Chinese Economics Thread

[ZeEa5KPul]

I think we're missing the forest for the trees here. I would counsel against taking the "investor" point of view when thinking about the Chinese economy and instead look at it from a strategic perspective. The Chinese banking sector could be in far worse shape than what @abenomics12345 depicts; so what? What matters strategically when considering an economy is two factors:
1) Its capacity to generate technology, and
2) Its capacity to scale technology.

China's performance is very encouraging on both counts. We regularly see examples of China rocketing up the world rankings in quantity and quality of scientific research, investments in science and education, number of STEM graduates, etc. That will pay massive dividends in the future.

On (2), China is the undisputed world champion with nothing remotely approximating a challenger in sight. It's Mike Tyson vs ten year-olds at this point. China didn't invent the lithium ion battery or the photovoltaic cell, but it absolutely dominates these and other strategic technologies. (2) will only strengthen further as (1) develops.

You'll notice that real estate markets have very little to do with (1) and (2).

Let's take the solar industry as an example. Prices for solar panels are in free fall:

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This is fantastic from a strategic perspective (not entirely, as I'll discuss later), but any current investor looking at this kind of price drop is tearing his hair out. You're looking at your futures profits getting butchered in a cut-throat price war. But even from an investor perspective, there are investors and there are investors. Prospective investors are looking at this as a golden opportunity - they'll get in when prices bottom out and make a killing.

China gets abundant clean energy that can't be interdicted by the US navy. No pollution, no carbon emissions that negatively impact China in the future, supporting a local industry instead of sending money abroad, energy security - what's not to like? Even better, prices will fall even further as sodium-ion batteries enter the market and "new" capacity (from falling curtailment) comes online.

It's so good that I'm worried the Chinese solar industry will kill the Chinese nuclear industry. It's clear why China needs a vibrant nuclear industry, and I hope the government will enact mandatory nuclear energy quotas to protect the industry from extinction. As much as I love solar, solar doesn't produce HEU and plutonium.

 

[sunnymaxi]

It's so good that I'm worried the Chinese solar industry will kill the Chinese nuclear industry. It's clear why China needs a vibrant nuclear industry, and I hope the government will enact mandatory nuclear energy quotas to protect the industry from extinction. As much as I love solar, solar doesn't produce HEU and plutonium.

nope. China has already plan something big for nuclear technology. spending huge amount of money in this industry. just recently localized all core parts of two different types of third generation reactors. Hualong One and Guohe One.

CNNC plans to start building a follow-on version, named Hualong Two, by 2024. It will be a more economical version using similar technology, reducing build time from 5 years to 4, and reducing costs by around a fourth from 17,000 yuan per kW to 13,000 yuan per kW.

Since 2021, China operating a demonstration generation-IV reactor, the HTR-PM

Announcement in 20th National party congress -

Fifteen national political advisors submitted a joint proposal to the ongoing two sessions, highlighting the necessity and feasibility of building nuclear power plants in inland areas, strengthening the development of nuclear power, expanding the spatial distribution of nuclear power and promoting the comprehensive use of nuclear energy for heating.

The 20th National Congress of the Communist Party of China views energy security as an important part of the modernization of national security system and proposed to promote carbon peaking and carbon neutrality actively yet prudently and safely develop nuclear power. Yang Changli, a member of the 14th National Committee of the Chinese People's Political Consultative Conference (CPPCC) and chairman of China General Nuclear Power Group, together with 14 other members of the CPPCC National Committee, submitted the proposal.

"China has established a solid foundation for achieving bigger goals and higher quality development of nuclear power," Yang told the Global Times on Sunday. In order to give full play to the strategic value and positive role of nuclear power, efforts should be made to maintain the construction of more than 10 generator units per year in the next decade under the premise of ensuring safety.

