Chinese Economics Thread

[horse]

It's hard to take someone who's account name is abenomics seriously

He's a really good poster.

He puts in a lot of effort, present the short term details. Although the long term is not really discussed too much, he knows.

His job is to focus on the short term, and he is willing to share. That makes for a good forum.

 

[abenomics12345]

Moving up the value chain has a multiplier effect on the economy as a whole. Look how the South Korean economy advanced rapidly after South Korean auto and semiconductor industry became competitive. Creating high valued goods allow you to pay higher salaries for less work done, and higher paid workers will be able to spend more money on goods and services, boosting local economy as well.

I never said anything that disagree with these points - I am simply pointing out the relative magnitude of issues.

 

[horse]

Chinese real estate is literally *the biggest* industry in the world and a deflation by 30% of said industry is not going to be offset over 1 year. How difficult is it to comprehend this simple fact?

People don't understand the Chinese real estate market.

Like, it is the biggest thing in the world.

People in the outside world, will just not understand it.

Okay, this is what I think.

Something like the phenomena like the Chinese real estate market, they probably have to rewrite the textbook.

It is still about capital, right? Capital went into the real estate market, but capital financed all that infrastructure and factories for industrial production.

Okay, I cannot prove it, but seems obvious that the government financed the infrastructure and industry via state owned banks, and the Chinese families and individuals bought up the real estate, that private money was generated from the economic fruits of the long term investments into that said infrastructure and industry.

That is interesting, because capital in the West seems to be controlled by the banks and the 1% or 10%. Capital in China, there is the government and there is the people. And seems to me, the people are bigger.

Not sure what my point is, seems like more questions than answers, lol.

The Chinese real estate market is uncharted ground for everybody.

 

[canonicalsadhu]

Yes, and instead Brazil pissed away all its oil profits via the carwash scandal and have had an excuse of a government for the better parts of the past decade. What's your point? That Korea has a better set of institutions than Brazil?

Have you not read the size of the hole from real estate that I've clearly articulated?

Go listen to Liu He's speech yesterday from Davos - real estate contributes to some 50% of local government finances - where are these hospitals/schools going to come from if local governments go bankrupt? If there are no schools or teachers, who is going to train the high caliber talent for the higher value added industries if they can't do algebra like the Brits?

Chinese real estate is literally *the biggest* industry in the world and a deflation by 30% of said industry is not going to be offset over 1 year. How difficult is it to comprehend this simple fact?

I don’t disagree with your point about real estate being a serious problem but I was commenting on a totally different point as I stated previously.
Regarding Chinese real estate being the biggest industry in the world — I’m not sure where you are getting your numbers. China’s real estate industry is smaller than that of the US. I posted this previously and will repost it again.
2019 data:

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: ~13%.

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: ~10.5%. (in fact, real estate, rental, leasing are smaller than 10.5% of China's GDP because this includes business services as well)

Construction is

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and 7.2% of China GDP, although construction obviously encompasses much more than just real estate construction and China has a higher percentage because it builds more highways, railways, ports, dams, grids, and other public infrastructure.

 

[TK3600]

People like sleepy tend to over focus on small details to conclude on decline of China while ignoring bigger factors like lifting covid restriction and possible currency appreciation. Abeconomic claim to be someone whose profession is related to the field so I will give him the benefit of doubt. However what is the past record of his predictions? Gordon Chang is also a professional mind you. I personally am skeptical of his questionable use of nomimal gdp for measuring global south econmic influence, and how he overemphasize on real estate contribution. I might be wrong of course. We will see.

His stance seems to be that around western prediction of 4.5% seen here.

Look, to be clear, 4-6% growth in 2023 for China is amazing compared to the rest of the world. But China is literally the cleanest shirt in a dirty laundry pile in the world - not the shining beacon of global growth it was in 2010s.

However, life isn't going to feel great when you're accustomed to 8% growth and are told to expect 4-5% in the best case scenario. (This is without that 100-200bp tailwind from population growth you had in the previous 4 decades - so more in per capita terms, which is fucking amazing if they achieved that). In the words of Hua Tuo - you need to 刮骨疗伤 - while it is good for you, it certainly feels like shit while in the middle of it.

My personal guess is an optimistic one of 6%. Not very high like some of us here, but still significantly above western thinktanks. We will see which camp is closer to the truth.

He at very least seems smarter than sleepy and mods already confirmed he is not him. We will see how 2023 goes. If he turns out to humble most of us I will rightfully apologize for accusing him as sleepy. If he is wrong that is also OK. As long as he acknowledge it and facilitate discussion meaningfully it is also great. Otherwise if he is consistently wrong like sleepy but never acknowledge it I will start calling him "drowsy student".

 

[Overbom]

My personal guess is an optimistic one of 6%. Not very high like some of us here, but still significantly above western thinktanks. We will see which camp is closer to the truth.

Good call. I personally say 6.5%.
Bet you that our 6 and and 6.5 calls are going to be closer to reality than whatever all these economists say

Btw, no disrespect to anyone but economics is not a science.

