Chinese Economics Thread

[Eventine]

PMI for industrial sector still below 50 indicating contraction and for service sector is slowing. Expect more stimulus coming soon.

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Global demand is slowing, manufacturing industries that are significantly export-driven will inevitably suffer. Tariffs, sanctions, and active efforts by the West to seek out alternative suppliers are also having an effect.

Look at German, South Korean, Vietnam, and Japanese PMI. All have basically been in contraction since the start of 2023, and earlier. Such is the fate of export-led industries in the age of falling Western demand.

Interesting enough though, India's PMI has actually been experiencing rapid growth. I know this community doesn't care much for Indians, and it is obviously coming from a low base, but the contrast with Vietnam is very interesting, since both are emerging economies, yet Vietnam's manufacturing PMI has been struggling since late 2022, while India's manufacturing PMI has been surging.

If this continues, we could be seeing a major shift in Global South investments, as investors tend to follow the herd.

The Biden-Modi meeting was without question motivated by the Americans salivating at the prospect of India becoming a new engine of growth for their investors.

 

[56860]

Global demand is slowing, manufacturing industries that are significantly export-driven will inevitably suffer. Tariffs, sanctions, and active efforts by the West to seek out alternative suppliers are also having an effect.

Look at German, South Korean, Vietnam, and Japanese PMI. All have basically been in contraction since the start of 2023, and earlier. Such is the fate of export-led industries in the age of falling Western demand.

Interesting enough though, India's PMI has actually been experiencing rapid growth. I know this community doesn't care much for Indians, and it is obviously coming from a low base, but the contrast with Vietnam is very interesting, since both are emerging economies, yet Vietnam's manufacturing PMI has been struggling since late 2022, while India's manufacturing PMI has been surging.

If this continues, we could be seeing a major shift in Global South investments, as investors tend to follow the herd.

The Biden-Modi meeting was without question motivated by the Americans salivating at the prospect of India becoming a new engine of growth for their investors.

India Superpower 2020 confirmed.

 

[Quan8410]

Global demand is slowing, manufacturing industries that are significantly export-driven will inevitably suffer. Tariffs, sanctions, and active efforts by the West to seek out alternative suppliers are also having an effect.

Look at German, South Korean, Vietnam, and Japanese PMI. All have basically been in contraction since the start of 2023, and earlier. Such is the fate of export-led industries in the age of falling Western demand.

Interesting enough though, India's PMI has actually been experiencing rapid growth. I know this community doesn't care much for Indians, and it is obviously coming from a low base, but the contrast with Vietnam is very interesting, since both are emerging economies, yet Vietnam's manufacturing PMI has been struggling since late 2022, while India's manufacturing PMI has been surging.

If this continues, we could be seeing a major shift in Global South investments, as investors tend to follow the herd.

The Biden-Modi meeting was without question motivated by the Americans salivating at the prospect of India becoming a new engine of growth for their investors.

Cannot trust statistic from India. They cannot even know what is their population. Besides, many already speculated India basically fake their economic growth figure, such as a study from Harvard.

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Yes it cannot be denied that India is developing fast but turning India to the next China is obviously not on the US table.

 

[luminary]

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“I would happily stay here for longer and I hope to come again soon,” Hipkins said.

Hipkins said he believed the publicity generated by his trip had been good for businesses. “Just the overall level of publicity that is generated by a New Zealand Prime Minister visiting China - New Zealand businesses really benefit from that."

Chen and Hipkins discussed the fact that Shanghai is bringing local trade standards, which it administers in a devolved way, up to CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership) standards.

China wants to join the CPTPP, of which New Zealand is a founding member.

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Mutual trade between Belarus and China reached $3.72 billion in January-May 2023, Chinese Ambassador to the Republic of Belarus Xie Xiaoyong said.

"In January-May 2023, trade between our countries reached $3.72 billion. China has become the second largest trade partner of Belarus, and Belarus is China's important trade partner in the Eurasia region," the Belarusian state-run news agency BelTA quoted the Chinese ambassador as saying.

Belarus and China have seen their trade and economic cooperation stand the difficult test of the Covid-19 pandemic, also being exposed to a number of external negative factors over the past few years, with mutual trade repeatedly reaching all-time highs, demonstrating strong resilience and great potential, he said.

