Chinese Economics Thread

bladerunner

Banned Idiot
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.

But if there is very little tech difference or capital utilisation


The other day I watched a program showing workers in the American south profitably making disposable chopsticks and exporting them to China for something around the $10hour.? The machinery used did not exactly look like state of art nor was the environs particularly flash, being an old abandoned factory so how could they do it.
So in the end a Chinese worker has to work longer hours to compensate ?
 

delft

Brigadier
The units used for capital, labor &ct. are in money in order to be able to compare them. For labor that means wages and related costs. Economic theory has never been able to even begin to develop a way of justifying any level of wage. To give an example I recently read about a plant in Ohio producing hoovers(?) that after five years was being reopened. The workers were now going to be paid $8/hr, while that had been $20/hr before the plant was closed. This shows that economic formulae are not necessarily helpful.
In coastal China higher tech companies need to pay higher wages to attract enough people to work for them and so they spoil the market for companies that cannot pay such wages ( Remember about the strikes for higher wages? ). These close or go to Viet Nam, Indonesia or Bangladesh or they migrate inland, helped by the huge investment in China's railways. The migrating companies will likely be driven to the next low wage country soon.
By raising wages in the coastal areas by some 20% per year added to the RMB rate rising compared to the dollar and the sometimes dramatic lowering of wages in the US the economy of the US will at some time revive.

Just one other anecdote: In the early '90's Boeing reduced the production of aircraft and fired some 10000 people. When a few years later the production of 737's reached the level of before the mass redundancy Boeing needed many more workers to produce these aircraft because the new people hadn't yet reached the productivity of the people who were fired a few years before.
 
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antiterror13

Brigadier
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


GDP = private consumption + gross investment + government spending + (exports − imports), or

It does ... when A sold a car to B, it was part of private consumption ($1B) and when B sold a car to A ($1B) it also part of private consumption, it would definitely add $2B into GDP.

private consumption is not necessarily for new cars only, including housing market, if you sold your 20 year old house to somebody, it will add to the country GDP for sure. Does it make you richer because the GDP increases ?
 
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bladerunner

Banned Idiot
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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I wonder if other countries have the right to object on the grounds that China has not honoured what she said she would do as a condition of entry into the WTO in the first instance.
 

Equation

Lieutenant General
I wonder if other countries have the right to object on the grounds that China has not honoured what she said she would do as a condition of entry into the WTO in the first instance.

LOL...that's the wonderful thing about WTO rules, everyone breaks them in one form or another and at one time or another!
 

petty officer1

Junior Member
bladerunner
Re: Chinese Economics Thread

But if there is very little tech difference or capital utilisation


The other day I watched a program showing workers in the American south profitably making disposable chopsticks and exporting them to China for something around the $10hour.? The machinery used did not exactly look like state of art nor was the environs particularly flash, being an old abandoned factory so how could they do it.
So in the end a Chinese worker has to work longer hours to compensate ?

This is where most people get confused. How much you pay in wage is a NOMINAL variable, this not REAL in the production process. Price in the market is only a measurement unit, it can be change all the time (ex.1 inches = 2.54 centimeters), but real variable do not. (1 inches of tape is still 2.54 cm of tape).

Ex. a ton of iron can be converted to a x amount of iron forks

US cost $50 to convert a ton of iron into= x amount of forks
China cost $45 to convert a ton of iron into= x amount of forks

One can do it cheaper but it still only produced the same amount of REAL outputs, which is x amount of fork. So if you throw out the wage, the production output is the same, just who can produce it quicker and more efficiently is only what matters. In the long-run wage DO NOT matter. Wage is just a incentive mechanism for your Labor to start working, how effective your labor can produce in a time period, can't be changed by wage, only training, technology and capital.

You can pay these worker $100 per hours, doesn't mean they are now able to produce more.

So China import US chopstick doesn't mean China do it more expensively, it means Chinese labor can do some thing more productive and demanded in the economy such as building a car. US now make chopstick means it have high labor surplus that is welling to work for less and do the work Chinese now don't need to do, since China are shifting labor to other sectors instead of making Chopstick.

The units used for capital, labor &ct. are in money in order to be able to compare them.

This may seems counter-intuitive (to me for a long time). But again, Value of price=/=actual outputs.

In US an apple is $0.89, in China it is $0.46.

But it is still an apple.

The difference in price is due to many factors as the supply in a certain area, and its demand.

we can compare how many ton of steel produced by nations, better than how much it cost in nominal value to produce them, Because in the end, the monetary cost do not matter.
Raw material --> Production --> The end result is still steels.

To give an example I recently read about a plant in Ohio producing hoovers(?) that after five years was being reopened. The workers were now going to be paid $8/hr, while that had been $20/hr before the plant was closed. This shows that economic formulae are not necessarily helpful.

Yes, they are paid less, but does this mean they produce it less efficiently?
When they are getting paid $8 or $48, they should have the same labor intensity. assuming the decrease in wage do not alter their work hours and level of competence.

