Chinese Economics Thread
- Thread starter Norfolk
- Start date
Some of you may think this post is not exactly Chinese economic thread.
But, I argue it is, because like the Hauwei case, it is all part of the "trade war" designed to damage China's standing in the world.
By following @CNN , we find how they make fake ne…:
But, I argue it is, because like the Hauwei case, it is all part of the "trade war" designed to damage China's standing in the world.
By following @CNN , we find how they make fake ne…:
Jura The idiot
General
Jura The idiot
General
Thursday at 6:21 PM
Chinese Vice Premier Liu He arrives in Washington DC for China-US 'phase one' trade deal
U.S. drops currency manipulation charge against China
Xinhua| 2020-01-14 07:23:41
Trade war: China to make huge purchases of US goods as details of phase one deal revealed
the full text of that agreement is going to be of interest
followup stories are:
Chinese Vice Premier Liu He arrives in Washington DC for China-US 'phase one' trade deal
U.S. drops currency manipulation charge against China
Xinhua| 2020-01-14 07:23:41
Trade war: China to make huge purchases of US goods as details of phase one deal revealed
- Sources confirm that China has committed to making large scale purchases of US$200 billion of American goods as part of the phase one trade deal
- Purchase target for manufactured goods of around US$75 billion, with China also committing to buy huge amounts of energy, agriculture and services
the full text of that agreement is going to be of interest
antiterror13
Brigadier
exactly ... TPP was supposed to exclude China ... part of Obama policies of Pivot to Asia which as we know failed miserably
So much for Trump and his supporters claiming that he's hurting China in this trade war and collecting all those taxes that "China is paying" for! Lol.
So I guess this would come as a bit of a shock to him and his supporters. On CGTN news just now. China just reported 5% growth in export year on year. With ASEAN replacing USA as China's 2nd largest trading partner!
It's funny we don't hear him saying trade war is easy to win any more .
So I guess this would come as a bit of a shock to him and his supporters. On CGTN news just now. China just reported 5% growth in export year on year. With ASEAN replacing USA as China's 2nd largest trading partner!
It's funny we don't hear him saying trade war is easy to win any more .
plawolf
Lieutenant General
As with all things, the devil is in the details.
The headline $200bn shopping list might seem massive, but firstly that is over two years, so only $100bn per year. That is against $120bn America exported to China in 2018.
That is significant because China could simply change its purchase pattern. So instead of buying $120bn of US goods incrementally over the year, it can make one big lump sum purchase at the start of the year, with deferred deliveries spread over the year, and just not make any more purchases.
Obviously that’s just a general idea and it won’t be possible to do that with the whole $100bn, but I would bet it would be possible to do so with a significant proportion, so the net extra additional purchases is going to be only a fraction of the headline $200bn figure.
If China is smart, and it most certainly is, it can also schedule the purchases to start with things it would have bought regardless, that way if the trade deal falls apart later, it can just run down those initial lump sum purchases instead of making new orders, and not really be out of pocket at all.
It can also make deferred ‘purchases’ whereby orders are placed, but deliveries are schedule for months or even years later, with payment on delivery of goods/services.
Those are just some obvious examples, the key is the detailed rules and definitions in terms of what is possible and what is not. But as a general rule of thumb, it is always possible to get around rules with expensive enough lawyers.
A good illustration is on agricultural goods. The SCMP article strangely chose to use the 2016 agricultural figures of $20bn, and is similarly oddly querying if China can make $40bn of purchases over 2 years.
However, if you look at more recent trade numbers, in 2018 Chinese imports of US agricultural goods was only $5.9bn. So, the far more obvious and pertinent question is, just how is the US going to meet a $40bn order when starting from a base of just $6bn? That’s nearly a 6 times increase in annual output if ordered within 1 year, and over a 2 times increase if over 2 years.
So, even if this $200bn is supposed to be ‘new’ purchases, it can mean substantially less depending on which year is used as the benchmark.
And just for the sake of argument, as a worst case scenario, let’s say that the $200bn is supposed to be new purchases on 2016 baseline.
On the face of it, that looks terrible for China as it needs to make massive additional purchases. But how is America planning on actually meeting this sudden one-off leap in demand that is double their previous annual export to China?
It just isn’t going to be done, because even if it is technically possible, few companies would be willing to take on the massive risk to actually make the massive investment needed to double their annual output or more for a one-off large order.
That means the US has to either open up previously protected sectors to export to China, or that $200bn cannot possibly all be additional new purchases.
Even if Trump goes full communist and uses state subsidies to massively boost supply to meet this demand, that’s both a terrible economic decision, and one that would hand China enormous power.
