Chinese Economics Thread

[voyager1]

With mutant COVID strain spreading around the globe, China will be lucky to manage six percent growth this year.

The India situation is indeed worrying. Only if a catastrophic mutant is created there and then spread all over the world will it result to a "low" 6 percent growth.

Economists project China's growth to reach 8-9% this year. Even with the trade war during Trump, the GDP figures didn't plummet by 3%. So I would say China is ok for now.


India is the only variable here. If a variant is created which can escape the vaccines then.........

 

[Xizor]

With mutant COVID strain spreading around the globe, China will be lucky to manage six percent growth this year.

I don't think so.
US and Europe has vaccinated or is reaching 50% mark. The rich Arab states have started rapid vaccination led by Israel, UAE. ASEAN isn't affected that much.

Add in the fact that the migration to online services is only strengthening, I believe China will register 7.5 to 8.5 growth. Then there is the American stimulus.
But this would be export driven. I see a less rosy picture for internal consumption. Chinese people likely would've their savings burned a bit.

 

[KYli]

I don't think so.
US and Europe has vaccinated or is reaching 50% mark. The rich Arab states have started rapid vaccination led by Israel, UAE. ASEAN isn't affected that much.

Add in the fact that the migration to online services is only strengthening, I believe China will register 7.5 to 8.5 growth. Then there is the American stimulus.
But this would be export driven. I see a less rosy picture for internal consumption. Chinese people likely would've their savings burned a bit.

Beside, in the short term, the lockdown and restriction in India and some other developing countries would force more Western companies to rely more on China for imports.

In addition, China has begun to drive consumer spending. This should sped up the recovery and accelerate the dual circulation economic strategy.

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[AndrewS]

With mutant COVID strain spreading around the globe, China will be lucky to manage six percent growth this year.

That is likely not accurate.

Counterintuitively, in 2020 during the lockdowns, we saw Chinese exports boom.

This was primarily due to incomes in the developed world being supported by the government, and then all the services spending being redirected to goods. Note that China doesn't generally export services.

If the world eases lockdown restrictions, we can expect spending to redirect back from goods to services, and industrial production in those countries to resume.

But if we do face another round of global lockdowns, the developed world governments should still be able to maintain incomes and China will be the only one whose industrial sector is unaffected.

So the statement should be the greater the lockdowns, the more China exports and grows.

 

[Xizor]

Beside, in the short term, the lockdown and restriction in India and some other developing countries would force more Western companies to rely more on China for imports.

In addition, China has begun to drive consumer spending. This should sped up the recovery and accelerate the dual circulation economic strategy.

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Pardon the pessimism, but China's internal consumption won't improve in the short term.

People need to get more cash in hand to consume but Factories running full doesn't mean more cash to people, just more for the owners. People need to be confident about the market and their livelihood to spend but with Corona still looming, there is uncertainty.

 

[AndrewS]

Chinese people likely would've their savings burned a bit.

That is not an accurate statement

If you crunch the real numbers in the PEW report below, in 2020, China continued to see the number of poor people reduce, whilst increasing the number of middle-income and upper-income earners. Of course, the pandemic did mean the increase wasn't as much as originally predicted.

Remember that we saw China had a single sharp lockdown where the government did provide a lot of support, and then saw an export boom afterwards.

We also see Goldman estimating that China has $308 Billion in excess savings as of March 2021.

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[caudaceus]

With mutant COVID strain spreading around the globe, China will be lucky to manage six percent growth this year.

The current position of Chinese economy right now is I think free-riding the global mass stimulus. As long as others keep the stimulus flows, China will be in a good position. They don't have to share the systemic risk as well.

 

[AndrewS]

Pardon the pessimism, but China's internal consumption won't improve in the short term.

People need to get more cash in hand to consume but Factories running full doesn't mean more cash to people, just more for the owners. People need to be confident about the market and their livelihood to spend but with Corona still looming, there is uncertainty.

COVID has been eliminated in China. You can see cases at zero many days.

And everyone knows that if there is an another outbreak, there will be a short, sharp, localised lockdown whilst they test every single person in the city over the course of 3 days.

Also remember that the Chinese government hasn't done much stimulus so far, so there's a lot of scope for this.

 

[AndrewS]

The current position of Chinese economy right now is I think free-riding the global mass stimulus. As long as others keep the stimulus flows, China will be in a good position. They don't have to share the systemic risk as well.

Is it really free riding?

I would say the global mass stimulus outside of China has been poorly targeted to benefit the ultra wealthy rather than the poor.

Also, if China was to stimulate its domestic economy even further now, there would be even more shortages and inflation.
For example, there is a global shortage of microchips which are used in so many products. There is no spare capacity to produce more.

So best for China to hold back and keep its stimulus in reserve.
It will be needed in 2 years time when other governments tighten economic policy.

 

[KYli]

Pardon the pessimism, but China's internal consumption won't improve in the short term.

People need to get more cash in hand to consume but Factories running full doesn't mean more cash to people, just more for the owners. People need to be confident about the market and their livelihood to spend but with Corona still looming, there is uncertainty.

All indications are that the labor day week would have enormous increase in travel, entertainment and consumption. China tried to tame down the Lunar New York traveling due to fear of resurgence of covid but they are actually encouraged more spending in the labor day holiday.