(btw what is hoovers? is it a vacuum cleaner?)

This shows that economic formulae are not necessarily helpful.

You are absolutely 100% right, in Economic models you have to make a lot of assumption, A LOT (no government intervention, no war, labor are like machine etc etc) but it is the only way we can have even a chance to interpret how we use resources and its opportunity cost.

In coastal China higher tech companies need to pay higher wages to attract enough people to work for them and so they spoil the market for companies that cannot pay such wages ( Remember about the strikes for higher wages? ). These close or go to Viet Nam, Indonesia or Bangladesh or they migrate inland, helped by the huge investment in China's railways. The migrating companies will likely be driven to the next low wage country soon.


Again, don't think about the wages in term of money, think about WHY they have low wages, low wages is because China has a surplus of labor, so their demand is lower in China and their wages(price) is lower.

Now China have a demand of labor more than the supply of labor willing to work for that wage, so Chinese manufacture will have to raise the wage.

It is all again supply and demand labor, wage do not change the total number of labor force in a market and how efficiently they convert inputs to output.

final note

In the end China or US can change their wages all they want, but it don't change how efficiently they produce. It is still determined by training, technology growth, capital and numbers of the participating labors.
 

bladerunner

Banned Idiot
China set to boost eurozone rescue fund: FT

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(AFP) – 1 day ago

LONDON — China is ready to pump money into the eurozone's bail-out fund if European leaders can convince it the investment is safe, senior government advisers told the Financial Times.

And another source told the paper the cash-injection could possibly top $100 billion (70.5 billion euros).

China needs assurances that other countries would contribute to the fund, which will be used to buy debt issued by countries in financial difficulties, the business daily reported.

It also needs to be sure that European leaders will refrain from criticising China's foreign exchange policy, the FT added.

Li Daokui, an academic member of China's central bank monetary policy committee, told the paper it was in China's "long-term and intrinsic interest to help Europe", which is the Asian powerhouse's leading trade partner.

Li admitted the Chinese government might face domestic opposition, and that it needed to convince the people that China was not "just a source of dumb money."

Another source told the paper that China might be willing to contribute between $50 and $100 billion dollars.

"If conditions are right then something a bit above $100bn is not inconceivable," the source added.

French President Nicholas Sarkozy announced at a summit in Brussels Thursday that eurozone leaders had agreed to leverage the 440-billion-euro European Financial Stability Facility to a trillion euros ($1.4 trillion).

Finding creditors to boost the fund is one of the keys to successfully implementing the plans, along with making banks agree to write down billions in Greek debt and recapitalising the banking sector so it can absorb the hit.

The rescue fund, the main weapon against the crisis, has already bailed out Portugal and Ireland, and would be tapped in a new Greek bailout.
 

Equation

Lieutenant General
I don't guys, the more I read about this Euro EFSF thing, the more I doubt it would work. Read up on the latest The Economists issue is pretty neat.

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A.Man

Major
GDP = private consumption + gross investment + government spending + (exports − imports), or

It does ... when A sold a car to B, it was part of private consumption ($1B) and when B sold a car to A ($1B) it also part of private consumption, it would definitely add $2B into GDP.

private consumption is not necessarily for new cars only, including housing market, if you sold your 20 year old house to somebody, it will add to the country GDP for sure. Does it make you richer because the GDP increases ?

My friend, only the final market value was counted or all added value.
 

A.Man

Major
This is a google translation of the facts

Do you know the United States: why is it so afraid of China? Why do constantly want to provoke war now?

In recent years the rabbits of incredible!

China's real economy have left United States remotely. China did not mention, is to avoid the China threat theory. United States of that, is because of the bad economy for elections need to be afraid to say. United States in fact only a number of high technology enterprises and military enterprises, medium and low basic has hollow.

If in the further development of high speed ten years!

2010 China's industrial production data, as well as the share of world output summary


You can see from the 2010 data:


1, since the 2008 economic crisis made China's world factories further consolidated, and further enhance world market share of major industrial products, promotion is huge. Some bricks at home and abroad of Viet Nam, and India to seize the Chinese market share fallacy enough already!


2, power generation, energy consumption, both beyond the United States. You want to know the United States already had spent more than 100 years on the throne of the two, both how much beyond that is a great achievement! This is a landmark event than GDP over Japan even more far-reaching effects. Empire really coming!


