Chinese Economics Thread


weig2000

Senior Member
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The doubters already here

Pettis had been popular among western media and analyst circle for a while after the financial crisis due to his consistent bearish view on Chinese economy. He was popular because he had been a professor of finance in one of the China's best universities (Peking University) for many years and is considered to "understand China." Therefore he was supposed to be more insightful and credible than your run-of-the-mill western analysts and lend to the credibilty of "China collapse" or "China hard-landing" crowd in desperate need of such things. For example, he insisted that China's GDP growth rate would drop to 3% or lower after the stimulus measures implemented after the financial crisis were withdrawn or faded away.

I had followed his blog for a number of years after the 2008 financial crisis, and even debated with him occasionally. Eventually I stopped following because I found his arguments were rather simplistic and him a sort of one-trick pony. His arguments boiled down to the so-called account identity, that is the relationship between investment, consumption, and net export in national economy. He thought Chinese economy had substantial imbalances and suffered from lack of consumption. The export growth was not sustainable and investment was debt driven. So China would have to significantly increase consumption, which was not easy due to a series of factors, including political barriers and demographic trend. Since mathematically the accounting identity has to hold, therefore it follows that China's economy invariably will slow down drastically or falter. Most of his blog posts were rehashing the same arguments again and again at least during the time.

I have to say his arguments made some sense, but his view about existing imbalance in Chinese economy was not something particularly unique or insightful. Most economists, policy makers and indeed Chinese leadership knew the problem and have been tackling the problem in various ways. Again, what made Pettis stand out was not so much because of his "insight" than his being inside China and teaching at an elite Chinese university for years.

I won't go into too much details, but my counterarguments, very simply, was that his view was too mechanical based on some accounting identity, and he ignored and didn't quite understand the underlying dynamics of the Chinese economy. It's not like that the accounting identity was a Newton's law and it does not describe the cause-and-effect relationship (Pettis has an undergraduate degree in physics). Furthermore, the nature of debt in China was quite different from that in a lot of western countries. While the demographic dividends (人口红利) in China have been diminishing, the dividends from the vastly improved human capital (人才红利) have kept increasing. The rapid and large-scale innovation in China over the last decade have proved my point. After all, China was only a middle-income country back then, and still is an upper-middle income country. There are plenty of opportunities and room for growth.

Double the GDP in fifteen years? It would be a failure of gigantic proportion if China could not delivery that. Double the GDP in 15 years is no small feat for any large economy. For China, it would be an average scenario, even at this stage of the growth.

In my decades of experiences of reading, observing and interacting with western media, analysts and indeed ordinary westerners, I've found majority of them ignorant and arrogant about China. These ignorance and arrogance can sometimes turn into overly panic and pessimism when they realize China has made huge strides beyond their wildest dream/nightmare. When these are mixed with some stream of subconsciousness (or consciousness) of wishing China to fail or at least slow down, these people can fall easy prey to very simplistic views. It's not hard to find these type of people around you, even in this forum or indeed in this thread.
 
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localizer

Colonel
Registered Member
Pettis had been popular among western media and analyst circle for a while after the financial crisis due to his consistent bearish view on Chinese economy. He was popular because he had been a professor of finance in one of the China's best universities (Peking University) for many years and is considered to "understand China." Therefore he was supposed to be more insightful and credible than your run-of-the-mill western analysts and lend to the credibilty of "China collapse" or "China hard-landing" crowd in desperate need such thing. For example, he insisted that China's GDP growth rate would drop to 3% or lower after the stimulus measures implemented after the financial crisis were withdrawn or faded away.

I had followed his blog for a number of years after the 2008 financial crisis, and even debated with him occasionally. Eventually I stopped following because I found his arguments were rather simplistic and him a sort of one-trick pony. His arguments boiled down to the so-called account identity, that is the relationship between investment, consumption, and net export in national economy. He thought Chinese economy had substantial imbalances and suffered from lack of consumption. The export growth was not sustainable and investment was debt driven. So China would have to significantly increase consumption, which was not easy due to a series of factors, including political barriers and demographic trend. Since mathematically the accounting identity has to hold, therefore it follows that China's economy invariably will slow down drastically or falter. Most of his blog posts were rehashing the same arguments again and again at least during the time.

