They should just hike the rmb by 5% so that all Chinese exports increase in price. this is the way you can make more money from the US.
Chinese companies like bitmain are selling mining machines all over the world, making lots of money.
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Chinese Economics Thread
- Thread starter Norfolk
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Chinese companies like bitmain are selling mining machines all over the world, making lots of money.
Instead of messing with FX rate. it's much easier just to remove or at least reduce export tax rebate if Chinese government really wants to increase the price of exports. Unfortunately, this action seldom occurs since a significant part of local GDP figure and employment rate is dependent on "zombie" export companies, firms that will be at a loss without rebates.They should just hike the rmb by 5% so that all Chinese exports increase in price. this is the way you can make more money from the US.
Chinese companies like bitmain are selling mining machines all over the world, making lots of money.
They should just hike the rmb by 5% per year so that all Chinese exports increase in price. This is the way you can make more money from the US, by increasing their inflation rate.Instead of messing with FX rate. it's much easier just to remove or at least reduce export tax rebate if Chinese government really wants to increase the price of exports. Unfortunately, this action seldom occurs since a significant part of local GDP figure and employment rate is dependent on "zombie" export companies, firms that will be at a loss without rebates.
caixin article about the effects of repeated covid outbreacks and lockdowns on consumption in china.
Do you think that the chinese government should start to accept the reality that they, like the rest of the world, are going to have to live with covid and drop the zero covid policy?
Do you think that the chinese government should start to accept the reality that they, like the rest of the world, are going to have to live with covid and drop the zero covid policy?
Zero covid policy can't possibly go on for as long as there's some covid virus around as there is ALWAYS going to be some covid virus around left.
So the remaining logical conclusion is that the chinese government is waiting for something else. Though what that else could be is debatable. Are they waiting for the current vaccine to be administered to enough people? if so, what is enough? Right not China is at 75% of population being vaccinated twice. While that figure will be rising more, the curve has slowed down quite a bit as most of the people left now are those who are not eager to get vaccinated. So getting to 80 percent might take a few months. But what if 90% is desired? That might take a year, or never.
After long enough time passes, another round of vaccination would have to happen anyway for everyone. That too is perhaps just 6-12 months away.
And what if the Chinese govt. deems that the current vaccine is not good enough for opening of the whole country? What if they decide that some other, newer vaccine is actually better and what they're really after? Is that then another year of applying such vaccine to most of the population?
To sum it up - if the goal is to have enough population vaccinated with a vaccine deemed sufficiently effective - that might be 6 or 12 or more months.
If the goal is to wait until virus disappears from the face of the earth - then China will be forever locked in.
So the remaining logical conclusion is that the chinese government is waiting for something else. Though what that else could be is debatable. Are they waiting for the current vaccine to be administered to enough people? if so, what is enough? Right not China is at 75% of population being vaccinated twice. While that figure will be rising more, the curve has slowed down quite a bit as most of the people left now are those who are not eager to get vaccinated. So getting to 80 percent might take a few months. But what if 90% is desired? That might take a year, or never.
After long enough time passes, another round of vaccination would have to happen anyway for everyone. That too is perhaps just 6-12 months away.
And what if the Chinese govt. deems that the current vaccine is not good enough for opening of the whole country? What if they decide that some other, newer vaccine is actually better and what they're really after? Is that then another year of applying such vaccine to most of the population?
To sum it up - if the goal is to have enough population vaccinated with a vaccine deemed sufficiently effective - that might be 6 or 12 or more months.
If the goal is to wait until virus disappears from the face of the earth - then China will be forever locked in.
I've thought about the opening-up problem for a very, very long time. Unfortunately, the conclusion I've come to is that it is better for China to stay closed.
The current vaccines do not prevent transmission. Even if 100% of the population is vaccinated, there will still be transmission and many people will die from COVID.
A good example is Spain, which is ~80% fully vaccinated with mRNA. Even then, Spain had 41 people die from COVID yesterday. That would mean 1,267 deaths in China - or 462,711 deaths yearly.
I think preventing 500K annual deaths is worth keeping China closed.
The current vaccines do not prevent transmission. Even if 100% of the population is vaccinated, there will still be transmission and many people will die from COVID.
A good example is Spain, which is ~80% fully vaccinated with mRNA. Even then, Spain had 41 people die from COVID yesterday. That would mean 1,267 deaths in China - or 462,711 deaths yearly.
I think preventing 500K annual deaths is worth keeping China closed.
Economically, I've also sadly concluded that opening China does more harm than good.
Consumption in China may be bad right now, but COVID would make things much worse. Imagine COVID circulating in China. Think about how Chinese people react to COVID. The majority of Chinese people would shut themselves in their homes and stay inside for as long as humanly possible. There would be an immediate, devastating, and years-long collapse in consumption.
There's also the effect on factories. There would be the inevitable massive productivity hit - closures, labor scarcity, etc. - that COVID takes on manufacturing. Right now China has an advantage in manufacturing goods over the entire world. This is due to its lack of COVID. That - perhaps permanent - advantage would disappear if China opens up.
There is some unknown, probably substantial gain for China by allowing people to easily move in and out. This probably provides substantial help to Chinese innovation and progress. Unfortunately, it's outweighed by the 500K deaths and the 33% drop in consumption.
To sum it up.
Advantages
Consumption in China may be bad right now, but COVID would make things much worse. Imagine COVID circulating in China. Think about how Chinese people react to COVID. The majority of Chinese people would shut themselves in their homes and stay inside for as long as humanly possible. There would be an immediate, devastating, and years-long collapse in consumption.
There's also the effect on factories. There would be the inevitable massive productivity hit - closures, labor scarcity, etc. - that COVID takes on manufacturing. Right now China has an advantage in manufacturing goods over the entire world. This is due to its lack of COVID. That - perhaps permanent - advantage would disappear if China opens up.
There is some unknown, probably substantial gain for China by allowing people to easily move in and out. This probably provides substantial help to Chinese innovation and progress. Unfortunately, it's outweighed by the 500K deaths and the 33% drop in consumption.
To sum it up.
Advantages
- Substantial but unknown increase in innovation and progress from freedom of movement
- Chinese tourists can once again reduce China's soft power around the world
- I get to visit China
- Millions of deaths
- 33% drop in consumption
- No more 25% annual export increases
- Chinese tourists cause $250 billion current account balance outflow
FX appreciation doesn't just affect export, it also reduces import prices, increases cost of debt servicing. Why use a blunt instrument when targeted therapy like removing export rebates can achieve similar results? Besides, getting rid of export rebate would force zombie companies to innovate and move up the value chain. I think we all know many Chinese firms are too comfortable with just making low end products.They should just hike the rmb by 5% per year so that all Chinese exports increase in price. This is the way you can make more money from the US, by increasing their inflation rate.