Chinese Economics Thread
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And we have to thank Washington DC, they're the one doing their utmost to achieve a peaceful reunification...lol
Now that the two countries are so close in GDP, exchange rates are much more relevant. China would have a larger nominal GDP if the RMB appreciates to 4.9
In 2027, according to IMF projections, China would only need the RMB to reach 5.6 for its economy to be larger.
We all know that 7 RMB buys a lot more goods and services than 1 dollar and as China becomes more developed the exchange rate should more closely reflect actual purchasing power. If China wants to be the largest economy today, it could dump the dollar reserves and buy up all RMB in the outside world. The currency would jump and China would officially be larger, but the exports would suffers
Yes, the decline and fall of the EU is a remarkable story and shockingly, they don't even seem to notice! In Europe they keep calling the EU the largest common market, not realising how much smaller than China or the US they are
Can you contribute something a little more constructive than unbridled nationalism and chest beating please?
This is a formal warning. The next time a similar or more severe act occurs, there will be a formal penalty
China is already the largest economy by a fair margin. Letting the RMB appreciate wouldn't even make the Chinese economy bigger in a meaningful way, all it would mean is that it would be bigger in terms of relative dollars but Chinese are not buying stuff with dollars.
The consumer market inside China, I.e. the economic activity that makes up almost 90% of the country, would still have the exact same level of activity as before, meaning the economy did not increase in real terms. Based on that, I think letting RMB grow is not a good move right now.
EU is actually not shabby as a market. They're just a bit smaller than US and China. Their real problem is that they have no cohesion. The only thing they can agree on are stuff dictated by outsiders, by themselves they never make policies meant to improve their market.
It is much much better for China to go all in on sponsoring Eurosceptism and then use bilateral deals on every (former) EU member.
supercat
Major
Both of the central government and local governments in China have various tools at hand to deal with any economic downturn.
The trend for yuan is appreciation. The combined effects with faster GDP growth assure that China will have a larger GDP than the U.S. in nominal terms in a few years.
The trend for yuan is appreciation. The combined effects with faster GDP growth assure that China will have a larger GDP than the U.S. in nominal terms in a few years.
I don't think China plans anything based on "nominal" gdp which can wildly fluctuate based on exchange rates and says almost nothing about national wealth. It is simply a too inaccurate measure for useful goals to be set.
The problem of nominal gdp is that it tries to create an imaginary baseline where goods and services cost the same globally, ignoring that different places have wildly different living costs.
In a hypothetical world where Chinese economic activity ran on nominal dollars, I.e. assuming costs of everything in China is equal to USA, say Califonia or NY costs, then most people in Shanghai, HK, Beijing, SZ etc would not even be close to able to affording their housing and these cities would be evacuated like Detroit.
But in reality that is not true, not only do people live there, but they have a lot of extra spending money.
An economic theory that does not describe reality has very low value.
Sure, nominal might be useful to show us what life would have looked like in an alternate reality where US retained a lead because rent and services in China suddenly costed a lot more. However, it is not useful if we were to try and create goals and policies based on the real world.
And before someone accuses me of bias or whatever, if America hypothetically had better/wider access(=prices) to goods/services vs China, they could also have a smaller nominal gdp but larger actual gdp than China, and I would defintely consider them the largest economy if things were that way.
Nominal GDP matters because foreign companies selling into your market don't care what they can buy with the revenue in your currency, they only care about how much they earn in their own currency. So if the RMB appreciates, the Chinese consumer market will be even more attractive for international exporters and commodities will be cheaper for China. Nominal GDP also determines how much you can borrow in foreign currencies and how much your money is worth when visiting a foreign country.
So nominal GDP describes an important reality. That's why there's so much prestige that comes with being the largest economy by nominal GDP. PPP is useful to compare relative quality of life, nominal compares relative international power.
Of course if you care about how that economic power translates into military power, industrial production is much more important. And volume is more important than dollar value. China is already the largest industrial power the world has ever seen. China produces more steel than the rest of the world combined. That's why they had to switch from calling western countries "industrial economies" to so called "advanced" economies. Because China has more industry than all G7 countries combined