Chinese Economics Thread


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Well, China significantly increased the college enrollments in the late '90s precisely to counter the youth unemployment issue amid economic downtown after the Asian financial crisis. The idea was to postpone the youth from joining the job market. See the following college enrollment statistics:

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From 1977, the first year Chinese colleges reopened to enroll students regularly after Culture Revolution, to 1996, the total college enrollments increased less than 3.6x. From 1997 to 2016, the increase in enrollments were 7x. The increase in enrollment rate was even more staggering: from 5% to 75%.

China is not going back to double digit growth rate, not even to the "bottom line" 8% growth rate that the then Chinese premier Zhu Rongji avowed to guarantee in late '90s. China's manufacturing industry is as strong as ever, but it is moving up the ladder and will not employ a lot of people marginally relative to the working age population. The other main growth drivers, real estate and infrastructure building, have diminishing returns, to put it mildly. You should not expect them to employ as many people. Therefore, the youth unemployment issue will persist.

Until China changes its growth model significantly, that is. That's not going to be easy, but it's another subject.

Employment in mature economies is driven by services. Small and medium businesses employed 70 to 80% of youths before the pandemic crushed that sector of the economy. Talking about everything from tech. start ups to restaurants and hospitality. So it’s no wonder youth unemployment is so high.

You can’t employ everyone in manufacturing because it’s largely automated and more so every day. It’s also highly subject to the global economy. Since global demand is declining, and China already has excess capacity relative to local demand, you can’t expect the industry to create more jobs.

The answer has to be to free more money from sectors like property to improve domestic consumption, particularly services consumption. The government also needs to support small and medium businesses in services sectors more because they’re the key to youth employment.

Too much of domestic wealth is tied up in the property sector where it is doing nothing but rent collection.


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Shandong Gold Mining, one of China’s biggest producers of the precious metal, said its controlling shareholder has discovered the country’s largest gold deposit.

A unit of Shandong Gold Group recently found a deposit containing 580 tons of gold in the northwestern region of Shandong province, Shanghai-based Shandong Gold Mining announced late yesterday.

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That's way too low, and going off Q1 at 4.5% something catastrophic would have to happen for China to not reach 6% growth this year.
If China is on track to achieve 6% or more growth, that will give the government more room for structural reform. If growth is strong, I expect further deflation of the property market, which is going to reduce growth again. So we'll end up at around 5-5.5%. The goal isn't to grow as much as possible this year but to build a sustainable growth model for the next decade.

So if growth is "too high" construction projects can be delayed to next year to rebalance the economy.

That's what they did in early 2021. Growth was so strong that the regulation of the tech and education sector became possible and then growth reduced significantly


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highlights China’s ascent to the top, as it now makes up more than half of the world’s steel production.


Global steel production in 2022 reached 1,878 million tonnes, barely surpassing the pre-pandemic production of 1,875 million tonnes in 2019. China, experienced a modest 2% decline, which due to the country’s large production amounted to a decline of 19.8 million tonnes, more than many other nations produce in a year.


China’s Meteoric Rise in Steel Production​

Although China dominates the world’s steel production with more than a 54% share today, this hasn’t always been the case.

In 1967, the World Steel Association’s first recorded year of
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figures, China only produced an estimated 14 million tonnes, making up barely 3% of global output. At that time, the U.S. and the USSR were competing as the world’s top steel producers at 115 and 102 million tonnes respectively, followed by Japan at 62 million tonnes.

Almost three decades later in 1996, China had successively overtaken Russia, the U.S., and Japan to become the top steel-producing nation with 101 million tonnes of steel produced that year.

The early 2000s marked a period of rapid growth for China, with consistent double-digit percentage increases in steel production each year.

The Recent Decline in China’s Steel Production​

Since the early 2000s, China’s average annual growth in steel production has slowed to 3.4% over the last decade (2013-2022), a considerable decline compared to the previous decade’s (2003-2012) 15.2% average annual growth rate.

