Chinese Economics Thread

[Minm]

The IMF has released the

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of its World Economic Outlook publication, which extends the horizon of its economic projections to 2028.

In 2028, the IMF projects China's GDP to be $27.49tn against USA projected GDP of $32.35tn. That is to say, the projection is for China's GDP in 2028 to be 85% of USA's GDP, up from 71% in 2022.

This is a significant downgrade from the October 2022 projection (93% in 2027), which was in turn a slight downgrade from the April 2022 projection (94% in 2027).

They're assuming an exchange rate of 6.16 RMB per dollar in 2028. If the US continues to grow mostly by inflation with very little growth in real terms, then the dollar should depreciate. If the currency doesn't adjust, then the RMB will be even more highly undervalued given its purchasing power. That doesn't seem very likely. And even if the exchange rate prediction implicit in IMF estimates comes true, then the US will end up with a highly overvalued currency, which is just going to kill domestic manufacturing and make them more import dependent

 

[Stierlitz]

A survey of 28 economists in March revealed that, on average, they expect the Chinese economy to grow 5.4% in 2023, up from 4.7% they forecast in December. The survey was jointly conducted by Nikkei and Nikkei Quick News.

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[Eventine]

Looking at the IMF projections the US GDP nominal growth is like 70-80% driven by inflation which is pretty unprecedented. I don't know how sustainable that is, and I wonder the long-term effects on the US competitiveness. They could probably get away with that if they had a monopoly on technology (like they had for the past decades and enjoyed solid growth as a result) but with the technological rise of China I don't think this is sustainable at all.
And apparently China's growth is going to decelerate to 3.4% in 2028? So basically China will stagnate at around 1/4th of US GDP/capita. This report seems rather absurd to me.

IMF's two main reasons for China slowing down are:

• Declining demographics.
• Slow down in aggregate productivity growth.

Both are legitimate concerns, but IMF projections assume past trends will hold for the future - ie that China's present trajectory with respect to demographics can't be corrected, and its aggregate productivity growth will continue to slow at the current rate.

They're saying, essentially, that the Chinese government will fail at everything it's set out to do. In that case, yeah, China will surely stagnate and not catch up to the US, which can always print more money and import more people to "boost" its economy.

 

[Lethe]

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They can't predict a few months ahead. I'd take their prediction 5 years ahead with a huge grain of salt.

The article you link is from January 2023. Notably, this is also when the current WEO report began to be put together: "The World Economic Outlook (WEO) database is created during the biannual WEO exercise, which begins in January and June of each year and results in the April and September/October WEO publication."

For comparison, the April 2017 edition of the WEO projected China's GDP in 2022 to be $17.7tn against USA $23.76tn (74.5%). The April 2023 edition lists China's 2022 GDP as $18.1tn against USA's $25.46tn (71%).

 

[CMP]

This article is from January 2023. Notably, this is also when the current WEO report began to be put together: "The World Economic Outlook (WEO) database is created during the biannual WEO exercise, which begins in January and June of each year and results in the April and September/October WEO publication."

For comparison, the April 2017 edition of the WEO projected China's GDP in 2022 to be $17.7tn against USA $23.76tn (74.5%). The April 2023 edition lists China's 2022 GDP as $18.1tn against USA's $25.46tn (71%).

Those numbers are deceptive when they do not factor in COL increase, inflation, etc. One could make a very strong case that 85-90% of US GDP growth (this year and last) is not quite real in the sense that a huge portion of it is FIRE schemes and government-approved vendors selling 50$ hammers for 500$ and 5$ boxes of ballpoint pens for 50$. The % of economy that is industrial (but measured in absolute terms) is a much more accurate measure of economic power. Otherwise it's just price gouging, asset flipping, and shell games all the way down the rabbit hole. A veritable economic house of cards.

 

[FairAndUnbiased]

Those numbers are deceptive when they do not factor in COL increase, inflation, etc. One could make a very strong case that 85-90% of US GDP growth (this year and last) is not quite real in the sense that a huge portion of it is FIRE schemes and government-approved vendors selling 50$ hammers for 500$ and 5$ boxes of ballpoint pens for 50$.

They have immense value added as anything murican is worth more. Murica.

 

[sunnymaxi]

Those numbers are deceptive when they do not factor in COL increase, inflation, etc. One could make a very strong case that 85-90% of US GDP growth (this year and last) is not quite real in the sense that a huge portion of it is FIRE schemes and government-approved vendors selling 50$ hammers for 500$ and 5$ boxes of ballpoint pens for 50$.

it amaze me. why people always forget RMB appreciation when it comes to nominal GDP ..

they thinks, RMB will forever stay on 6-6.50. LOOL

it is matter of few years before RMB will appreciate. China doesn't need much growth to surpass USA in nominal

1 US dollar = 5 RMB .. game over

 

[CMP]

it amaze me. why people always forget RMB appreciation when it comes to nominal GDP ..

they thinks, RMB will forever stay on 6-6.50. LOOL

it is matter of some years before RMB will appreciate. China doesn't need much growth to surpass USA in nominal

1 US dollar = 5 RMB .. game over

I imagine part of keeping it stable rather than appreciating steadily, at least until this competition reaches the most definitive (and terminal) conclusion, is to maximize market share and supply chain control. Chinese domestic consumption is being temporarily sacrificed at the altar to topple an evil empire.

 

[BoraTas]

This to me looks like the effect of global economy cratering. Raw material prices coming down. Demand for Chinese goods are coming down. Everything is getting cheaper. Kind of crazy to me CNY continues to struggle in its valuation.

https://twitter.com/i/web/status/1645600554385821696

Yuan isn't traded much in Forex markets so its value is mostly about domestic sentiment which is not great. US interest rates are also over 4%.

And as far as I read, one of the chronic problems of the Chinese economy is generated money goes to production (and to large corporations) to an unhealthy level. So in China, money printing generates deflation and consumer sentiment recovers slowly after crises.

 

[tphuang]

Yuan isn't traded much in Forex markets so its value is mostly about domestic sentiment which is not great. US interest rates are also over 4%.

And as far as I read, one of the chronic problems of the Chinese economy is generated money goes to production (and to large corporations) to an unhealthy level. So in China, money printing generates deflation and consumer sentiment recovers slowly after crises.

i beg to differ as someone that works at a company that does FX trading and I can see how much CNH we trade. It may not be traded as frequently as EUR/USD, but it has enough action.