I have to say his arguments made some sense, but his view about existing imbalance in Chinese economy was not something particularly unique or insightful. Most economists, policy makers and indeed Chinese leadership knew the problem and have been tackling the problem in various ways. Again, what made Pettis stand out was not so much because his "insight" than his being inside China and teaching at an elite Chinese university for years.

I won't go into too much details, but my counterarguments, very simply, was that his view was too mechanical based on some accounting identity, and he ignored and didn't quite understand the underlying dynamics of the Chinese economy. It's not like that the accounting identity was a Newton's law and it does not describe the cause-and-effect relationship (Pettis has an undergraduate degree in physics). Furthermore, the nature of debt in China was quite different from that in a lot of western countries. While the demographic dividends (人口红利) in China have been diminishing, the dividends from the vastly improved human capital (人才红利) have kept increasing. The rapid and large-scale innovation in China over the last decade have proved my point. After all, China was only a middle-income country back then, and still is an upper-middle income country. There are plenty of opportunities and room for growth.

Double the GDP in fifteen years? It would be a failure of gigantic proportion if China could not delivery that. Double the GDP in 15 years is no small feat for any large economy. For China, it would be an average scenario, even at this stage of the growth.

In my decades of experiences of reading, observing and interacting with western media, analysts and indeed ordinary westerners, I've found majority of them ignorant and arrogant about China. These ignorance and arrogance can sometimes turn into overly panic and pessimism when they realize China has made huge strides beyond their wildest dream/nightmare. When these are mixed with some stream of subconsciousness (or consciousness) of wishing China to fail or at least slow down, these people can fall easy prey to very simplistic views. It's not hard to find these type of people around you, even in this forum or indeed in this thread.


Despite having spent decades in the US, I still would say that I don't understand it fully.

Yet, Westerners pretend they're more expert than Chinese on China.
 

Crang

Senior Member
Registered Member
Despite having spent decades in the US, I still would say that I don't understand it fully.

Yet, Westerners pretend they're more expert than Chinese on China.
The reason why they think they are experts on China is because China is a Big Unknown Factor, and the brain hates dealing with big unknowns that could change your life. Especially since China feels Alien to them, a psychological threat. Therefore they simply reduce China into something digestible for their brains, resulting in simplistic ideas about China. This way they resolve the threat factor in their brains, but end up understanding things wrongly.

And of course, they usually resolve the threat factor by resolving that China is Nothing To Worry About. And that whatever happens in China, White People™ can take care of it.
 

localizer

Colonel
Registered Member
The reason why they think they are experts on China is because China is a Big Unknown Factor, and the brain hates dealing with big unknowns that could change your life. Especially since China feels Alien to them, a psychological threat. Therefore they simply reduce China into something digestible for their brains, resulting in simplistic ideas about China. This way they resolve the threat factor in their brains, but end up understanding things wrongly.

And of course, they usually resolve the threat factor by resolving that China is Nothing To Worry About. And that whatever happens in China, White People™ can take care of it.

The think they can just bomb every problem to oblivion. That's their solution to everything.

Always threatening colored folks.
 

lcompocida

Junior Member
Registered Member
Is anyone here familiar with the HSR network?

I noticed some cities have multiple HSR stations. How does that work? What if you need to change to another line?
Do you have to (example) leave Jinhua West station then take a cab to the Jinhua South station?

Why didn't they just build a mega station? Kind of feels like the centralisation would be more beneficial than the few kilometers of track saved

The biggest cities tend to have multiple railway megahubs, as one-single megahub is going to be inefficient for cities like Guangzhou, Chengdu, Shanghai. The reason for this is because generally, these cities are quite large, meaning that if you just have one railway station, say, in the center, if everyone from the periphery has to travel to the central station, to transfer to long-distance national routes, it just makes everything inefficient, in terms of convenience, connectivity, and time. Remember, one of the biggest selling points of HSR is convenience. If say, the PRD megacity only had one big megahub in South Guangzhou, what does that mean for passengers in Shenzhen? Or passengers who live in North Guangzhou. See, that's the problem with the biggest cities, they are often cover a larger expanse, and are polycentric, meaning there are multiple CBD's and central focal points rather than just one.

