Chinese Economics Thread

[SimaQian]

Can you explain why China is increasing its US holdings..

No. Overall China USD holdings is trending downwards. The recent rise of USD in China is simply because of vast trade surplus of China against all major economies. China sells more than buys from outside. You see the China foreign currency reserves strongly correlates with USD treasuries holdings and it started to ramp up when China had the covid under control and got its economy back in roaring conditions. When you have excess money in hundreds of billions, the quick and safest way to earn interest is buy US debt.





If shit gets real and dollar gets dumped, it will be Japan will be hurt the most, both in absolute number
and per capita USD debt holding.

 

[NiuBiDaRen]

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[krautmeister]

And China is still hoarding US dollars and buying US bonds. Schizophrenic decisions lol

Imagine holding a weakening curreny where you are getting sanctioned from using it like every month

Advanced tech is getting banned pience by pience, chips getting banned etc

Can you explain why China is increasing its US holdings..

The thinking is that there aren't other alternatives capable of absorbing the size of China's surplus. So, they do the easy thing and buy US debt and probably some US stocks as well. In any case, China purchases of US government debt has been mostly dropping over the last few years. As older bonds and treasuries matured, there was less buying to replace them. The difference isn't huge but it is there. The remainder of the surplus has been going to ODI and into US dollar denominated spending on the Belt and Road. Imo, China should be spending as much of their currency reserves right now as possible, to accomplished 3 things.

1. Reduce their fiat currency reserves as fast as possible since the entire world is printing money like crazy right now. This currency depreciation is concentrated more on the core Western nations than countries like China so the currency inflation will be more serious for them.
2. This will help the world economy, which will indirectly spur China's own economy while increasing China's influence
3. Prepare for a huge drop of the US dollar value that is coming within the next few years, which the digital RMB will make worse

 

[Tyler]

And China is still hoarding US dollars and buying US bonds. Schizophrenic decisions lol

Imagine holding a weakening curreny where you are getting sanctioned from using it like every month

China is not hoarding US$ like you claimed. Those US$ came from trade surpluses. International trade is still conducted mainly in US$. Customers paid for Chinese products in US$. China's central bank had to recycle those useless US$ by buying US treasuries, which pay at least some interest. There are few alternatives, like the Japanese bonds or European bonds, which pay negative interest rates or even lower interest rates.

As the US$ falls, the Japanese will be in trouble as they have a trillion$ of US debt out of their $1.36 foreign reserves. This would happen just when the Japanese semiconductor industry further weakens over the next couple of years. The Japanese economy will shrink further and even go bankrupt, as they lose almost all of their technological advantages.

 

[Strangelove]

A 180 from a exactly a year ago...

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• Previously, the U.S.-China trade war caused companies to move their supply chains out of China. As a result, countries like Vietnam and India benefited as companies set up shop there.
• But the situation is changing, and supply chains could pivot back to China as cases spike in India and Vietnam, according to Zhang Zhiwei, chief economist at Pinpoint Asset Management.

Rising Covid cases in Vietnam, India may push manufacturing to China: Economist

The Covid-19 resurgence in some parts of Asia could lead to a change in fortunes for China, according to an economist.
Previously, the U.S.-China trade war caused companies to move their supply chains out of China, shifting their production and distribution networks for products and services. As a result, countries like Vietnam and India benefited as companies moved to set up shop in their countries.

But the situation appears to be changing, and supply chains could pivot back to China as cases spike in India and Vietnam, according to Zhang Zhiwei, chief economist at Pinpoint Asset Management.

“Before the pandemic, we saw factories moving out of China — Samsung, Foxconn these big name companies — setting up factories in Vietnam, India,” he told CNBC’s “Street Signs Asia” on Monday.

The spike in cases in those two countries has forced factories owned by Taiwanese contract manufacturer Foxconn, a major Apple supplier, to shut down facilities in India and Vietnam, he said.

“This could put the relocation of supply chains on hold for quite some time. The key issue here is that international travel is suspended, so multinational companies can’t send their staff to India and Vietnam to set up new factories,” Zhang added.

Cases in India surged to record-breaking highs in April and

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.

In Vietnam, the northern province of Bac Giang on Tuesday ordered four industrial parks — including three that house production facilities of Taiwan’s

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— to temporarily shut down due to an outbreak of Covid-19.
The situation could benefit China, Zhang suggested. However, he pointed out that the extent of how much China could stand to gain will depend on how long the situation in India and Vietnam continues for.