Because at the end of the period, after the US has invested heavily to boost output and made $200bn worth of goods ready for delivery, China can just pull a Trump and demand to renegotiate everything, or else it will rip up the whole trade deal and refuse to buy any of those $200bn (or however much is left) worth of American goods.
We can sit here and game out any number of possible scenarios, but at the end of the day, it’s the detailed rules and provisions in the agreement that matters so much more than the headline numbers. So unless we get those detailed fine print, it’s very hard to make a conclusive conclusion.
But my feeling is that Trump would care most about the headline numbers, whereas China would care more about the detailed rules. Based on that, if there isn’t a detailed list of rules published to go with this agreement, then I would maintain my previous conclusion that China would have gotten the better end of the deal in the details and fine print, which could make the headline numbers all but meaningless. If there is a detailed fine print published to go with the agreement, we can finally make a definitive analysis once we have a copy.
The headline $200bn shopping list might seem massive, but firstly that is over two years, so only $100bn per year. That is against $120bn America exported to China in 2018.
That is significant because China could simply change its purchase pattern. So instead of buying $120bn of US goods incrementally over the year, it can make one big lump sum purchase at the start of the year, with deferred deliveries spread over the year, and just not make any more purchases.
Obviously that’s just a general idea and it won’t be possible to do that with the whole $100bn, but I would bet it would be possible to do so with a significant proportion, so the net extra additional purchases is going to be only a fraction of the headline $200bn figure.
If China is smart, and it most certainly is, it can also schedule the purchases to start with things it would have bought regardless, that way if the trade deal falls apart later, it can just run down those initial lump sum purchases instead of making new orders, and not really be out of pocket at all.
It can also make deferred ‘purchases’ whereby orders are placed, but deliveries are schedule for months or even years later, with payment on delivery of goods/services.
Those are just some obvious examples, the key is the detailed rules and definitions in terms of what is possible and what is not. But as a general rule of thumb, it is always possible to get around rules with expensive enough lawyers.
A good illustration is on agricultural goods. The SCMP article strangely chose to use the 2016 agricultural figures of $20bn, and is similarly oddly querying if China can make $40bn of purchases over 2 years.
However, if you look at more recent trade numbers, in 2018 Chinese imports of US agricultural goods was only $5.9bn. So, the far more obvious and pertinent question is, just how is the US going to meet a $40bn order when starting from a base of just $6bn? That’s nearly a 6 times increase in annual output if ordered within 1 year, and over a 2 times increase if over 2 years.
So, even if this $200bn is supposed to be ‘new’ purchases, it can mean substantially less depending on which year is used as the benchmark.
And just for the sake of argument, as a worst case scenario, let’s say that the $200bn is supposed to be new purchases on 2016 baseline.
On the face of it, that looks terrible for China as it needs to make massive additional purchases. But how is America planning on actually meeting this sudden one-off leap in demand that is double their previous annual export to China?
It just isn’t going to be done, because even if it is technically possible, few companies would be willing to take on the massive risk to actually make the massive investment needed to double their annual output or more for a one-off large order.
That means the US has to either open up previously protected sectors to export to China, or that $200bn cannot possibly all be additional new purchases.
Even if Trump goes full communist and uses state subsidies to massively boost supply to meet this demand, that’s both a terrible economic decision, and one that would hand China enormous power.
Because at the end of the period, after the US has invested heavily to boost output and made $200bn worth of goods ready for delivery, China can just pull a Trump and demand to renegotiate everything, or else it will rip up the whole trade deal and refuse to buy any of those $200bn (or however much is left) worth of American goods.
We can sit here and game out any number of possible scenarios, but at the end of the day, it’s the detailed rules and provisions in the agreement that matters so much more than the headline numbers. So unless we get those detailed fine print, it’s very hard to make a conclusive conclusion.
But my feeling is that Trump would care most about the headline numbers, whereas China would care more about the detailed rules. Based on that, if there isn’t a detailed list of rules published to go with this agreement, then I would maintain my previous conclusion that China would have gotten the better end of the deal in the details and fine print, which could make the headline numbers all but meaningless. If there is a detailed fine print published to go with the agreement, we can finally make a definitive analysis once we have a copy.
Correct you can not only look at the headline numbers but also the time table as well. China can purchase 50 billion dollars of US agricultural goods and even 200 billion dollars of US goods and services overall but what is the time scale we are talking about. And even if China made those purchases over the next 2 years what will be the delivery dates and there for payment schedule.
antiterror13
Brigadier
well, there are too many cars in China already ... way too many