Chinese Economics Thread

[Michaelsinodef]

I wouldn't call the tariffs a "failed policy". It was a necessary response to the previous administration's surprising hostility towards a long time trading partner. Critical Australian imports began to be seen as vulnerabilities, and the tariffs signaled Chinese customers to look for potential alternatives. Was it an overreaction? Maybe. Australian imports are still preferred as you've pointed it out.

Personally I would like an end to the finger-pointing and a return to pre-2018 relations, so I'm hoping for a positive outcome to the meeting.

No, @Lethe is corret that it would be a 'failed policy' if it's end goal was to say, 'change Australian behavior through punishment'.

But we don't know if that was the goal, it could be the big goal, it could be 1 among many goals or it could not at all be a goal.

In each case, whether or not the policy would then be a 'failure' or not would depend on the goals/vision/wanted results for the policy set at its outset.

 

[xypher]

Beijing's economic sanctions against Australia have failed to produce any useful results, partly because Beijing is evidently unwilling to inflict serious costs on itself by restricting Australian iron ore, but mostly for the same predictable reasons that Washington's sanctions against any number of countries also typically fail to produce useful results. Recognising failed policies and being willing to move beyond them is the mark of an intelligent, pragmatic government. As things stand, Canberra wants something from Beijing, and Beijing will want certain things in return.

I suspect that one of the things Beijing will want is guarantees that vehicle exports to Australia (currently we are something like China's fifth- or sixth-largest vehicle export market, with considerable potential for future growth) will not fall victim to the full-spectrum economic warfare campaign that Washington is pushing its allies to adopt.

Sanctions did hit the industries and sectors that were put under them, people who thought that they could easily replace Chinese market are now

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. Moreover, even if the bans are lifted,

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:

Some insiders say that the bulk of trade is expected to eventually resume, but a considerable chunk has already been supplanted by other countries

“They don’t buy it at all, but rather they import barley from alternative origins as well as alternative grains such as corn,” he explained. “Australian barley has not been on top of the list for Chinese buyers in recent years – actually, it isn’t on the list at all.”

Pierre Tam, president of the Hong Kong Wine Industry Association, said that Australian wine cannot reclaim its lost market share in China because products from Chile and Argentina have already replaced it.

However, Chinese restaurant owners and seafood importers said Australian rock lobsters are set to face “severe” competition

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if they return to Chinese restaurant tables.

Yes, primary reason why those effects are maybe not that visible on the overall numbers is because the bulk of Chinese imports from Australia is iron ore. However, China is already addressing this issue by developing new mines in Africa and will probably source even more iron from Brazil, seeing that Lula is driving his country steadily towards China. I expect this to be one of the things Xi & Lula will discuss in their meeting. Plus don't forget that Russia & China are now closer than ever and Russia also has major iron ore reserves. The pressure is mounting on Australian exporters, they are now open to

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.

China is securing that iron ore dependency front so that when the push comes to shove, they could cut off Australian iron ore without too much pain. It will still bring short-term pain, perhaps a lot of it (kind of like cutting Russian energy did to EU) but in mid- and long-term China will source the necessary resources from other place while Australia will permanently lose a huge chunk of their trade.

 

[tphuang]

Yes, primary reason why those effects are maybe not that visible on the overall numbers is because the bulk of Chinese imports from Australia is iron ore. However, China is already addressing this issue by developing new mines in Africa and will probably source even more iron from Brazil, seeing that Lula is driving his country steadily towards China. I expect this to be one of the things Xi & Lula will discuss in their meeting. Plus don't forget that Russia & China are now closer than ever and Russia also has major iron ore reserves. The pressure is mounting on Australian exporters, they are now open to

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.

You are not assessing this correctly. Australian iron exporters have already settled iron trades in RMB. The main reason are the cheap Russian iron import in RMB. Now, they need to force these people to use Dalian commodity exchange and to settle in RMB or they won't buy them.

You need to encourage Australians to trade in RMB. It was due to this that Vale is also pushing to trade in RMB and that's how we got de-dollarization in the recent China/Brazil talks. Of course, the catalyst for this is Russia.