And its not like the government hasn't connected these multiple megahubs together, they have, which creates cross-transferability capacity and capability between megahub stations you are talking about anyway, which differentiate the rail networks of China versus say rail networks of England. For example, Hongqiao Station is a pass-through railway hub that connects to Shanghai South Station, Shanghai East, etc. Guangzhou North Station connects with Guangzhou South, which itself connects with hubs in Shenzhen, Foshan, etc. Whereas in London, Paddington, Waterloo, King's Cross/St. Pancras, Euston, and London Bridge stations are all disconnected from each other. In fact, the unique thing about the biggest railway hubs (Hongqiao, Guangzhou South, Chengdu East) is that they are always pass-through megahubs, not terminus stations, which enable direct connectivity and transferability via HSR rail between other metropolitan hubs, unlike in London, where transfers between hub stations must be done on indirect transfer routes via the Underground.

This is in contrast to small and medium cities, which are small enough that one megahub satisfies demand, as one megahub only needs to serve one single CBD/center focal point.
 
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solarz

Brigadier
Isn't that why Lu Xun wrote Ah Q? To warn us not to console ourselves in fake victories to make ourselves feel better, because other ppl are winning us? Now... I feel like Ah Q can be used for these Australians... and also Indians.

阿Q正传

That's because that was exactly where China was 100 years ago. Thankfully, the CPC changed all of that.
 

lcompocida

Junior Member
Registered Member
Pettis had been popular among western media and analyst circle for a while after the financial crisis due to his consistent bearish view on Chinese economy. He was popular because he had been a professor of finance in one of the China's best universities (Peking University) for many years and is considered to "understand China." Therefore he was supposed to be more insightful and credible than your run-of-the-mill western analysts and lend to the credibilty of "China collapse" or "China hard-landing" crowd in desperate need of such things. For example, he insisted that China's GDP growth rate would drop to 3% or lower after the stimulus measures implemented after the financial crisis were withdrawn or faded away.

I had followed his blog for a number of years after the 2008 financial crisis, and even debated with him occasionally. Eventually I stopped following because I found his arguments were rather simplistic and him a sort of one-trick pony. His arguments boiled down to the so-called account identity, that is the relationship between investment, consumption, and net export in national economy. He thought Chinese economy had substantial imbalances and suffered from lack of consumption. The export growth was not sustainable and investment was debt driven. So China would have to significantly increase consumption, which was not easy due to a series of factors, including political barriers and demographic trend. Since mathematically the accounting identity has to hold, therefore it follows that China's economy invariably will slow down drastically or falter. Most of his blog posts were rehashing the same arguments again and again at least during the time.

I have to say his arguments made some sense, but his view about existing imbalance in Chinese economy was not something particularly unique or insightful. Most economists, policy makers and indeed Chinese leadership knew the problem and have been tackling the problem in various ways. Again, what made Pettis stand out was not so much because of his "insight" than his being inside China and teaching at an elite Chinese university for years.

I won't go into too much details, but my counterarguments, very simply, was that his view was too mechanical based on some accounting identity, and he ignored and didn't quite understand the underlying dynamics of the Chinese economy. It's not like that the accounting identity was a Newton's law and it does not describe the cause-and-effect relationship (Pettis has an undergraduate degree in physics). Furthermore, the nature of debt in China was quite different from that in a lot of western countries. While the demographic dividends (人口红利) in China have been diminishing, the dividends from the vastly improved human capital (人才红利) have kept increasing. The rapid and large-scale innovation in China over the last decade have proved my point. After all, China was only a middle-income country back then, and still is an upper-middle income country. There are plenty of opportunities and room for growth.

Double the GDP in fifteen years? It would be a failure of gigantic proportion if China could not delivery that. Double the GDP in 15 years is no small feat for any large economy. For China, it would be an average scenario, even at this stage of the growth.