 

[tphuang]

For everyone, I'm just listening to this panel from WEF. Yes, I know WEF is evil... but there are some smart people here. Anyways, I would recommend people to listen to it. The people here believe that business delegation travels to and from China will start in February after the Chinese New Years. That is a good way to re-establish connection between Chinese offices and their Western business. I saw HP this morning say there is no interest in moving production/supply chain away from China. All these are good things. They mentioned 6 months for consumer confidence to return to regular levels based on US experience. I personally think it will be sooner than that because the covid wave swept through China faster. My guess is that consumer confidence will return to regular levels by Q2. One of the speakers here who spoke to someone in Shanghai said that the traffic and subway usage are back to 2019 levels and people are going to shops and cinemas again.

I must say that in the context of European energy crisis and economic issues, there is no better time than now fro China to welcome more European businesses to the low energy production in China. Chinese oil and power are so much cheaper than Europe!

 

[abenomics12345]

People like sleepy tend to over focus on small details to conclude on decline of China while ignoring bigger factors like lifting covid restriction and possible currency appreciation. Abeconomic claim to be someone whose profession is related to the field so I will give him the benefit of doubt. However what is the past record of his predictions? Gordon Chang is also a professional mind you. I personally am skeptical of his questionable use of nomimal gdp for measuring global south econmic influence, and how he overemphasize on real estate contribution. I might be wrong of course. We will see.

His stance seems to be that around western prediction of 4.5% seen here.



My personal guess is an optimistic one of 6%. Not very high like some of us here, but still significantly above western thinktanks. We will see which camp is closer to the truth.

He at very least seems smarter than sleepy and mods already confirmed he is not him. We will see how 2023 goes. If he turns out to humble most of us I will rightfully apologize for accusing him as sleepy. If he is wrong that is also OK. As long as he acknowledge it and facilitate discussion meaningfully it is also great. Otherwise if he is consistently wrong like sleepy but never acknowledge it I will start calling him "drowsy student".

I gave two numbers, 4-5% CAGR is the medium term growth I would expect over the next 5 years. In terms of 2023 specifically, I would expect anywhere in the 4-6% range - probably edging closer to 5.5 than anything else. But honestly even if you had a time machine and knew what it was, what good is it? Literally not going to add any value.

FWIW I have a bet with someone for 500 dollars about retail sales growth for 2023 - my bet was 8% and their bet was 15% - we will be splitting the difference at 11.5% - anything higher I would pay a pro-rata and anything lower I would receive a pro-rata.

I would *love* to be wrong.

The hilarity here is I'm actually personally invested in the success of China - I've yet to see anyone else here put money behind their bold claims.

 

[abenomics12345]

I don’t disagree with your point about real estate being a serious problem but I was commenting on a totally different point as I stated previously.
Regarding Chinese real estate being the biggest industry in the world — I’m not sure where you are getting your numbers. China’s real estate industry is smaller than that of the US. I posted this previously and will repost it again.
2019 data:

Please, Log in or Register to view URLs content!

: ~13%.

Please, Log in or Register to view URLs content!

: ~10.5%. (in fact, real estate, rental, leasing are smaller than 10.5% of China's GDP because this includes business services as well)

Construction is

Please, Log in or Register to view URLs content!

and 7.2% of China GDP, although construction obviously encompasses much more than just real estate construction and China has a higher percentage because it builds more highways, railways, ports, dams, grids, and other public infrastructure.

You have to add on Steel, Cement etc; as well as the multipliers.

The issue is a lot of construction in China happens *because* of real estate development. As well, remember the 65 trln of LGFVs? A lot of that debt requires land sales by local governments to pay interest. Zunyi Road and Bridge is the first of many to come.

Seriously, people need to read 置身事内 to get a sense of the data.

 

[AndrewS]

The biggest thing is Belt and Road - that is necessary for demand generation for you can call the "Infrastructure Industrial Complex" (ala Military Industrial Complex) in China - the economy has gotten too good at building things - need to send that capacity elsewhere. To give you context, as much as people jerk off to MiC2025, it didn't make it into the Party Constitution, but Belt and Road made it into the Party Constitution:

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Then all the industrial upgrade we talk about here are all great - its just that the base is too small today. Like sure we get a couple hundred billion of growth from EVs and a few hundred billion from Semiconductors (now) - that's all great - except the offset is a 5 trln real estate hole. Aviation will be big - it will be a trillion+ industry, as will automobiles (which China is in process of winning).

I would add that solar will be a trillion RMB industry as well.

If we go with 3 million tonnes of solar polysilicon production by 2025, that would be enough for approx 1000 GW of solar panels every year.

Based on Saudi project costings, that would be $642 Billion (2.7 Trillion RMB) of fixed asset investment per year.

1000GW of solar panels (generating say 1000 TWh per year on average) would roughly cover global incremental electricity demand increases every year.

The constraint is finding enough shovel-ready projects (or smaller-scale residential projects)
Plus there is also the storage element, which I think will be largely dependent on EV adoption.

There are some industry musings that solar production will also need to be significantly higher by 2030.