The past couple of years have seen China’s steel production decline, with 2021 and 2022 marking the first time the country’s production fell for two consecutive years in a row.


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Important reform for financial market!

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Beijing regulators are leaning into a seven-week rally in China's sovereign bond market by widening access to onshore interest-rate swaps. Yet what sounds like a rather technical turn of the screw is a huge and timely reform win for institutional investors keen on trading Asia's biggest economy.

“Timely,” because it coincides with Group of Seven (G7) members heading to Hiroshima, Japan to contain any number of financial troubles. They include runaway inflation, failing Western banks, the specter of a US default and desperate attempts to woo global south countries .

In China, though, the vibe is more about
opening a recovering financial system to global investors hungry for growth and higher-yielding assets as the post-Covid-19 trade gains momentum.

Here, the new“Swap Connect” program between China and Hong Kong is wisely timed. It opens the way for overseas funds to access derivatives vital to hedging bets in China's bond market. The dearth of hedging tools has long turned off the biggest of the big money.

The swap scheme will enable punters to deal in key money-market rates tied closely to People's Bank of China (PBoC) policies. This will likely deepen institutional investors' involvement in China markets, building on the existing Bond Connect plan. The move dovetails with a powerful bond rally driven by expectations that the central bank will add more liquidity this year.

For Xi Jinping, Swap Connect helps fulfill a pledge to open mainland capital markets to international funds. It turns the page, to some extent, from the regulatory crackdowns of 2020 and 2021. It also reminds top investment banks that geopolitical turbulence between Beijing and Washington isn't getting in the way of market reforms.

The program “will be a huge leap forward in developing the domestic derivatives and bond markets,” says Rose Zhu, chief China country officer at Deutsche Bank, which Beijing named as a key market maker for Swap Connect.

“Leveraging our cross-border strengths, we look forward to playing an active role in helping international investors get a head start via Swap Connect” and “helping accelerate the opening up of China's financial markets and RMB internationalization.”

Monish Tahilramani, head of Asia Pacific markets at HSBC, says the hedging tool marks“an important complement to Bond Connect and a positive sign that onshore markets continue to open up.”

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highlights China’s ascent to the top, as it now makes up more than half of the world’s steel production.

View attachment 112986
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wrote more about this





quite profound stuff. he used steel production as the basis argument here for industrialization.

You need steel to support on other industries that China has.

And the key is to silently incorporate surrounding Asian continent to China's industrial chain. That was agreed to more or less with central asian countries in Xian this week


Another China is doomed article from Bloomberg. This time is about Hegang and local debt. Hegang's problem is the depleted coal mines which they haven't found a new source of development except graphite but only at 1/6 of what coal brings for them.

One thing stands out is that many youngsters from other top cities move to Hegang and buy a few apartments with as little as 40,000 yuan. Not sure if it would be a trend for those online influencers that can live anywhere would start to move to lower tier cities in order to save cost of living.
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One potential draw for Hegang is cheap property prices, particularly among the “lie-flat” generation of young people disillusioned by the high stress and living costs in China’s mega-cities. Hegang boasts the lowest home prices among China’s cities, a side-effect of its shrinking population coupled with excessive supply.

Diya, a 33-year-old singer and music teacher who asked to be identified by his stage name, moved to Hegang two years ago from Shanghai — a place, he said, where “even if I try my best and work 24 hours a day, I won’t be able to make enough money to become rich or own a home.” He can now afford to own three properties in the city, including his current home, a 50-square-meter third-floor walk-up apartment for 40,000 yuan — about 1% of the cost of a similarly sized place in Shanghai.

“All of my colleagues, friends and relatives laughed at me when they heard I was moving to Hegang, because that’s considered going downward to a lower place,” he said. “But Hegang is a place where you don’t need a lot of money or ambition to live well. It’s like a shelter to me.”