World Economics Thread
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bladerunner
Banned Idiot
As part of the stimulus package the government has encouraged lending. Olivia Chung of Newsweek has written an article on this and is printed on atimes., and the overall effect it is having on the banks books as the percentage of bad loans increase..
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Do you think the Govt could be laying the seeds of its own banking crisis sometime in the future?
Im rather curious, as for a long time now people have been predicting the imminent onset of a China banking collapse.
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Do you think the Govt could be laying the seeds of its own banking crisis sometime in the future?
Im rather curious, as for a long time now people have been predicting the imminent onset of a China banking collapse.
Rising China
Junior Member
:china::china::china:
If you read a little bit more carefully, you will see that China trade with the rest Asian countries and Middle Eastern countries throughout her history. She will be fine in the future if she trades only with Asia, Middle East, Africa, Central and South America, Oceana, Australia and Russia. So, do not make assumption that China has to have U.S. and Europe markets to survive.
Can you statistically prove that global demand for Chinese products are not high? Quality of a product depends on the buyers, not Chinese suppliers. Chinese suppliers only produce products of good or poor quality to fit the budget of the purchasers. Quality of products that Chinese suppliers sell to Dollarama stores are definitely not as durable as those sold to Banana Republic stores. So, do not assume that there is no demand for Chinese luxury goods. The milk, toothpaste, and toy scandals are the exceptional cases, and those involved were severely punished. These scandals, furthermore, don't wreck the global economy. The toxic financial products created by U.S. financial institutions cause havoc worldwide, and none of those involved were punished. Only in the U.S. where greedy and incompetent executives were not punished, but rewared with big bonuses for the mistakes they make. Definitely, Chinese will think VERY CAREFULLY before making any debt financing to U.S.
How can U.S. have wealth when it has to print monies and borrowing to finance its stimulus packages? How can you call that wealth? China only uses a tiny portion of her reserve to pay for the stimulus packages.
If you read a little bit more carefully, you will see that China trade with the rest Asian countries and Middle Eastern countries throughout her history. She will be fine in the future if she trades only with Asia, Middle East, Africa, Central and South America, Oceana, Australia and Russia. So, do not make assumption that China has to have U.S. and Europe markets to survive.
Can you statistically prove that global demand for Chinese products are not high? Quality of a product depends on the buyers, not Chinese suppliers. Chinese suppliers only produce products of good or poor quality to fit the budget of the purchasers. Quality of products that Chinese suppliers sell to Dollarama stores are definitely not as durable as those sold to Banana Republic stores. So, do not assume that there is no demand for Chinese luxury goods. The milk, toothpaste, and toy scandals are the exceptional cases, and those involved were severely punished. These scandals, furthermore, don't wreck the global economy. The toxic financial products created by U.S. financial institutions cause havoc worldwide, and none of those involved were punished. Only in the U.S. where greedy and incompetent executives were not punished, but rewared with big bonuses for the mistakes they make. Definitely, Chinese will think VERY CAREFULLY before making any debt financing to U.S.
How can U.S. have wealth when it has to print monies and borrowing to finance its stimulus packages? How can you call that wealth? China only uses a tiny portion of her reserve to pay for the stimulus packages.
bladerunner
Banned Idiot
There is no guarantee that what worked in the past will work in the present and we are now live in a more integrated world, with a lot more competitive countries wanting a share of the wealth/trade.
Your assertion, that you can manage by restricting your trade to the regions you mentioned, is the opposite of what the govt is indicating eg/ cars western market.. South and Central America, Africa, and the Pacific Islands, is not a given, for China. The Europeans and Americas still have a great deal of influence and preference in these regions,and don't forget, that despite Chinas inroads into Africa, it is still only third behind America and France, in terms of investments.
You place a great emphasis on cost but the price of goods isn't everything especially when one wants to go up the value chain, quality, reliability are equally importantand dont forget there's going to be lot more competition at the lower end with smaller returns.
Using cars as an example, at the moment the Chinese seem to treat the manufacturing of a car as just another product, and go about it in the same manner as making a bargain basement DVD player, where they think the price is the decider.( There is quite a good article on Chinese car industry in this weeks Businessweek where it points out areas where they need to improve on).
