Zero covid with omicron is great.
Chinese Economics Thread
- Thread starter Norfolk
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Zero covid with omicron is great.
I am trying to be argumentative but what is the price for 1-2 million dead 5-10 million crippled people?
I had a question in mind a while ago, on why China is planning a massive push into invest in a lot of infrastructure projects again, if commodity prices might go high from all of their building. So I searched whether interest rates and commodities have a relation with each other, and this is the first result.
So if US is planning to hike their interest rates, then its going to put a downward pressure on commodity prices, which can help make infrastructure building a lot more cheaper, by making metal and building materials more cheaper. What I wonder is if all the money printing and stimulus China been doing has to do with them buying commodities to be used in those infrastructure projects.
Yes, and the price they pay is gigantic trade deficits. The US dollar is massively overvalued.
As they say in economics: there's no such thing as a "free lunch".
China has a surplus of foreign currency, mainly in USD and EUR which it can't really get away from because China has a trade surplus.
But we've seen these countries massively increase the money supply, so those currencies will face higher inflation and depreciate against commodities and other real products which are tangible.
This is relative to China which hasn't printed as much money.
Higher interest rates in the US will slow down the economy, but unless they go with really high rates like in the 1980s, it won't be enough to stop high domestic US inflation because the US money supply doubled in the past 2-3 years.
So from China's perspective, the actual cost of commodities doesn't actually matter, as it's better to buy them now with foreign currency that is depreciating. In 5-10 years, the USD might only retain half its value, given inflation is already 8% per year. But the Chinese government still has to hold a lot of USD because there is nowhere else to put it.
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But the concern is if the infrastructure projects are actually wasteful or productive in the long-term.
And it looks like the focus is on "construction and efficiency of infrastructure networks in fields such as transport, energy and water conservation" as per Xi Jinping via Bloomberg.
The energy aspect is a no-brainer, given we'll likely see 3+ years of high energy prices. This is due to a combination of COVID disruptions and shortages, the Russia-Ukraine War and expectations of high inflation, so it makes sense to buy real assets rather than hold a depreciating paper currency. So I'd expect to see a bigger push into nuclear, wind, solar, grid batteries, long-distance electrical transmission etc. In the long-run, electricity generation is going to shift from coal (and gas) anyway but recently we've seen China having to build additional coal plants to address electricity shortages.
Given that electric vehicles will likely account for the majority of vehicle sales in China by 2025, this will further increase overall demand for electricity at the expense of oil. In the year 2022, it's already looking like one-third of Chinese car sales will be electric (6+ million cars).
Investment in transport infrastructure such as electric vehicle charging points is also a no-brainer, as there are currently only 1.1 million public charging points in China and roughly another 1 million private charging points.
If we're looking at an electric future in China, there will have to be tens of millions more public charging spots for electric cars.
And the widespread availability of public charging spots will accelerate the adoption of electric cars.
Current electric cars have the benefit of being cleaner and also significantly cheaper than petrol/diesel cars over their lifespan. This is an entirely new industry than Chinese companies can take the lead in. And we're still at the beginning, so we can expect to see large improvements in electric vehicles, whilst petrol/diesel technology has plateaued.
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Premature conclusions. If they are going to say that China is cooking its books then they should at least wait for the release of April and Q2 data. That's when the lockdowns started seriously impacting the economy. If you see China proclaiming normal growth for Q2, then that article would be true.
However, for Bloomberg to draw conclusions based on Q1 data and citing lockdowns as the reason for it, it is false. Lockdowns only started seriously affecting China on April
Ask Japan how it cooks it's economic books, they're one of the masters on that regard.
The US as well.
escobar
Brigadier
Everyone cook this book in one way or another. Interesting interview from Joerg Wuttke the president of the EU Chamber of Commerce in China
On Ukraine sanction