Chinese Economics Thread

[sunnymaxi]

State-owned Unicorns.



China strategy is totally different as compared to USA. they are following German model. state/provincial government creating little giants in high tech fields like high end equipment , tools , aerospace , aviation , biomedical , integrated circuit , materials and 21st century related tech. like 5G/6G , green , Ai , quantum etc.

These are state-owned Unicorns funded by Chinese government directly or indirectly. in these unicorns many are privately owned but supported by local government. Beijing stock exchange especially established only for this mission.

so far in 14th five year plan they have created very important 9000 SMEs. solved hundreds of bottleneck in high tech manufacturing. ever since Trump launched tech and trade war, we have seen more breakthrough China did than they have done in past 2 decades.

 

[sndef888]

State-owned Unicorns.

View attachment 111355

China strategy is totally different as compared to USA. they are following German model. state/provincial government creating little giants in high tech fields like high end equipment , tools , aerospace , aviation , biomedical , integrated circuit , materials and 21st century related tech. like 5G/6G , green , Ai , quantum etc.

These are state-owned Unicorns funded by Chinese government directly or indirectly. in these unicorns many are privately owned but supported by local government. Beijing stock exchange especially established only for this mission.

so far in 14th five year plan they have created very important 9000 SMEs. solved hundreds of bottleneck in high tech manufacturing. ever since Trump launched tech and trade war, we have seen more breakthrough China did than they have done in past 2 decades.

I wish this would expand to automotive sector. Many of the high tech components in cars and machines/robots in car factories are still imported from Germany.

 

[sunnymaxi]

I wish this would expand to automotive sector. Many of the high tech components in cars and machines/robots in car factories are still imported from Germany.

one of the most reputed automobile brand in the world have 95 percent localization rate. China provide 95 percent local components/parts to Tesla Shanghai factory. same with other foreign brands currently in Mainland have using domestic supply chain. except for some components. so its fine

sometimes its good to have import rather than build by themselves coz of obvious reasons. its not about technological bottleneck but return on investment is pretty narrow on that specific component.

i don't think so what you said is true.

KUKA most famous German industrial robotic brand is now Chinese owned. their main R and D base and production base located in China. same with ABB. they are now producing robots in China. industrial robots/Machinery are not strategic. in case of emergency China will not face any technical problem to produce those industrial things at home. China also have indigenous complete set of industrial machinery/tools.

 

[paiemon]

The financial sector in China is severely underdeveloped (capital markets and risk management) which causes massive piles of savings to pile up without good investments: this causes a lack of unicorns/startups and firm size from a lack of good equity structures to invest in, a persistent credit crunch as securitized products, structured debt products and corporate bond markets don't exist to be able to effectively manage the risk of loans to corporates and real estate bubbles since its one asset class that investors in China can simultaneously use as a house.

I agree that Chinese households put too much wealth into housing, turning into an investment and speculative asset to the detriment of overall society. And to your point part of the reason is the lack of investable securities to everyday people, whether through lack of literacy, regulation or development of the market. The social safety net gaps also play a role, but having more options to build wealth and prosperity tied to overall economic growth would lead to a more balanced economy and better standard of living for the broader society. That being said, the financial markets should be subject to strict oversight and regulation to avoid turning into Casinos like wall street where the securities are manipulated perpetually higher divorced from the overall economy or average citizen for the benefit of a few. Bottom line is avg citizens should have more ways to create wealth and save through financial markets and assets which should track the overall growth of the economy. The financial speculation of housing in developed countries is outrageous as anyone looking to rent or buy lately knows, and in a less developed country like China its robbing future opportunities.

 

[xypher]

State-owned Unicorns.

View attachment 111355

China strategy is totally different as compared to USA. they are following German model. state/provincial government creating little giants in high tech fields like high end equipment , tools , aerospace , aviation , biomedical , integrated circuit , materials and 21st century related tech. like 5G/6G , green , Ai , quantum etc.

These are state-owned Unicorns funded by Chinese government directly or indirectly. in these unicorns many are privately owned but supported by local government. Beijing stock exchange especially established only for this mission.

so far in 14th five year plan they have created very important 9000 SMEs. solved hundreds of bottleneck in high tech manufacturing. ever since Trump launched tech and trade war, we have seen more breakthrough China did than they have done in past 2 decades.

That's way better than your typical tech "unicorn", i.e. yet another variation of a messenger, some social media with a twist or a shop app. Quality unicorns are as rare as the name suggests, while the bloated valuations of the kind I described above will die out soon because the age of easy money is over.

 

[tphuang]

Another factor I looked at is China's battery sector investment

https://twitter.com/i/web/status/1649486637569658883

The numbers are quite starting for Q1 with over 800GWh of projects in construction or started construction based on the linked article. CATL, Eve Energy & BYD all have projects of 150GWh or more. I was a little surprised by the scale of Eve Energy investment since they haven't been known for automotive batteries. I guess they are anticipating huge demand in ESS market going forward.

 

[Quan8410]

I agree that Chinese households put too much wealth into housing, turning into an investment and speculative asset to the detriment of overall society. And to your point part of the reason is the lack of investable securities to everyday people, whether through lack of literacy, regulation or development of the market. The social safety net gaps also play a role, but having more options to build wealth and prosperity tied to overall economic growth would lead to a more balanced economy and better standard of living for the broader society. That being said, the financial markets should be subject to strict oversight and regulation to avoid turning into Casinos like wall street where the securities are manipulated perpetually higher divorced from the overall economy or average citizen for the benefit of a few. Bottom line is avg citizens should have more ways to create wealth and save through financial markets and assets which should track the overall growth of the economy. The financial speculation of housing in developed countries is outrageous as anyone looking to rent or buy lately knows, and in a less developed country like China its robbing future opportunities.

China put too much money in the real estate is because the local governments depend on land sales for budget, a big part. They know the price will rise no matter what. So it is the fall of past governments. Also the urbanization of China and uneven developement of cities has led to some sky high price in large cities like Shenzhen, Shanghai, etc. The solution is to having a newer governance model for local government to generate budget as well as make development between tier-1, tier-2 cities less uneven.

 

[USTBasisRollCarry]

Make that 3 to 6 months, especially with SVB bellying up...

SVB is resolved and it got bought out by First Citizens, the Bank Term Financing Program (BTFP) by the Fed has stabilized the HTM losses by every other bank by agreeing to buy back treasuries, agencies and MBS at face value and the startups suffered no losses since they got of their deposits back in 72 hours

 

[USTBasisRollCarry]

Do you have any really reliable data on these startups?
1) on how startups are counted
2) how long they are around

The startups tend to have spotty reporting but tend to be software or biotech companies that have publicly disclosed funding terms with PE/VC firms.

3) promising startups that are looking for money, but can't get access to money

A few data points suggest this: the PBOC has substantial amounts of deposits from banks while at the same time, inflation is running lower than 2% in China and any survey of SMEs in China reveal a lot of complaints about finding financing. There are definitely issues with respect of financial/credit intermediation when all 3 facts are simultaneously true. If there are substantial credit demands that can earn higher than the risk-free rate yet banks are keeping their cash at the PBOC earning the risk-free rate, this structure is suboptimal.

 

[caudaceus]

Discussions of why China has fewer startups than the United States have an invariable financial sector component. That's my entire point. Not that the US financial sector is perfect.

The rise of US startups last decade In my mind was due to zero interest rate. When it's gone I don't think there will be torrent of startups like before.