I suggest to you that is not always the case. A car is usually the second most expensive item a individual is likely to purchase, after his home, and with it they would like a little reliability and a high standard of manufacturing.
Wouldn't you you find it a little disconcerting that a Ten year old Toyota Corolla with 250,000ks on the clock and I could get another 200,000 ks more. which I can buy for $1500-2000 dollars, can be a better buy than a brand new Chinese made car for say $15000 dollars? .I know because in 1978 I bought a Toyota XT brand new and kept it for 15yrs, it had 540,000ks on the clock when the rust got to it.
Usually using lesser spec, parts as a cost saving , can be a false one, as the cost of repair to the owner can far outweigh the price of a better quality part from the start. A person who has a good experience with a car can be a repeat purchaser, a disgruntled one, never again.
I can name dozens of basic household consumer items that I have purchased in the past where cheaper was probably not the better option. Take a common thing like a can opener, for years I've bought a Chinese can opener for $8-10 , only to have them cease to function within the year. The last time I purchased two a Chinese, and one of Dutch manufacture according the packaging and it had a 5yr guarantee. It cost me $25, and is still going strong neary 4yrs later, so which is the better buy in the long run.?Please dont think Im knocking Chinese made products , because Im not, and have often and still do, buy made in China
would you mind not underline everything but only the important part in the future?
I don't know if you came up with what you are saying or someone else did, but either way, you basically posted a lot of nothing. Sure, China is in a much better position than a lot of countries to survive the economic depression, but that's no time to boast.
The important things are what China must do to help itself in the future. And certainly the reckless lending they are doing right now is not a good thing, even though it's showing short term recovery in the economy. What I do like what they are doing is the rebates for the appliances and cars for rural buyers. Rather than borrowing money to America to buy its good, China is giving money to its own citizens to buy the goods. Which is a far better investment, since America has no ability to ever pay back the debt that it owes other than through a significantly devalued dollar. Giving money its own citizens to buy goods rather than save up will improve the living standards of its citizens, provide market for its domestic industries to replace the export markets. Which is a much better solution than just lowering taxes, which the frugal Chinese population will just save up rather than spend. So, this actually helps China to improve on the problem where domestic savings is too high.
China lives by the same rules of economics as every country. If certain Western models didn't work, that's because they are bad models, not because Western capitalism is different from Chinese capitalism. China is doing well because it's doing all the right things when it comes to capitalism. It has low taxes, less regulations, vast labour pool, high education, good transportation, competitive spirit, pro-business policy making. It's winning because it's better at capitalism than Western countries like US and UK, which are increasingly becoming facism or socialism (depending on which stand points you are looking from).
Rising China
Junior Member
:china::china::china:
If you look more carefully, you will see the two quotation marks at the beginning of second paragraph and the end of the last paragraph. There is your answer. It's not to boast about Chinese achievements over the years, but to point out the facts. Do not assume that China and Chinese people have to depend on the West for trade and investment to survive and grow. Do not assume that Chinese people cannot make good quality products and there is no demand for Chinese luxury goods. What the Chinese suppliers make is for the purpose of fitting the budget of the buyers. You can't expect a $10,000 car to last as long as a $70,000 Lexus. If the buyers are willing to pay a higher price, definitely they will get better quality made-in-China products. When comparing China-made products at today price with other country-made products in the past, please take into consideration time-value-and-money principle. Of course, Chinese governments have all the rights economic policies to support economic growth, but they are different from pure capitalism of the West. Have you ever heard of the phrase "market economy with Chinese characteristics"? Suppy and demand theory is universal for thousands of years so you cannot say that China follows Western capitalism principles. If you live in China and live outside China, but in other Asian countries where there are ethnic Chinese for a long time, you will understand better what I implies here by CHINESE ways of doing business.