In particular, Belarus-China annual trade was at $5.8 billion at the end of 2022, growing by 33% from the previous year. China's imports from Belarus were up 65.4% year-on-year.

 

[AndrewS]

Global demand is slowing, manufacturing industries that are significantly export-driven will inevitably suffer. Tariffs, sanctions, and active efforts by the West to seek out alternative suppliers are also having an effect.

Look at German, South Korean, Vietnam, and Japanese PMI. All have basically been in contraction since the start of 2023, and earlier. Such is the fate of export-led industries in the age of falling Western demand.

I'd only categorise Vietnam as being acutely affected by falling Western Demand.

In the case of South Korea and Japan, I reckon much of their manufacturing contraction has been due to the competition from new Chinese factories in higher-value industries.

Germany is more insulated from Chinese competition because they export mainly to Europe.
But Germany has been deindustrialising, primarily due to the self-inflicted decision to impose sanctions on Russian energy.

Interesting enough though, India's PMI has actually been experiencing rapid growth. I know this community doesn't care much for Indians, and it is obviously coming from a low base, but the contrast with Vietnam is very interesting, since both are emerging economies, yet Vietnam's manufacturing PMI has been struggling since late 2022, while India's manufacturing PMI has been surging.

If this continues, we could be seeing a major shift in Global South investments, as investors tend to follow the herd.

The Biden-Modi meeting was without question motivated by the Americans salivating at the prospect of India becoming a new engine of growth for their investors.

Yes, India's short to medium term outlook looks good.

But I've long compared India to Brazil, which also had periods of fast growth before getting stuck in the middle-income trap.

And that is mainly due to structural factors (infrastructure, atrocious education, lackadaisical attitude to timekeeping/deadlines, internal divisions due to language/culture/race/caste/wealth, malnourishment).

And the crazy thing is that many of these issues appear to be getting worse in India eg. hunger and communal differences getting worse over the past 10 years

 

[luminary]

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that sought to invest US$10 billion​

Russia welcome:

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• “We have the very famous presidential suites, where President Xi Jinping stayed during his visit to Moscow.”
• Russian tourism delegations have been showcasing their latest programmes tailored for Chinese clients, as US-led sanctions squeeze the sector
• Tourist-friendly moves include new e-visa system and more Chinese signage

 

[tygyg1111]

Good breakdown of current issues in China's economy:

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Our current biggest problems include: first, both expected and actual external demand are declining and have long-term implications; second, we hope to rely more on domestic demand recovery (increase internal circulation efforts), but the reality is that the recovery is insufficient; third, whether it is from the perspective of residents or finance sector (including local governments), debt pressure has reached its limit; fourth, aging and declining birth rates are accelerating rapidly, and the number of new population will drop significantly.

The author's suggestion is to return to the original intention of the real estate reform in 1998, make a painful decision, and re-establish the system of affordable housing and low-rent housing outside the commercial housing market, and supply them in large quantities after measurement. First, pilot it in the first-tier cities, and then quickly promote it to the second-tier cities. If you want to make an analogy, it is similar to the "HDB" system in Singapore.

The benefits of this policy are:

1. It can quickly boost the recovery of real estate construction, thereby driving upstream industries such as building materials.
2. It can quickly enable young people in first- and second-tier cities to own their own homes, thereby driving industries such as furniture and home appliances. Only with a house can there be various new demands, and can various innovations in domestic demand have a focus.
3. Young people have very low loan pressure. After the consumption of related industries recovers, disposable income will be significantly increased, which can be used for other consumption.
4. Only with their own homes can people dare to have children. Only with a house of sufficient size can their parents live together to help take care of the children. Is this difficult to understand?