Right now, export growth in China is between 20% to 40% a month, he said. If the factories in India and Vietnam return to production very soon, China’s exports would be expected to slow down in the second half of the year as companies move their manufacturing to those two countries.

“But if supply chain (in India and Vietnam) is disrupted for a long time, we could see this kind of 20%, 30% export growth (in China) to continue into next year,” Zhang said.

 

[voyager1]

Excuse me but do these people running all these businesses and factories have any brains in their heads?

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A wave of shutdowns and temporary production stoppages is sweeping through a number of factories in China’s southern manufacturing hub as the surging cost of raw materials eats away at profits

This may come as a surprise to some, given that many overseas customers have been turning to China to fulfil orders that would normally go to countries currently being ravaged by the coronavirus, including India and China’s Southeast Asian neighbours – competitors in the manufacturing sector.

“It means that, the more we produce, the more we lose,” he said. “Each tonne we produce is equivalent to a loss of 1,500 yuan.”

Why do the cry? If you have high demand, then raise prices lol

Imagine during the pandemic being the only country producing goods and not raising prices. These people need to have their heads checked. MBAs are urgently needed for these "businessmen" who dont get the notion of supply & demand dynamics.

If you got ultra high demand and material costs are getting high then raise prices and be done with it

LMAO at shutting down factories because the cost of raw materials got too high. Solution: raise prices for your customer

And this is a good lesson, to have iron-clad and flexible contracts with customers so that the business is not locked on a stable price for a long period of time. because now that raw materials are rising, some factories might not even be able to raise prices due to their contracts with the clients

 

[KYli]

The article failed to mention the global implication of rising raw material prices. Chinese manufacturers should take this opportunity to raise prices.

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[voyager1]

The article failed to mention the global implication of rising raw material prices. Chinese manufacturers should take this opportunity to raise prices.

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For some magic reason they dont want to

They didn't raise prices a lot during the pandemic when they didn't have competition. They were basically a monopoly and they still kept prices low somehow


All these factory owners should go to university and get a proper business degree

Imagine having a monopoly and not raising prices............
Imagine having a sky-high demand and not raising prices........

Incompetent

 

[KYli]

For some magic reason they dont want to

They didn't raise prices a lot during the pandemic when they didn't have competition. They were basically a monopoly and they still kept prices low somehow


All these factory owners should go to university and get a proper business degree

Imagine having a monopoly and not raising prices............
Imagine having a sky-high demand and not raising prices........

Incompetent

The problem for China is that there are too many stiff domestic competitors that would start the race to the bottom as soon as the production bottleneck is resolved. An extremely cutthroat environment has helped China to remain competitive but at the same time preventing many companies from moving up the value chain. Many Chinese companies miss many good opportunities to make decent money due to the fear of raising price would cost them business clients. In the end, these companies got struck in being the low end factories. Chinese government has always put employment as its top agenda but the thinking has changed so a stronger yuan and exporting inflation are tolerated.

 

[Kaeshmiri]

Excuse me but do these people running all these businesses and factories have any brains in their heads?

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Why do the cry? If you have high demand, then raise prices lol

Imagine during the pandemic being the only country producing goods and not raising prices. These people need to have their heads checked. MBAs are urgently needed for these "businessmen" who dont get the notion of supply & demand dynamics.

If you got ultra high demand and material costs are getting high then raise prices and be done with it

LMAO at shutting down factories because the cost of raw materials got too high. Solution: raise prices for your customer

And this is a good lesson, to have iron-clad and flexible contracts with customers so that the business is not locked on a stable price for a long period of time. because now that raw materials are rising, some factories might not even be able to raise prices due to their contracts with the clients

I think you answered your question here...They accepted orders for X no. of goods at Y price well before this price rise took place. Any supply side price fluctuations will have to be borne by them. Their choice is to either cancel the order all together and damage future business prospects or accept a small profit/loss.

Also it depends on the type of goods. Contratcs for Essential/Novelty goods can be immediately re-negotiated but not for Non-essential items . There are others who would replace you easily.

Then comes the consumer side. The article mentions that consumer demand is as it is low and passing down the price rise would simply be illogical and kill the already low demand.