If you look more carefully, you will see the two quotation marks at the beginning of second paragraph and the end of the last paragraph. There is your answer. It's not to boast about Chinese achievements over the years, but to point out the facts. Do not assume that China and Chinese people have to depend on the West for trade and investment to survive and grow. Do not assume that Chinese people cannot make good quality products and there is no demand for Chinese luxury goods. What the Chinese suppliers make is for the purpose of fitting the budget of the buyers. You can't expect a $10,000 car to last as long as a $70,000 Lexus. If the buyers are willing to pay a higher price, definitely they will get better quality made-in-China products. When comparing China-made products at today price with other country-made products in the past, please take into consideration time-value-and-money principle. Of course, Chinese governments have all the rights economic policies to support economic growth, but they are different from pure capitalism of the West. Have you ever heard of the phrase "market economy with Chinese characteristics"? Suppy and demand theory is universal for thousands of years so you cannot say that China follows Western capitalism principles. If you live in China and live outside China, but in other Asian countries where there are ethnic Chinese for a long time, you will understand better what I implies here by CHINESE ways of doing business.
The reason that China is succeeding is the same reason America succeeded in the past. That it is opening itself up to trading with rest of the world, that it is building up capital to buy the machinery needed for higher productivity, that it doesn't have as much regulation in the market, that it has low taxes that makes local businesses more competitive, that it is creating policies favouring small businesse and stressing strong academic base doing R&D. If anything, the so called "Chinese characteristics" like allowing rampant copyright infringement is hurting the growth, because that hurts the local R&D effort.
Rising China
Junior Member
:coffee::coffee::coffee:
No, definitely no. Chinese banks won't collapse. Reasons are as follows:
1. For the past 20 years, Western governments and economists had been predicting that Chinese banks would collapse. But, they didn'tchina::china::china. Back then, Chinese governments didn't have a lot of monies in reserve and the banks were burdened with huge bad loans. However, the governments did manage to reduce those loans and turned the situations around, and banks did make profits nana::nana::nana.
2. Chinese banks have gone through two financial crises - Asian Financial Crisis in 1997 and the Current Crisis. Chinese governments and banks have enough experience to manage and control risks caused by non-performing loans.
3. Since all Chinese banks are state-owned, with 2 trillion dollars in reserve, Chinese governments have the ability to come to the rescue when needed.
4. As of last year, all Chinese banks are the most profitable banks in the world. So these banks can absorb bad debt expenses easily. The worst that can happen to these banks is that their profits drop, but their existence won't be jeopardised.
5. Since these free lendings are part of the government stimulus packages (monetary policy), governments are fully aware that a certain amount of monies will become non-performing loans. This percentage of bad debt expense has already been taken into account in the budget. So, there will be no cause for panic if it happens. Besides, the monetary policy that Chinese governments implements in the stimulus packages is a short term strategy to stimulate the economy. These bad debts can't accumulate to the point that they will jeopardise those banks.
6. Remember this "Market economy with Chinese Characteristics". Back then, we were poor and lack of talents in the financial field, but we still managed to turn our banks around and made them become profitable entities. Now, we have the skills, the brains, and the means; we can manage this bad debt risk a lot more effectively.
No, definitely no. Chinese banks won't collapse. Reasons are as follows:
1. For the past 20 years, Western governments and economists had been predicting that Chinese banks would collapse. But, they didn't
china::china::china. Back then, Chinese governments didn't have a lot of monies in reserve and the banks were burdened with huge bad loans. However, the governments did manage to reduce those loans and turned the situations around, and banks did make profits nana::nana::nana.2. Chinese banks have gone through two financial crises - Asian Financial Crisis in 1997 and the Current Crisis. Chinese governments and banks have enough experience to manage and control risks caused by non-performing loans.
3. Since all Chinese banks are state-owned, with 2 trillion dollars in reserve, Chinese governments have the ability to come to the rescue when needed.
4. As of last year, all Chinese banks are the most profitable banks in the world. So these banks can absorb bad debt expenses easily. The worst that can happen to these banks is that their profits drop, but their existence won't be jeopardised.
5. Since these free lendings are part of the government stimulus packages (monetary policy), governments are fully aware that a certain amount of monies will become non-performing loans. This percentage of bad debt expense has already been taken into account in the budget. So, there will be no cause for panic if it happens. Besides, the monetary policy that Chinese governments implements in the stimulus packages is a short term strategy to stimulate the economy. These bad debts can't accumulate to the point that they will jeopardise those banks.
6. Remember this "Market economy with Chinese Characteristics". Back then, we were poor and lack of talents in the financial field, but we still managed to turn our banks around and made them become profitable entities. Now, we have the skills, the brains, and the means; we can manage this bad debt risk a lot more effectively.