Chinese Economics Thread


New Member
Registered Member
But they are racing against time for getting this right.
Why the intense urgency? They shouldn't drag this out but there is no bigger pile of debt they are racing to defuse before some big cascade of liabilities goes off. The crash has already happened and the worst risks already basically contained. They have time to be careful with the details.
So many ways - but all roads lead back to the central government taking on additional debt.
This is true but I don't see why it should take on that debt to fund social expenditures, or why you think that would be good for growth. The federal government has taken on collosal debt over the past 30 years to fund social security and Medicaid as progressive taxation has been effectively eliminated, and yet the economy has not grown nearly fast enough to pay even a small portion of that off.

You're talking about hundreds of billions of dollars a year in medical insurance, education expenditures, pensions etc. doing that for even a couple years would create an enormous amount of new debt without providing significant growth impetus. Prior to the pandemic these things were already being paid for with debt, just indirectly through land sales. That didn't result in a big boost to growth. And yes cg debt would have much lower interest, but why even do that when taxes can already pay for it while also achieving other important goals at the same time?

I'm not familiar with the ricardian equivalence principal but I have read Kalecki's selected essays, and I'm also not retarded. I do not believe that the effect of a given quantity of real taxation on the economy is time-invarient and I'm sorry if I implied as much.

The cake can and will continue growing but providing something resembling a comprehensive suite of modern social services to 1.4 billion people is really goddamn expensive and the richest 300 or so million of those people will have to accept a significantly higher overall tax burden for it to happen, even if everything else goes perfectly.


Junior Member
Registered Member
About the wage, I think what china will do is allow wage to be in level to consume domesticly but not going high enough for import goods.


Junior Member
Registered Member
@abenomics12345, if some of the gears in China's economic system have gotten stuck due to the housing market turmoil as has been postulated here (correct me if I am wrong), then the solution to get the gears moving again is for government entities to take additional debt and clear the blockage so to speak (i.e., a bailout) so we can start from a clean slate. If so, I have some questions about the implications of doing so as follows:

1) Housing accounts for a large chunk of household wealth, so its reasonable to assume a significant portion of unfinished homes were purchased for investment purposes. If a bailout were to occur, would this not also underwrite the actions of investors who have been driving up housing prices, many of whom were affluent?
2) Some of those homes purchased as investments may have been encouraged under prior government policy that lacked restraints on housing and only turned sour due to policy changes. While turning away from housing as an investment asset is desirable, alot of pain is being inflicted on those currently holding the bag. If their investments are propped up, would this not encourage future speculation in another asset that could bring about a similar scenario (aka moral hazard)? Conversely, if their investments are allowed to remain in free fall, would this not lead to long term reshaping of their spending/investing habits (for better or worse) not dissimilar from those who grew up during the great depression or GFC.
3) If we ignore the difficulties faced by falling investment assets of the affluent, does it not create a trickle down effect in terms of reducing capital that can be invested in businesses since those with capital may choose to invest in safer assets such as bank deposits? Conversely, if they are bailed out whats preventing a new speculative bubble from forming elsewhere with this extra capital?

Probably a gross oversimplificiation, but it seems to me like a damned if you do, damned if you don't situation.


Senior Member
Registered Member
Can anyone provide a detailed/comprehensive rationale for why China has a property price floor from a knowledgeable standpoint? I am quite curious about this.


Registered Member
This is true but I don't see why it should take on that debt to fund social expenditures, or why you think that would be good for growth. The federal government has taken on collosal debt over the past 30 years to fund social security and Medicaid as progressive taxation has been effectively eliminated, and yet the economy has not grown nearly fast enough to pay even a small portion of that off.

Here is the estimate of the economic multiplier effect for different types of US government spending.

Overall +1.61
Healthcare +4.3
Military -9.8

Now, these figures aren't directly translatable to China.
But you can see that Chinese healthcare spending should have one of the highest economic multipliers, which makes sense if most of it goes into additional jobs and wages which are mostly spent straightaway.


My guestimate is that China could usefully spend 4% of today's GDP ($800 Bn) on additional productive healthcare spending, which would have long-term economic, health and productivity benefits. Call it an upgrade of China's human capital stock in economic terms. I previously outlined some ideas below.

And this would not be entirely funded by the government, as there should be a standard (but affordable) charge for every service, to reduce waste and increase accountability.


I think China could significantly increase healthcare spending on publicly funded General Practitioners for example.
At the moment, it's still very hospital-led, which is not ideal.

There's like 2 million doctors in China (17 per 10K population).

So if China adds 1 million general practitioners, roughly one-third will be GPs, which looks about right compared to any developed country (excluding the crappy US system of course)

Since GPs spend most of their time on preventative medicine or dealing with minor issues so they don't become major ones, such an upfront investment really pays off in the long-run.

It would mean overall rate of doctors in China would increase 25 per 10K population, which is not excessive compared to developed world countries.

And if each GP costs $100K per year, that is an extra $100Bn, which is 0.5% of GDP.
Plus you've got the upfront costs of building such a system and some years to train the staff, which is the real bottleneck.


Another thing is myopia (short-sightedness)

My guess is that at any time, you could easily have 100 million children in China who would benefit from overnight contact lenses or special glasses which reduce or eliminate myopia progression (which mostly happens in childhood when the eyes are still growing)

If this was adopted en-masse as a public programme, my guess is that this would cost say $100 each per year, which is a bargain compared to elsewhere. That is still only another $10 Bn.

But I think such a programme would be worth it, as it has long-term benefits which should outweigh the costs.


Looking at the dentist density in China - they could increase from 245K to 1.2 Mn dentists to reach European levels.

Call it another 1 Mn dentists. Maybe that's another $100K each per year?
So $100Bn (0.5% of GDP)

Again, there will be long-term benefits in terms of preventing serious (and expensive) dental issues arising in the future.

China's nursing density also looks pretty very low.
So they could aim to double the number of nurses, which means 5 million more.
At $50K each, that would work out as $250 Bn, or 1.25% of GDP.

The same applies to the physiotherapist density.
To reach European levels would have to increase from 0.140 Mn to 1.9 Mn
At $50K each, that would be $88 Bn, or 0.44% of GDP.


So you could reasonably embark on a programme to build more local polyclinics (combining a GP, Dentist, Opticians, Physios) within walking distance in every district.

And because Chinese cities are generally very densely populated, you can build many larger and more efficient polyclinics, which both compete and cooperate with each other.


So if you total all this up and maybe add some other programmes, that might hit 4% of today's GDP in terms of annual spending. But this doesn't include upfront investment costs and it will take time to train all the staff.

Plus before making such a big expansion, you really want the national health code identification system to be ready, so that all the different healthcare providers can actually communicate with each other.

And the key point is that all these items listed above will result in a healthier population which is also more productive. And that the government sets a reasonable "standard" price for services, but doesn't stop people from choosing to go private and pay more if they wish to, or from opting into a private health insurance plan.

In any case, the return on this sort of government spending should be a large net positive (even in terms of tax revenue alone) in the long term.