Global South matters, and they will matter quite a lot more in the next 10 years
Chinese Economics Thread
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Most of the "global south" will never matter. They have high population but poor prospects (e.g. Nigeria, Pakistan, Egypt etc). Why is Taiwan so important for our global economy despite having only 24 million people? Because they specialise in high-tech exports, which relatively few countries can. It's quality, not quantity, that ultimately counts.
The only country that can seriously challenge the Western system is China. India in theory wants a multipolar world but is too weak to create it without help from China. Since India view China with suspicion, that's a non-starter.
ASEAN are atypical from the so-called "global south". Their economies are actually doing well but some of them are already quite old (e.g. Thailand) and others are being undermined by Washington (e.g. Myanmar). Vietnam and Indonesia are the two stand-outs but I'm only really hopeful about Vietnam of the two.
I think it's fair to say that nobody can really predict the growth this year or currency movement. If you can predict currency movement, you should go exchange some RMB right now. If you are not willing to do so, don't make statements like RMB will definitely grow. That is far from a certainty.
While I would generally veer to the side of Chinese economy growing like 5 to 6% in 2023, that's far from a guarantee due to the general weakness in the world economy. Hard for China to sell its products if half the world can't feed itself. That's an exaggeration, but you get the gist here.
The main thing China has going for it in 2023 is the low comparison point in 2022. 2022 Q2 was such a weak quarter due to the lockdowns, that 10% YoY growth in Q2 of 2023 is quite possible. You get a EU 2022 situation where 2020/2021 was so weak that they grew in 2022 despite facing mounting trouble.
Just having no lockdowns alone will result in some growth.
While I would generally veer to the side of Chinese economy growing like 5 to 6% in 2023, that's far from a guarantee due to the general weakness in the world economy. Hard for China to sell its products if half the world can't feed itself. That's an exaggeration, but you get the gist here.
The main thing China has going for it in 2023 is the low comparison point in 2022. 2022 Q2 was such a weak quarter due to the lockdowns, that 10% YoY growth in Q2 of 2023 is quite possible. You get a EU 2022 situation where 2020/2021 was so weak that they grew in 2022 despite facing mounting trouble.
Just having no lockdowns alone will result in some growth.
I do think this list is distorted by short term USD strength. Although if you look at it carefully, it's still shocking how irrelevant EU and Japan economy is right now vs US & China. China alone is basically the combined GDP of non-US G7 economies. By end of 2023, there will be quite a gap between China and those nations.
It's quite interesting the Iranian economy is larger than Italy at this point.
On the other hand, the growing economic distortion in APAC also shows why ASEAN countries will be increasingly dependent on the Chinese economy.
I'm too lazy to do this now, but would be good if we can do a chart of Chinese trading breakdown by region for 2022:
US
EU
ASEAN
Latin America
RCEP
Africa
Russia
Western Asia
1. Justin Lin states potential growth is 8%, not mid-5%.
2. China's debt is denominated in RMB, its debt is whatever it wants it to be. For as long as China's per-capita income is less than the OECD average, capital formation and productivity growth will continue to drive GDP.
3. Population growth is decades away from reaching its end, you just have to define "population" correctly. 25% of China's labour force is in agriculture, that should be less than 5%. That means more than 20% of China's workforce isn't participating in the productive economy. Education levels, urbanization, etc. will continue to feed more people into China's technological and industrial machine for at least another generation.
4. They (as in pessimistic economists) are a joke. China's robot density is already higher than America's and approaching Germany's.
5. There is no "debate", it's just idiots who have been wrong for decades continuing to make noise and be wrong. A nice chunk of the reason America is in the state it's in is that these people get paid to provide policy guidance.
The most important thing is that China continue its convergence with the developed countries and close that gap as soon as possible. From that perspective, it doesn't matter if growth in China is 0.5% so long as "growth" in the West is -5%.
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Chinese growth expectations for 2023 aren't really dependent on external sources.
It's based on "family bank balances are up 42 per cent, or $4.8tn, since the start of 2020 — an amount that is larger than the UK’s GDP."
Much of that saving was based on fear, so there is going to be a lot of spending that will be unleashed after COVID passes.
Source below
ft.com/content/e592033b-9e34-4e3d-ae53-17fa34c16009?sharetype=blocked
They'll find a way to pay, they have no choice because they can't live without Chinese exports. As for how they'll pay, well... there's a reason people have two kidneys.
Tell me what you think the USDCNY exchange *should* be based on what you think PPP adjustments should be - and I will happily give you CNY at that exchange for your USD.
Substantial amount of ASEAN trade is actually rerouting by Chinese companies to bypass US tariffs; or Chinese parts (with high value added) to be assembled (cheap labour) in ASEAN; terminal consumption is still in the US - ASEAN actually doesn't have nearly as much economic value add in that trade relationship. So they don't quite matter other than what China used to do in the 90s. Majority of ASEAN is socially/politically as fucked as the US/LatAM - they do not have the institutions nor the state capacity to develop into middle income economies anytime soon. Like I said, wake me up when Belt and Road start paying dividends.
See my comment re: the decomposition of that 'pent up demand' - if western media is bullshit when they report 'anti-China' headlines, I don't see how you can credibly cite them when they report something that you happen to agree with. Idiotic reporters *cough* Minnie Chan *cough* are just idiots who should be ignored.
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You ought to know that the volume of currency exchanged between the US and China is a trivial portion of both economies. Total trade with the US is less than 5% of China's GDP. The exchange rate is completely arbitrary and has no bearing on the fundamentals of China's economy.
Prove it.
Your decomposition doesn't add up to 100%.