The disadvantages of this strategy are:

1. The prices of first- and second-tier commercial housing may substantially decline, leading to a significant drop in rent. The "paper wealth" of those who own one or two houses will significantly depreciate. Those who inexplicably own many houses will also see a significant depreciation in their real wealth. (The rapidity of this depreciation is so fast that they may not even have enough time to sell and profit from it, meaning that there is no pressure on capital flight. However, this cannot be considered a disadvantage.)
2. Since the rise in prices and reduction in inventory, those who have purchased houses in the past six or seven years will suffer losses; their mortgages may also become problematic. The expected income from bank mortgages will decline (but whether one can afford to buy a house or take out a mortgage is already a problem). Overall, this is the end of a good era for commercial bank mortgages (which has already ended, but no one wants to admit it and there are still illusions).
3. This may be the most important disadvantage, which is that land finance will come to an end. Recently, I have seen the capabilities of AI in China, which can replace many people who are good at writing articles and making PPTs. This can perfectly match the long-term declining demand for civil servant jobs.
4. Correspondingly, transfer payments to local governments will decrease, and the funds can only be used for cutting-edge purposes. This will force local governments to delegate power and benefit, and on the basis of existing infrastructure, encourage the private sector to create economic vitality.

The above is what the author refers to as the need for the real estate sector, financial sector, and landlords to jointly relinquish their interests.

The difficulties of this strategy are:

1. The determination of decision-makers. More importantly, to gain the understanding of the majority, it is not enough to have determination. It also requires a lot of time to openly discuss and reach a consensus.
2. The professional ability of the policy execution teams. The success of Singapore's "HDB" system is not just because it is cheap. Nor does it encourage laziness. Behind the HDB system is a series of professional analyses and arrangements. Since China was willing to seriously learn even the British legacy of the Hong Kong land lease system in order to reform and open up, can we also seriously learn from Singapore's system? The HDB system does not neglect commercial housing. How to form a reasonable combination, there should be many experiences to draw from.
3. Opposition to vested interests, for example, some people believe that China's real estate system is the source of credit and cannot be abandoned. The author's first job was in the real estate industry, and want to discuss this issue briefly. It is certain that real estate can generate credit, and even in the past thirty years, China's urbanization has indeed depended on the existing real estate system. The author believes that if it were not for the destocking in 2015, housing prices would have been reasonable. The author even believes that the overall housing prices in mainland China in 2017 did not have bubble, but there were significant problems later on. It is correct that real estate can create credit, but the impact of this credit creation on the economy cannot be just a slogan. Instead, we need to carefully examine the flow of each fund. Developers' loans are ultimately spent in several areas: first, land sale revenue (ultimately flowing to the government); second, the building itself (construction, labor, etc.); and third, sales expenses. Homebuyers' loans are used to purchase homes. These two loans ultimately flow to the pockets of ordinary people, including developers' staff, construction workers (migrant workers), sales personnel hired by developers, and upstream industries (various building materials) workers. However, these are all small amounts, and the big amounts are two: one is land sale revenue, which has already been explained; the other is the entrepreneurs and executives of developers. The HDB system significantly reduces the income of these two big playes, but the money flowing to the upstream and downstream of the industry has not decreased because the economic cycle will occur as long as the houses are still being built and sold. This means that the impact of the HDB system on credit is only a decrease in land revenue and a decrease in the income of developers' wealthy (and super-wealthy) class. The reality is that after destocking and the six wallets, coupled with the impact of the epidemic, the land sales model can no longer continue. This conclusion is also evident from the number of new population. Therefore, it is now another opportunity for structural reform.

 

[Biscuits]

Not really too important as gdp per capita isn't good at measuring life quality, but as of 2023 q2 according to IMF's early report, China is now high income.

The difference in wealth is only arbitrary compared to last year, but with that, a large part of the world has now officially become high income.

Of course, we know this isn't going to stop. China had for more than a decade had regions that exceeded or equalled western Europe in gdp per capita, and also regions which equal eastern Europe and worse, where development potential were gradually realized. Going over an arbitrary threshold won't change the unique development potential within China, and there are areas inside the country which are not high income yet.

 

[Maikeru]

Services expanding. Construction mega-expanding. Manufacturing slightly contracting:

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[mossen]

Final 2022 GDP numbers are out, via the World Bank.



China is now falling behind, despite having a per capita GDP only 1/5th that of the US. This year was supposed to be different but given the very weak RMB and property sector, it looks like the US will pull ahead even further this year. This all calls into question the forecasts of China surpassing the US by 2030. It may in fact never happen.