The entire de-dollarization all started with Russia. Once 1 major commodity/energy exporter started to settle in non-USD currency, everyone else have to do the same or risk losing market share with their #1 customer.

That's why the Saudis are investing in Chinese refineries and securing long term supply contracts (most likely in RMB). Without Russians being cut off from USD/EUR, there is no way things can move this quickly

similarly, this has also helped INR and will probably also help IDR. And this is a good thing for China and CNH. The problem facing China is America using its larger economy to push its hegemonic goals. a weaker USD will reduce that.

https://twitter.com/i/web/status/1642034029527457797

China needs to get Hong Kong to peg HKD to CNY and stop investing in UST. It's kind of stupid for HK to still accumulating more UST at this point.

With Lula visiting soon, let's see if FTA gets negotiated. Lula wants a more united deep south american union to negotiate with China

https://twitter.com/i/web/status/1642062842663944192

 

[Overbom]

With Lula visiting soon, let's see if FTA gets negotiated. Lula wants a more united deep south american union to negotiate with China

https://twitter.com/i/web/status/1642062842663944192

I thought this was always on the cards, its just that they preferred that the EU-Mercosur agreement was first ratified before moving on with negotiating with China (obviously to have a stronger negotiating position).

The only big difference IMO could be if Brazil really pushed for a FTA without waiting for the EU-Mercosur agreement to be ratified first, but that would be quite stupid so I doubt they would do it

 

[tphuang]

I thought this was always on the cards, its just that they preferred that the EU-Mercosur agreement was first ratified before moving on with negotiating with China (obviously to have a stronger negotiating position).

The only big difference IMO could be if Brazil really pushed for a FTA without waiting for the EU-Mercosur agreement to be ratified first, but that would be quite stupid so I doubt they would do it

The problem for Lula is that Uruguay is pushing for its own FTA with China and same with Argentina. Chile and Peru already have FTA with China IIRC. So while Lula would prefer to wait, things are not always in his timeline

 

[vincent]

Beijing's economic sanctions against Australia have failed to produce any useful results, partly because Beijing is evidently unwilling to inflict serious costs on itself by restricting Australian iron ore, but mostly for the same predictable reasons that Washington's sanctions against any number of countries also typically fail to produce useful results. Recognising failed policies and being willing to move beyond them is the mark of an intelligent, pragmatic government. As things stand, Canberra wants something from Beijing, and Beijing will want certain things in return.

I suspect that one of the things Beijing will want is guarantees that vehicle exports to Australia (currently we are something like China's fifth- or sixth-largest vehicle export market, with considerable potential for future growth) will not fall victim to the full-spectrum economic warfare campaign that Washington is pushing its allies to adopt.

So what if Aussies continues its path toward becoming a vassal state? Discouraging it is just one part of the strategy. Another likely part of the strategy is to discourage other countries from following its footsteps.

 

[tphuang]

The story of Chinese industries winning is often the story of its East Asian rivals falling. Last November, Nikkei had an article that said China was on track to have 43% of market share in OLED vs Korea at 55%.

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That's quite different from previous years when Korea probably have over 70% market share. The untold story is how Japan has been completely defeated. Recently, JOLED filed for bankruptcy. That's basically the end of Japan in OLED. A story that has already played out in shipbuilding

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We will see what happens now, but the focus should be on BOE. There has been some concerning stories about its production for Apple thus far. But if it can fix those things up, then the long term trajectory for China in OLED is quite good. With Samsung being the only obvious smartphone maker that will buy OLED from its domestic native producers

 

[tphuang]

More data point of a recovery in the Hong Kong economy. Utilizing its closeness to Chinese capital to attract more crypto firms. Also helped by the closure of numerous crypto related banks in America.

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[henrik]

More data point of a recovery in the Hong Kong economy. Utilizing its closeness to Chinese capital to attract more crypto firms. Also helped by the closure of numerous crypto related banks in America.

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Hong Kong is a much safer place for Binance's founder Zhao Changpeng these days.

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[tphuang]

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good summary of where Huawei is at. They've turned things around and 2023 should be a year of growth for them into new areas.

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This is good news for Chinese refineries. India is extend ban on export of diesel/gasoline, so Europe will have to buy more from China.