 

[Deleted member 24525]

One child policy is fundamental for China especially during the early days of reopening. Without one child policy, there would be at least another 400 to 500 millions people in China. How much resources would need to allocate and how many jobs need to create for these people? Does anyone think China could give people the same kind of education, nutrients, and resources if China has additional 500 millions people.

So no, one child policy is a right policy and this policy is one of the reasons why China can develop so rapidly. However, one child policy has run its course. CPC's mistake is not relaxing and ending one child policy sooner. People should be allowed to have 2 child in early 00s. And 3 child policy should enact in at least 10 to 15 years ago. But no government is perfect and no one can predict such a rapid decrease in the birth rate. Although, it is still CPC's responsibility to fix this problem and they need to develop and derive a feasible long term plan quickly in order to arrest the decline of births.

As for housing policy, without the old housing policy, there won't be an economic miracle after the great recession. Land sales is the main source of income for infrastructure and urban planning. Most of the development and modernization in China during the last decade can't do without land sales. It is just a lesser of the two evils but a necessary for housing prices to increase. The mistake is that the government didn't take enough action to prevent the rise and many local governments have become addicted to the easy money from land sales and refuse to alleviate housing prices even after pressure from the central government.

As for debt, China has one of the world highest saving rates, it is not unwise to compare China and the US for the debt to disposal income ratio. Most Chinese household has enough saving to pay off their debts if needed or at least there are enough savings to keep paying mortgages for a long period of time for many Chinese household due to the very high saving rates. US problem is low to negative saving rates and high personal debts.

Your sentiment on the one child policy is right but off on the details. The policy itself actually had essentially zero impact on Chinese fertility. It was the Later, Longer, Fewer campaign in the 70's that was the decisive policy-driven factor in lowering the birth rate, and which created China's accelerated demographic transition that greatly aided its development. The one child policy by comparison was put into place after widespread birth control access and rapid urbanization had were already causing the fertility rate to rapidly decline. This Harvard study explains it nicely.

Challenging Myths About China's One-Child Policy - Scholars at Harvard

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[BoraTas]

China gets abundant clean energy that can't be interdicted by the US navy. No pollution, no carbon emissions that negatively impact China in the future, supporting a local industry instead of sending money abroad, energy security - what's not to like? Even better, prices will fall even further as sodium-ion batteries enter the market and "new" capacity (from falling curtailment) comes online.

China's wind and solar focus many drivers other than environmental concerns as you say here.

1- It is already the cheapest form of energy. Fossil fuels became expensive and plants to burn them are quite expensive nowadays. Solar and wind directly reduce the cost of production and living.

2- Air cleanliness directly affects citizens' health and happiness. Both are important.

3- It is the way to energy independence which is impossible for China otherwise, at least not without abnormal methods.

4- Solar and wind farms would be quite resistant to enemy strikes, unlike coal plants with turbine rooms that can be targeted.

5- It can become an export industry that brings a lot of money.

EVs are complementary to clean energy. They can directly use the electricity that is generated, eliminating the need for fuel.

 

[HighGround]

Your sentiment on the one child policy is right but off on the details. The policy itself actually had essentially zero impact on Chinese fertility. It was the Later, Longer, Fewer campaign in the 70's that was the decisive policy-driven factor in lowering the birth rate, and which created China's accelerated demographic transition that greatly aided its development. The one child policy by comparison was put into place after widespread birth control access and rapid urbanization had were already causing the fertility rate to rapidly decline. This Harvard study explains it nicely.

Challenging Myths About China's One-Child Policy - Scholars at Harvard

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It also has little to do with the "number of jobs we need to create". More people, means more jobs are created automatically. This is like the stupid illegal immigration argument of immigrants "stealing" American jobs.

Jobs create other jobs. More people means you need more housing which means more construction workers which means more cooks which means more farmers which means more tractors which mean more engineers and so on and so forth.

Quite frankly, if China had more people, China would have a bigger economy.

 

[Deleted member 24525]

It's so good that I'm worried the Chinese solar industry will kill the Chinese nuclear industry.