First, the basic data:


1, crude steel production: 627 million tons, an increase of 9.3%, 44.3% per cent of world output, more than sum of 2nd-20th place;


2, steel production: 798 million tons, an increase of 14.9%


3, cement production: 1.868 billion tons, an increase of 15.53%, 60% per cent of world output;


4, electrolytic aluminum production: 15.65 million tons, an increase of 21.4%, more than world output of 65%;


5, refined copper production; 4.57 million tons, an increase of 10.6%, 24% per cent of world output; import 4.29 million tons, consumption equivalent to 8.8 million tons, more than world output of 50%;


Coal yield 6,: 3.24 billion tons, rose 8.9%, world output 45%;


7, crude oil production: 202 million tonnes, an increase of 6.9% imports from 239 million tons, an increase of 17.4%; apparent consumption of 439 million tons;


8, ethylene production: 14.189 million tons, an increase of 31.7%, second in the world (the United States first); equivalent spent about 24 million tons, self-sufficiency is about 59%;


9, fertilizer production: 67.406 million tons, an increase of 5.6%, 35% per cent of world output;


10, plastics production: 55.5 million tons, an increase of 20.9%, 20% per cent of world output;


11, chemical fiber production: 30.9 million tonnes, an increase of 12.44%, 42.6% per cent of world output;


12, glass production: 630 million weight boxes, an increase of 10.9%, more than world output of 50%


Data second, industrial products:


1, car production: 18.2647 million units, an increase of 32.44%, 25% per cent of world output;


Sales of 18.0619 million vehicles, an increase of 32.37%, beyond the United States creating new car sold 17.5 million cars of all-time.


2, ship production: completions for shipbuilding 65.6 million deadweight tons, an increase of 54.6%, 41.9% for the world;


New orders of 75.23 million deadweight tons, an increase of 290%, 48.5% per cent of the world's total;


Armed with orders of 192.915 million dwt, 40.8% per cent of the world's total;


Completions for shipbuilding and handheld order quantity per cent world share both have larger increase than 2009;


Exports first exceeded 40 billion dollars up 42.07%.


3, production of construction machinery: $ 59 billion, an increase of 20%, 43% per cent of world output (construction machinery: excavators, loaders, bulldozers, cranes, concrete pumps, forklifts, rollers etc)


4, computer production: 246 million, an increase of 35%, 68% per cent of world output, share than 2009 a 8 points;


5, color TV output: 118 million units, an increase of 19.5%, 50% per cent of world output, share than 2009 upgrade 2 points;


6, refrigerator production: 73 million, rose 23%, world output 65%, share better than 2009 upgrade 5 points;


7, air conditioner production: 109 million units, an increase of 35%, 80% per cent of world output, share than in 2009 up to 10 points;


Output of 8, cell phone: 998 million, an increase of 61%, more than world output 70%; share than 2009 surged 20 points;


9, washing machine production: 61 million, an increase of 21%, 44% per cent of world output, share than in 2009 up to 4 points;


10, the microwave output: 68 million units, an increase of 12%, 70% per cent of world output;


11, digital camera output; 82 million units, 65% per cent of world output;


12, digital TV set-top box: 150 million units, 73% per cent of world output;


Three data, infrastructure:


1, power: new installed capacity of 91.18 million-kilowatt, total installed capacity to 962 million kilowatts (United States of 1 billion-kilowatt), an increase of 10. 7%;


2, power output: 4.2065 trillion, an increase of 13.2%, 22% per cent of total world electricity production for the first time beyond the United States (United States 2010 about 4.11 trillion degrees), became the first in the world;


United States already had spent more than 100 years in this position, generating capacity more than United States a symbol of a milestone;


3, road: new highway traffic mileage 105,000 km (including Express), total length reached 3.984 million km of highway network;


Added Expressway 8,258 km total length reached 74,100 km (United States of 90,000 km);


4, railway: 4,986 put into production new line kilometers, 1554 km of passenger dedicated lines;


Production double track 3,747 kilometres;


Business total mileage of 91,000 km (second only to United States), in which high-speed 8,358 kilometers.


5, energy: primary energy consumption of 3.25 billion tons of coal equivalent, an increase of 6%, for the first time beyond the United States, became the first in the world, and it's also a milestone flags.


Four, light industrial products and other:


1, yarn production: 27.17 million tons, an increase of 17.5%, 46% of the total share of the world;


2, output: 80 billion m, an increase of 6.2%


3, gold production: 340.876 tons, an increase of 8.57%, first in the world;


From the yarn production, output growth rate analysis, China's share of the world textile will only not be reduced.


2009 China agricultural data summary


2009 world total population is 6.78 billion, Chinese kouzhan world 21%.


From the data view, China's diet should be the best in the world.


Grain output 1, 531 million tons, the world's share of 24%;


2, meat production 76.42 million tons, the world's share of 28% (pork, beef, mutton, poultry meat);


3, egg production, 27.41 million tons, the world's share of 45%;


4, 35.18 million tonnes of milk yield, share of the world's population, only 5% (vary);


5, production of 51.2 million tons of aquatic products, the world's share of 40%;


6, vegetable yields 570 million tons, 50% of the total share of the world;


7, fruit production of 195 million tons, the world's share of 18%;


8, oil output of 31 million tons, the 7.5% of the total share of the world (China is the world's largest importer of soybeans);


9, sugar yield 12 million tons, share the world of 7%




Third, the production of construction machinery: $ 59 billion, an increase of 20%, 43% per cent of world output (construction machinery: excavators, loaders, bulldozers, cranes, concrete pumps, forklifts, rollers etc)
 
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