Chinese Economics Thread
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supercat
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The trade data indicate that the U.S.' attempt to decouple and isolate China is just some fool's errands. Also, these data suggest that China's growth rate in 2022 might be higher than previously estimated.
Here is China's export to Russian compared to other nations. I wonder how much of these was conducted with their own currencies?
2023 growth will be on the stronger side than potential growth given the low base effect from 2022 pandemic controls. However, I've dug into that so called 'pent up savings' - it's actually not nearly as big as otherwise would be indicated. I've seen data that decomposes the savings by region and its in poor regions that people have saved - rich regions (Zhejiang/Jiangsu) have actually seen savings run-rate decline. I've seen a study that's decomposed the contribution of the reduction in Retail Sales we saw in 2022 vs run-rate (pre-pandemic), and it has been driven largely by income reduction (~60%), reduced propensity to consume (~60%), and the last part excess savings (20%).
Families have suffered significant negative wealth effect as a result of 1) reduced property price growth expectations (and in certain cases have seen their property prices drop); 2) stock market investments shrinking as a result of the mini-bubble in 2021 deflating in equity markets.
As a result (partially) of 1) - people have substantially reduced property purchases in 2022 vs. 2021 - with sales down some 30%. As a result of the high economic exposure to real estate (20-30%, depending on who you ask, including the secondary/tertiary multipliers) in the overall economy, income growth expectations are now lower. So we've seen a bit of a vicious cycle in expectations. Three red lines implemented in 2020 to reign back this also has been contractionary. Overall this is the controlled demolition of the real estate sector - and the slowdown we are seeing is a feature, not the bug, of said policies. However they've started stimulating to stabilize the economy.
Longer term though, growth will not be as high as it was in the 2000s/2010s - if you read the more optimistic economists (Justin Lin Yifu, for example), they would argue that potential growth is in the mid-5% range for China; pessimistic economists out there believe China is stuck in the middle income trap already (capital formation as driver of GDP is tapped out given debt/GDP, population growth has reached its end, and they do not believe productivity growth will come). This is of course the center of debate as it relate to industrial upgrade in various sectors, which is the key to driving productivity growth (robots making more things faster, for example).
In short, China is in a bit of a liquidity trap with weak, but notably improving consumer/business confidence. I'm fairly optimistic that 2023 will see some bounce back - but the longer term is not as rosy as it was pre-Shanghai - that really changed the fundamental behaviour/expectations. I've met with some Chinese companies' management teams lately, and we are seeing some green shoots, 2023 should be much better than 2022.
Families have suffered significant negative wealth effect as a result of 1) reduced property price growth expectations (and in certain cases have seen their property prices drop); 2) stock market investments shrinking as a result of the mini-bubble in 2021 deflating in equity markets.
As a result (partially) of 1) - people have substantially reduced property purchases in 2022 vs. 2021 - with sales down some 30%. As a result of the high economic exposure to real estate (20-30%, depending on who you ask, including the secondary/tertiary multipliers) in the overall economy, income growth expectations are now lower. So we've seen a bit of a vicious cycle in expectations. Three red lines implemented in 2020 to reign back this also has been contractionary. Overall this is the controlled demolition of the real estate sector - and the slowdown we are seeing is a feature, not the bug, of said policies. However they've started stimulating to stabilize the economy.
Longer term though, growth will not be as high as it was in the 2000s/2010s - if you read the more optimistic economists (Justin Lin Yifu, for example), they would argue that potential growth is in the mid-5% range for China; pessimistic economists out there believe China is stuck in the middle income trap already (capital formation as driver of GDP is tapped out given debt/GDP, population growth has reached its end, and they do not believe productivity growth will come). This is of course the center of debate as it relate to industrial upgrade in various sectors, which is the key to driving productivity growth (robots making more things faster, for example).
In short, China is in a bit of a liquidity trap with weak, but notably improving consumer/business confidence. I'm fairly optimistic that 2023 will see some bounce back - but the longer term is not as rosy as it was pre-Shanghai - that really changed the fundamental behaviour/expectations. I've met with some Chinese companies' management teams lately, and we are seeing some green shoots, 2023 should be much better than 2022.
That's literally not possible. Urban population and more importantly the level of education is still increasing, fast. Unless they believe a primary school graduate from rural is as productive as a university graduate urbaner then they are repeating Collapse of China-industrial-complex talking points. I don't think any scenario that doesn't have RMB appreciating and China growing at 4.5% is realistic at all.
2023 will be weak for exports - Europe is full on in stagflation and the US is going to see a slowdown at best, if not a full on recession in 2023.
I think what you're saying is very high likelihood, but 4.5% growth you're citing is the potential growth - just don't discount the risk of mis-execution at local government level - which can cause headaches for consumers/businesses alike. That is how you get highly educated people want to leave.
What about the expected performances in the rest of the Global South economies in 2023?
Vietnam is doing great - but it's the GDP of Heilongjiang with the population of Henan.
Singapore is great, it's got the population of Chaoyang district in Beijing.
India's also big and growing, but it's base is so small that it doesn't move the needle globally. Majority of Indians consume similarly to Sub-Sahara Africa (see my comment on Africa below).
Brazil central bank overnight rate is 13% - inflation is running hotter than that.
A friend visited Indonesia to look at 'great investment opportunities' and came back saying that consumers are struggling.
Peru just had a coup, Chile is okay, but it's population smaller than Beijing.
Africa - sure, lots of people but they barely can feed themselves.
What you need to understand is that the Global South doesn't matter *today*, economically speaking. Global GDP is ~100 trln USD, top 20 economic entities account for about 80 trln of that 100 trln. Wake me up in a decade when Belt and Road starts to work out and their economies start growing.
Folks, if you're living in North America feeling the grocery bills - it's not like basic commodities aren't globally fungible goods that don't have the same prices - people in the global south are struggling 5-10x worse than you are.
What is the breakdown of those numbers by countries. How did it get the record surplus? with what countries?
Show me the PPP and we can talk. Money do not have same purchase power in so called developed country. China alone can solo the top 3 and China belongs in global south. Saudi Arabia can collapse the economy of the so called developed world overnight but sure they hold no power according to you. The truth is the wealth of the western country are severely overrated. Their cost of living is high and debt also high. They are on path of collapse and that is not something to be jealous of.