Chinese Economics Thread

[Deleted member 24525]

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

I know the cost of renewable capacity is cheaper than anything else by a significant margin but I haven't seen research that really factors in the price of associated ESS into the overall calculation. I've seen some sources that say renewable projects were obligated to invest in ESS equivalent to between 10-30% of their renewable generation capacity. Was this a national requirement or just a thing in certain provinces?

 

[tphuang]

I know the cost of renewable capacity is cheaper than anything else by a significant margin but I haven't seen research that really factors in the price of associated ESS into the overall calculation. I've seen some sources that say renewable projects were obligated to invest in ESS equivalent to between 10-30% of their renewable generation capacity. Was this a national requirement or just a thing in certain provinces?

I'm not concerned with ESS at all. the price on ESS is now close to 1RMB/wh. At some point with SIB, it will go below that. Especially for something like solar, you can put it anywhere. on your rooftop, at abandoned mines, nearshore next to a beach, in the desert, in charging stations.

It's for wind that you really need to be concerned with transmission, because they have to be built at really far away locations

 

[PopularScience]

Meanwhile incomes are growing every year and house prices have been dropping for some time now. So the problem will solve itself eventually, that's why I think it's short term.

House prices are also highly skewed by the most desirable cities, so the average person in an average town would have a much more affordable life. Nobody deserves to own an apartment in Shanghai just because they want to

But mostly I'm just saying that high house prices are an unfortunate side product of smart decisions. Look at Venezuela, not Sweden, for what happens when you build lots of houses without being a rich country with strong industry. They called it great mission housing Venezuela. It's better to first invest in sustainable economic development and into social housing later. A booming real estate market being positive for the economy is another great side effect.

yes. In the third-tier cities the average new house price is RMB 400,000 to 500,000.

 

[Minm]

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

It's easy to ramp up renewables when they're only a small proportion of the overall electricity supply. China is still only at 30% renewables and that includes hydro. Once supply is closer to 100% of electricity demand, it will become a lot less efficient as you need so much more capacity to cover peak demand. So having some flexible nuclear power would be very complementary. I'm not sure if any of the new nuclear reactors China is developing are built with flexibility in mind

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[Strangelove]

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'World factory' upgraded with high-tech, new energy and originality

Updated 14:26, 13-Jun-2023

Aerial photo shows Nishui Liugui Village Fortress in Humen Township of Dongguan City, south China's Guangdong Province, June 24, 2020. /Xinhua

Dongguan in south China's Guangdong Province earned the title "world factory" as a result of its unparalleled manufacturing enterprise and foreign trade volume, but it's now moving beyond its stereotypical image as just a hub for mobile phones and garments.

As the 24th Chinese city to have a GDP above 1 trillion yuan (about $140.62 billion), Dongguan is forging ahead with high-tech, new energy and originality.

Advanced sci-tech research

In the "world factory" lies a world-class sci-tech project, China Spallation Neutron Source (CSNS). Over 1,000 research tasks have been tackled since it started in August 2018.

Chen Hesheng, general director of the CSNS and an academician at the Chinese Academy of Sciences, explained that a spallation neutron source is like a super microscope to help study the microstructure of some material.

"This function could find out, for example, when the parts of high-speed trains should change to avoid accidents caused by fatigue of materials," he said.

Chen said the transformation of CSNS achievements to practical use is underway. For now, the second phase of CSNS is under construction, and the cooperation between CSNS and high-level colleges and institutes is accelerating to build scientific research instruments.

Chen considered the CSNS the most significant infrastructure behind the comprehensive national science center in the Guangdong-Hong Kong-Macao Greater Bay Area.

Aerial photo shows the Sea Battle Museum in Humen Town, Dongguan City, south China's Guangdong Province, June 23, 2020. /Xinhua

Emphasis on new energy

Founded in 2010, Greenway Technology is a leading manufacturer of lithium-ion batteries for micro-mobility and energy storage applications such as electric bikes, electric motorcycles, drones, intelligent robots and sound equipment.

With clients in over 80 countries and regions, Greenway has invested nearly 260 million yuan in research and development in the recent three years to secure its competitiveness in the new energy market.

Thanks to early-stage planning and quick response, the company has rapidly grown and maintained a 20 percent share of the European market, said Liu Cong, Greenway's vice president.

According to official statistics, Dongguan's new energy industry saw revenues up 11.3 percent year on year to 66.73 billion yuan in 2022.
The local government has coordinated policies and funds to build a strategic base for emerging industries, including new-style energy storage, new energy vehicles, parts, semiconductors and integrated circuits, said Liang Yangyang, chief economist of Dongguan's industry and information technology bureau.

Staff wearing masks work at the factory of OPPO in Dongguan City, south China's Guangdong Province, February 13, 2020. /CFP

Originality in manufacturing

Despite emphasizing high-tech and new energy, Dongguan still attaches great importance to manufacturing, which contributes to over half of the city's GDP.

