Chinese Economics Thread

[bladerunner]

Good answer, but I have a question regarding "The biggest bug bear most had against seeing china as a market economy is that her economy had excessive state...". Why does it matter if the company is either run by the state or private? I mean a company is company regardless of who runs it, it's sole mission is to make profits.

Yes but over here we saw the ready availability of finance to SOE or state sanctioned companies as an unfair advantage . Theres reason to believe they get funding under less strict critera etc than Western counterparts. Petty Officer had recently posted articles in the economics thread on the subject of loans for state sanctioned firms and private companies.
However a lot of it is on ideology as well, and I can't see countries like China strictly meeting all the
criteria in what constitutes a free market economy and that it would be foolish to even try. Come to think of it i don't think any countries meet the full criteria of a free market economy. So we should cut the B.S. and redefine each countries position.
For developing countries like China and co with tens of millions still desperately poor who will never be able to pay market prices for goods, and with the widening of the divide between the rich and the poor, an opportunity for China to convince the West that perhaps she should be cut some slack and viewed as a "mixed market economy". A certain amount of state control through ownership but with the privileges of a free market economy in the WTO enviroment and possibly reviewed again in X number of years. It would certainly save on this silly bickering.
If China's money is not part of any rescue package, then perhaps the West don't see themselves in dire straits.

 

[antiterror13]

GDP means nothing really ... imagine this imaginary scenario :

Mr. A sold a car to Mr. B for $1B and an hour later Mr. B sold the same car to Mr. A for $1B, the transaction doesn't do anything to the economy, but the GDP increases by $2B.

 

[delft]

bladerunner is right. State sanctioned firms like General Motors would be dead by now if they hadn't been state sanctioned. Nowadays no country runs a free market economy.

 

[Geographer]

Mr. A sold a car to Mr. B for $1B and an hour later Mr. B sold the same car to Mr. A for $1B, the transaction doesn't do anything to the economy, but the GDP increases by $2B.

That's not true. Sale of used goods is not included in GDP.

GDP = C + I + G + X - M

Where:
C = new consumer goods and services
I = new business goods and services
G = government spending on new goods and services
X = exports
M = imports

 

[innoweb]

what happened to china now? also the people are getting harsh and showing no concern to their fellowmen.

 

[petty officer1]

You are correct, but IMF numbers are easier for lay people to understand.

A few years ago, the IMF changed the way it calculated GDP. To smooth out currency fluctuations, the IMF switched to the average currency exchange rate for the entire year; instead of using the traditional currency exchange rate at the end of the year.

It is more appropriate to use the end-of-the-year currency rate for China, because its currency keeps appreciating. It doesn't make sense to use the average currency exchange rate for the year, because it will only reflect half of the currency appreciation and undercount China's economy by a quarter of a trillion.

However, I don't want to confuse lay people and it's easier to just use the IMF numbers. An estimate of $7.25 trillion is closer to China's actual GDP, but it's too complicated to have to explain it to non-economists.

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Also, the United States is the largest contributor and has the largest percentage of votes at the IMF. The IMF tends to inflate projections for the U.S. economy (e.g. IMF 2011 projection of U.S. 4% economic growth is silly; it's actually 0.85% for the first half-year of 2011) to keep its largest shareholder happy.

Unlike the IMF claim, the U.S. economy will not hit $15.2 trillion this year. $14.6 trillion x 1.04 = $15.2 trillion. There is no way the U.S. economy can attain 4% growth for this year. Using real economic data of 0.85% growth for the first half-year, a closer estimate is $14.6 trillion x 1.0085 = $14.7 trillion.

From U.S. Department of Commerce, Bureau of Economic Analysis:

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"Real gross domestic product -- the output of goods and services produced by labor and property
located in the United States -- increased at an annual rate of 1.3 percent in the second quarter of 2011, (that is, from the first quarter to the second quarter), according to the "third" estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 0.4 percent."

Math:

U.S. economic growth for first two quarters of 2011: 0.4%, 1.3%

Average U.S. growth rate for first half-year of 2011: (0.4 + 1.3)/2= 1.7/2 = 0.85% (not 4% like the IMF is claiming)

Chinese PPP will out grow US by 2015. Itself is very impressive.

But China still have a long way to go to match the labor productivity of United State of America in term of output per unit of labor.

Technological investments have to keep on growing, If China wants to maintain this level of growth (8%+ per year). It has no other choice.

 

[Equation]

Thanks Pettyofficer, bladerunner, deflt, and geographer for your answers. Okay so tell me how and what exactly is "output per unit of labor"? Because right now I'm thinking in terms of numbers of products made by a single factory worker, like the poor folks in Foxconn manufacturing plant.

 

[no_name]

Apparently China will automatically gain Market economy status in 2016 under current WTO rules.

There is something about that status make it alot easier for China's export products to out-compete Europe's. Currently Europe has only advantages in a few high tech areas that China wants. Hence the recent visit by Chinese officials to European countries to strike so deals in return for financial help (which feel through).

Part of the deal is to recognise China as a market economy earlier and to sell some of the techs China wants. In the long run this will make Europe unproductive and eventually lose out to China but it remains to be seen if they can survive the very imminent economic crisis without outside help.

I found this issue related article written by someone but it is in chinese:

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[petty officer1]

Thanks Pettyofficer, bladerunner, deflt, and geographer for your answers. Okay so tell me how and what exactly is "output per unit of labor"? Because right now I'm thinking in terms of numbers of products made by a single factory worker, like the poor folks in Foxconn manufacturing plant.

Output per labor is calculate by Y/L or (Y=output)/(L=Labor force) Note labor force do not include people such as students and retired etc.

US can produce more output per labor because it has better capital (K) and better technology to make Labor (L) more productive, example one American worker at GM can produce 1/5 of a car, where at China a worker can only produce 1/9 of a car, (this is purely a example, numbers are make up).

So America with its less population can still out produce China at this moment, but if China catch up with America's outputs per unit of labor, China would be 4 times as big as US on amount of outputs per year.

This can only be done with continued investment (which comes from saving) into capital (K), and increasing technological innovations to increase productivity of Labor (L).

When you look at the production of a economy, It comes from two main variable, K and L,
K stands for capitals (property, plant and equipments) and L stands for labor,

These two are variables in the famous Cobb-Douglas production function Q = ALαKβ, Q=total output.

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where K and L is the variable that convert a certain amount of input into a certain amount of output.
where A is technology, also the parameter of the production function.

China have to keep on investing and innovating just to survive the population growth and keep up the growth with the rest to the world.

(btw I just watched TX Ranger totally collapsed just before I wrote this, aw....)

 

[bladerunner]

Thanks Pettyofficer, bladerunner, deflt, and geographer for your answers. Okay so tell me how and what exactly is "output per unit of labor"? Because right now I'm thinking in terms of numbers of products made by a single factory worker, like the poor folks in Foxconn manufacturing plant.

Ah just notice petty officer answering your question but ill post mine anyways.

Very good question Equation I thinking exactly along the same lines as you but there must be more to it than when comparing countries. I think it could be related to conditions of work even though the same machine to produce the goods is used.
lets say in China you have a line worker whose task is to take the two parts of a widget and press them together and place in another box and the worker can produce a completed product at an average of 160 an hour .
While in America you have a worker of similar ability doing the same thing under the very similar conditions and she can complete 205 sets. The question would then be why.
Is the worker in America happier because she has to work less hrs to achieve her goals?
Does not live in dorm like conditions?