They serve different purposes. Solar/wind are mainly for accommodating growth in power demand whereas nuclear is for replacing already-existing coal and other fossil power generation/capacity. The government is kind of dragging its feet on nuclear at the moment because of neuroticism over water availability issues inland but long term (2026+) they will sort it out.

 

[Deleted member 24525]

It also has little to do with the "number of jobs we need to create". More people, means more jobs are created automatically. This is like the stupid illegal immigration argument of immigrants "stealing" American jobs.

Jobs create other jobs. More people means you need more housing which means more construction workers which means more cooks which means more farmers which means more tractors which mean more engineers and so on and so forth.

Quite frankly, if China had more people, China would have a bigger economy.

This isn't true. Immigration and changes in the wage share of national income have a strong negative correlation. More jobs are not created automatically because the people coming are overwhelming broke. Dumping huge numbers of desperate people onto the job market with no corresponding increase in aggregate demand causes wages to fall, it's simple supply/demand. Working class people aren't stupid for recognizing this dynamic.

Now the story here is different for China, since its government not only goes out of its way to spur investment and create jobs, but actually has the tools to do so unlike most others, however the country has its own reasons for not wanting even more people.

 

[HighGround]

This isn't true. Immigration and changes in the wage share of national income have a strong negative correlation.

This is not true whatsoever in the context of United States. The empirical evidence for this claim in United States is extraordinarily poor. This is due to several things. Firstly, worker substitution is not perfect. Second, the long-term effects of immigration tend to offset the potential short-term effects.

More jobs are not created automatically because the people coming are overwhelming broke. Dumping huge numbers of desperate people onto the job market with no corresponding increase in aggregate demand causes wages to fall, it's simple supply/demand. Working class people aren't stupid for recognizing this dynamic.

You do understand that every "broke immigrant" has to eat, sleep, and keep themselves busy right? The reason for why immigration has been such a disaster in areas like Europe, is due to the disastrous decision of those governments to guarantee basic living standards in exchange for... basically nothing.

In most other countries, either due to the poverty of those countries or basic common sense, immigrants are generally owed very little, thus forcing those immigrants to work in order to fund their consumption. Consumption that all human beings inherently have. That's where the increase in aggregate demand comes from.

Like you said, it's simple supply/demand.

And basic working class people are incredibly stupid and do not recognize many dynamics. Just as most liberal white-collar workers are also incredibly stupid and also cannot recognize basic dynamics, like why people are outraged about massive influxes of foreigners coming into their country.

Now the story here is different for China, since its government not only goes out of its way to spur investment and create jobs, but actually has the tools to do so unlike most others, however the country has its own reasons for not wanting even more people.

All governments go out of their way to spur investment and create jobs. China isn't unique because it has that impulse. China is unique because it has been extraordinarily competent at balancing the interests of workers, capital, and the State. That does not mean there haven't been mis-steps.

I consider the one-child policy to be one such mis-step. Perhaps at one point this police was necessary because there was uncertainty as to whether economic growth was sustainable. But in my opinion, the one child policy probably should've been abolished as the new millennium, and in hindsight, it was probably not needed at all.

 

[KYli]

Your sentiment on the one child policy is right but off on the details. The policy itself actually had essentially zero impact on Chinese fertility. It was the Later, Longer, Fewer campaign in the 70's that was the decisive policy-driven factor in lowering the birth rate, and which created China's accelerated demographic transition that greatly aided its development. The one child policy by comparison was put into place after widespread birth control access and rapid urbanization had were already causing the fertility rate to rapidly decline. This Harvard study explains it nicely.

Challenging Myths About China's One-Child Policy - Scholars at Harvard

Please, Log in or Register to view URLs content!