As one of the city's industrial pillars, the toy industry has over 4,000 manufacturers and nearly 1,500 supporting enterprises. Among them, ToyCity is a pioneer in exploring paths for more brand power and added value.

Originality is the key to the company's success, said Zheng Bo, ToyCity's founder, while introducing the fashion and trend toys designed by his company.

Toy companies used to choose contract manufacturing at the expense of initiative. But it's different now, Zheng said, stressing that creating original brands with intellectual property rights wins independence and profit for toy businesses.

ToyCity's annual turnover has exceeded 100 million yuan, and profits have surged over 300 percent since its path changed towards originality, Zheng added.

Furthermore, supportive measures have been implemented by the local government, such as financial support, fashion toy centers and Chinese fashion design competitions to establish a whole industry chain for toy manufacturing.

 

[abenomics12345]

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).

"Generating" technology requires investment in R&D, which is a function of GDP ("real gold/silver") - China cannot invest in R&D to 'generate' new technology unless it has *capacity* for spending on R&D . Like, average people do not live off of technology improvement - they need compensation. STEM grads don't mean much unless they are paid appropriate wages to actually do STEM work.

'Scaling technology' is not a function of just capacity to 'make' things - but also a capacity for there to be *demand* for things.

Real estate at 20-30% of GDP was an immense driver of the two things you mentioned in the past. So no, ironically, focusing on technology without focusing on commercialization is how you end up making things that people don't want.

The USSR was amazing at generating technology and scaling technology too - they are necessary but not sufficient for a diversified/strong economy.

 

[TK3600]

"Generating" technology requires investment in R&D, which is a function of GDP ("real gold/silver") - China cannot invest in R&D to 'generate' new technology unless it has *capacity* for spending on R&D . Like, average people do not live off of technology improvement - they need compensation. STEM grads don't mean much unless they are paid appropriate wages to actually do STEM work.

'Scaling technology' is not a function of just capacity to 'make' things - but also a capacity for there to be *demand* for things.

Real estate at 20-30% of GDP was an immense driver of the two things you mentioned in the past. So no, ironically, focusing on technology without focusing on commercialization is how you end up making things that people don't want.

The USSR was amazing at generating technology and scaling technology too - they are necessary but not sufficient for a diversified/strong economy.

So in other words China struggle to provide the demand for its technology, despite generating plenty of technology.

 

[abenomics12345]

So in other words China struggle to provide the demand for its technology, despite generating plenty of technology.

Yes, that is why China struggle with overcapacity and disinflation while the RoW struggle with shortages and inflation. When the State Council releases a policy document for expanding domestic demand:

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, the message we should take from that is: "we don't think demand is sufficient and we want it higher".

Ironically, there were 53 mentions of "investment" and 80 mentions of "consumption" in a report about *demand*.

The logical solution is that the RoW buy things from China at a low cost but Uncle Sam wants decoupling.

 

[TK3600]

Yes, that is why China struggle with overcapacity and disinflation while the RoW struggle with shortages and inflation. When the State Council releases a policy document for expanding domestic demand:

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, the message we should take from that is: "we don't think demand is sufficient and we want it higher".

Ironically, there were 53 mentions of "investment" and 80 mentions of "consumption" in a report about *demand*.

The logical solution is that the RoW buy things from China at a low cost but Uncle Sam wants decoupling.

So from your point of view do you think China should slow down on stimulating innovation until the demand go up? Or perhaps stimulation innovation while provide even greater incentives to build demand?

 

[abenomics12345]

So from your point of view do you think China should slow down on stimulating innovation until the demand go up? Or perhaps stimulation innovation while provide even greater incentives to build demand?

Absolutely not on slowing down innovation expenditures. Fairchild Semi got started making chips for missile guidance but over time started making chips for consumer products. You can't just do one or the other, you need both. Have a read of the document I linked earlier, it goes through how they think they can generate additional demand.

The issue is structural reform of problematic policies to unleash demand - demand is a function of agency of the consumer; the question is how you get average citizens to consume more and have them save less.

- For example only 45% of migrant workers (some 290 million population) feel that they are 'locals' in the city they work.

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This needs to go up for people to want to plant roots - people will buy modern conveniences for their place (computer/AC/washing machine/dishwasher/cars) if they consider it as a permanent home. But why would they consider it as their 'home' if they are treated as second class citizens? (Inferior access to healthcare insurance coverage, inferior access for education for their kids, and inability to purchase affordable real estate)

- As another example, I have had at least half a dozen Chinese companies complain to me about local protectionism. Local governments have punitive enforcement of policies/laws against non-local competitors in benefit of local players - that doesn't bode well for 'may the best win' and instead sets up a 'may the one with the best connections win' situation. Companies therefore don't want to deal with this and competition goes away and you have monopolies that provide sub-par products/services. This is a deadweight loss in not reaching 'potential growth' that needs to be addressed.

These things all take time to realize and the demand side is a lot harder to reform than the supply side ("we need a new bridge in the next year" vs. "residents need to make enough money to afford buying cars to use said bridge")