In my decades of experiences of reading, observing and interacting with western media, analysts and indeed ordinary westerners, I've found majority of them ignorant and arrogant about China. These ignorance and arrogance can sometimes turn into overly panic and pessimism when they realize China has made huge strides beyond their wildest dream/nightmare. When these are mixed with some stream of subconsciousness (or consciousness) of wishing China to fail or at least slow down, these people can fall easy prey to very simplistic views. It's not hard to find these type of people around you, even in this forum or indeed in this thread.
Now as for his claim that China cannot double nominal GDP by 2035 in 2020 terms- important thing to consider is the average annual rate of growth. Now, at least for the next 5 years, 2021-25 period, IMF forecasts China to grow an average of 6.1% per year, while many targets floated by top Chinese economists are in the 5.5-6% per year on average in this period. Considering the IMF had underestimated China's GDP growth in their previous several forecasts almost consistently, I would not be surprised if the average is closer to 6.3%-6.4% per year between 2021-25. Now, for 2026-30 period, my expectation would be for growth to come at an average of 5.2%-5.3% growth per annum between these 5 years, as China's growth gradually tapers off, and grows an average of 4.7%-4.8% per year between 2031-35. Now, this means that China very likely, perhaps almost certainly, can double its GDP by 2035. These growth rates are generally in-line with the current pre-coronavirus trend: that of slowly tapering-off growth. In fact, my current prediction is China being able to double nominal GDP, in RMB terms, to be 2032-33, based on these trends, and its 2035 GDP being 120% larger than its 2020 GDP; on average, this amounts to a 5.4% growth per year, for the next 15 years between 2021-35.
Now, it could be more pessimistic than this, but it definitely could be more optimistic than this personal forecast of mines. Xi's prediction of doubling by 2035 requires China to grow slightly more than 4.7% per year for the next 15 years- not extremely challenging for China at all, and in fact, would be a disappointment compared to the currently-forecasted trends among many top economists, so Xi's forecast is actually sort of a "worst-case" pessimistic bottom-line forecast. Now, China's growth for the next 15 years could be as optimistic as being 130% bigger than its 2020 GDP, i.e. an average growth rate as high 5.7% growth per year between 2021-35. I personally think it's going to be closer to 5.3%-5.4% growth per year for the 2021-35 15-year period, but we'll see.
 

weig2000

Senior Member
Now as for his claim that China cannot double nominal GDP by 2035 in 2020 terms- important thing to consider is the average annual rate of growth. Now, at least for the next 5 years, 2021-25 period, IMF forecasts China to grow an average of 6.1% per year, while many targets floated by top Chinese economists are in the 5.5-6% per year on average in this period. Considering the IMF had underestimated China's GDP growth in their previous several forecasts almost consistently, I would not be surprised if the average is closer to 6.3%-6.4% per year between 2021-25. Now, for 2026-30 period, my expectation would be for growth to come at an average of 5.2%-5.3% growth per annum between these 5 years, as China's growth gradually tapers off, and grows an average of 4.7%-4.8% per year between 2031-35. Now, this means that China very likely, perhaps almost certainly, can double its GDP by 2035. These growth rates are generally in-line with the current pre-coronavirus trend: that of slowly tapering-off growth. In fact, my current prediction is China being able to double nominal GDP, in RMB terms, to be 2032-33, based on these trends, and its 2035 GDP being 120% larger than its 2020 GDP; on average, this amounts to a 5.4% growth per year, for the next 15 years between 2021-35.
Now, it could be more pessimistic than this, but it definitely could be more optimistic than this personal forecast of mines. Xi's prediction of doubling by 2035 requires China to grow slightly more than 4.7% per year for the next 15 years- not extremely challenging for China at all, and in fact, would be a disappointment compared to the currently-forecasted trends among many top economists, so Xi's forecast is actually sort of a "worst-case" pessimistic bottom-line forecast. Now, China's growth for the next 15 years could be as optimistic as being 130% bigger than its 2020 GDP, i.e. an average growth rate as high 5.7% growth per year between 2021-35. I personally think it's going to be closer to 5.3%-5.4% growth per year for the 2021-35 15-year period, but we'll see.

Another way to look at it, doubling GDP means that roughly reaching close to the level of GDP per capita today in southern Europe countries, such as Portugal, which had a GDP per capita of 23,407 USD in 2018, in 15 years.
 

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