would only need Germany as long as Germany retained its technological edge.

“My fear is that this window is closing, China is progressing in achieving more and more technological leadership, and we are stagnating,” he said.


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Disagree, I think the party needs to step in to make sure private capitalists pay their workers fair wages. Inequality in China needs to be reduced. What's the use of a Communist party without at least some socialist measures?
All these cadre guys do is sit there in his own office and take bribes from the companies. Waste of human resources. Counterproductive.

I met these people before and they're all human waste.
All these cadre guys do is sit there in his own office and take bribes from the companies. Waste of human resources. Counterproductive.

I met these people before and they're all human waste.
If things go badly. But if things go badly, then everyone is terrible and every move is a blunder. When it is implemented properly, it prevents companies from being consumed by their greed and being seduced into unethical practices at the cost of national direction and benefit.