It is a politically motivated essay that the sole purpose is to discredit Mao and CPC. The authors made the conclusion first and searched for evidence to support their conclusion in order to discredit Mao and attack CPC. CPC doesn't start a new policy such as one child policy by going countrywide right from the start. Most of CPC's policies started at the local level first and then expanded to national level slowly.

This applied to one child policy. Even though, the official starting date of one child policy is 1979, many policies have already put in place prior to 1979. Prior to one child policy, the government already attempted to give access to birth control and contraception to decrease the urban fertility rate. However, the enforcement was varied by province and urban and rural.

Most of the southern provinces such as Guangdong, Fujian or Hainan, the enforcement was non-existed except for state owned companies and urban city. In the contrary, Northeast area, the enforcement was very strict due to the fact that there were many state owned companies. The author didn't even make an attempt to take into account of regional difference.

In addition, the central government in attempt to further slow down the birth rate, many regional government were under pressure to make much more strict enforcement during the late 80s and early 90s. Which means that the government was constantly monitoring the birth rate in order to restrict births. That's why another rapid decline in fertility rate started during that period as China enforced the most restricted one child policy at that time.

Therefore, your argument that one child policy has zero impact on fertility rate is completely wrong. First, one child policy is an extension of prior birth control policies before 1979. These policies are not mutually exclusive. In the contrary, one child policy is an expansion and extension of such previous birth control policies that put under a single umbrella to make it more easily enforceable. Second, even though urbanization is a very important factor in the decline of birth rates. However, the birth rates would be substantially higher without one child policy. Many women in the rural at that time still want child as the government was forced to double down during late 80s and early 90s to prevent a birth resurgence.



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In addition, more people don't mean more jobs. India LPR is 41%. China LPR is 67%. Even at the level of 67%, many rural Chinese still can't get decent jobs. A lack of decent and productive employment is the main issue for many countries. Of course, if you only want to put food on the table without the consideration of education and nutrients and quality of life then people can always live and accept less. But China doesn't want to be India. China wants to prosper. China wants to modernize. And China is willing to pay the price to get there.

 

[tphuang]

nope. China has already plan something big for nuclear technology. spending huge amount of money in this industry. just recently localized all core parts of two different types of third generation reactors. Hualong One and Guohe One.

CNNC plans to start building a follow-on version, named Hualong Two, by 2024. It will be a more economical version using similar technology, reducing build time from 5 years to 4, and reducing costs by around a fourth from 17,000 yuan per kW to 13,000 yuan per kW.

Since 2021, China operating a demonstration generation-IV reactor, the HTR-PM

Announcement in 20th National party congress -

Fifteen national political advisors submitted a joint proposal to the ongoing two sessions, highlighting the necessity and feasibility of building nuclear power plants in inland areas, strengthening the development of nuclear power, expanding the spatial distribution of nuclear power and promoting the comprehensive use of nuclear energy for heating.

The 20th National Congress of the Communist Party of China views energy security as an important part of the modernization of national security system and proposed to promote carbon peaking and carbon neutrality actively yet prudently and safely develop nuclear power. Yang Changli, a member of the 14th National Committee of the Chinese People's Political Consultative Conference (CPPCC) and chairman of China General Nuclear Power Group, together with 14 other members of the CPPCC National Committee, submitted the proposal.

"China has established a solid foundation for achieving bigger goals and higher quality development of nuclear power," Yang told the Global Times on Sunday. In order to give full play to the strategic value and positive role of nuclear power, efforts should be made to maintain the construction of more than 10 generator units per year in the next decade under the premise of ensuring safety.

I'm really pro nuclear energy but the growth of wind/solar is just off the charts right now. Nuclear simply takes too long and too much capex to be relevant for a long time. I've seen some impressive planning by Shandong gov't with their 40GW nuclear base that they announced recently, but I have no idea how they get there. Even China is not at the point where it can just ramp up for 4 to 5 new completed reactors a year to 15 a year in 3 or 4 years.

The economics on renewable is just so good already and is continuing to get cheaper