Chinese Economics Thread
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I would say both Tencent and Alibaba are undervalued.
That's the thing, predictions are just predictions, nobody knows what will happen even tomorrow much less a decade from now..some predictions were even saying China's economy will overtake the US in 2020 . Yet it hasn't come to pass yet. Just like some were claiming India will be a 5trillion dollar economy by 2020 or so. Yet they are still quite a distance away from it. So nothing in this world is guaranteed. We can only predict and forecast looking at the past a d current trend but we can never be 100% sure it will really happen.
Yeah but the world doesn't use PPP for measurement per se, giving comparisonbetween countries and fact that most countries trade internationally with others, except pariahs like North Korea(where ill say PPP is a better measurement for them. Lol ). Else even India has twice Japan's GDP if we use PPP measurement.Why are people losing their minds over a relatively useless measure of economic power?
As others have pointed out, the increase in nominal GDP disparity is purely a result of depreciating RMB. Why did the RMB depreciate? Because US jacked up interest rates like crazy during the last 12 months. Once these interest rates are lowered, RMB will appreciate again and the nominal GDP gap will close.
In real terms, China outgrew US last year (3% vs 2.1%) even with lockdowns. This year, China will massively outgrow the US in real terms (5.5-6.5% vs 1-2%). This is reflected in PPP, which unlike nominal GDP, accounts for fluctuations in exchange rates. By this more accurate measure, China will increase its lead over the US by over 6 trillion in 2023.
Nominal GDP is a coping mechanism for westerners who don't understand how exchange rates work. This coping mechanism will break down horribly should China decide to appreciate the RMB to its true value. It could happen tonight, but it won't, because China isn't interested in winning imaginary dick-measuring contests.
There are a million and one better metrics for measuring economic power and influence: PPP, trading partners, manufacturing output, market shares, etc. Don't get caught up in nominal GDP because reddit told you it's important.
trade isn't nominal GDP, since services are much less traded across borders than goods and thus services are not a global market the way goods are. nobody will buy a 10 USD haircut in China or have need for 200 USD accounting service for US income taxes in China.
Depends, to be honest, I'll agree with Tencent , but Alibaba, I'm not so sure, don't think they have an optimistic future as tencent..
The world US really unpredictable, I remember hust a few years ago, Alibaba was a fast growing behemoth who was almost matching the biggest US tech giants like Amazon, Facebook etc in Valuations and many were even predicting that they will overtake these companies in Valuations in a few years . Yet today they have fallen far behind ( granted its also due to the tech crackdown launched by Chinese government this past 3 years, but still it shows that we never know for sure what will happen tomorrow. Fir example I don't think anyone expected the Chinese government going after them so suddenly the way things happened, plus Covid which only nase things worse. So yes, the world we live in is full of unknowns
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If the US grows by 1.5% this year and China by 4.5% then the gap lessens by about 400 billion. If these numbers prevail as the average then Chinese gdp will overtake that of the US in 2035. And these numbers are on the pessimistic end. If it's 4.7% then the overtaking happens in 2033. And US growth could well be closer to 1%.
Personally I'm of the opinion that Chinese growth will probably slow quickly to ~4.5% but then decline much slower than predicted after that. And US growth will probably be more like 1.2% than 1.5% through 2035, so the convergence date is basically unchanged.
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Overtook by 2016 already.
India is also bigger by now. The issue with India is that their gdp has come under question about how accurate it is, and their spending, output and consumption isn't truly in line with what should be the 3rd biggest economy.
More important than GDP is how much resources can be utilized by the state. Cumulative Africa has not much less GDP than India, but these areas struggle with converting their local transactions into larger businesses, educational and societal development.
Nothing is guaranteed, but in general societal development is very stable and hard to reverse. America is not going to suddenly grow much faster than China, and as long as China keeps growing at a normal pace while America at best can match but not greatly exceed China's pace, we can predict with high likelihood that US isn't ever going to catch up.
It is completely meaningless to try and compare GDP without adjusting for inflation first. You're essentially looking at a make believe reality where Chinese people pay 5$ for a carton of eggs, pay 200 000$ for a tuition and so on.
In the fictional world of non adjusted gdp, the primary driver of "economy size" is not actual economic size but inflation and deflation.
Since the currency value is controlled by the central bank, you cannot make predictions without reading the minds of both Chinese and American central bank decision makers.
Depending on how badly US is willing to fuck over living standards at home by hiking up prices in exchange for keeping the dollar internationally competitive and how important China thinks it is to suppress currency value in order to keep expanding exports, the answer to a fictional "convergence" date can be either a couple of days away to never. Or China and US will "switch places" multiple times over the next time period.
There's basically no stability to evaluating gdp without first taking into account inflation. It nearly purely depends on central bank decisions rather than measurable economic strength.
Looking at gdp without accounting for inflation is like measuring BMI without looking at height. It makes the whole measure worthless.
China might never overtake the US in nominal GDP now because the US will now have perma high inflation forever ending in hyperinflation due to mega-money printing and de-dollarization until the empire collapses.
Let's say the US has grown 1% in real terms in a year, and had 4% inflation, it means that their nominal GDP number by the end of that year is now higher 5% than the last despite it not meaning anything positive and it actually being bad for the economy.
It doesn't differentiate between raising prices and actual economic output alongside many other things. I recommend everyone to stop watching over bullshit nominal GDP numbers, it is an inferior productivity indicator in around 5-10 ways.
Let's say the US has grown 1% in real terms in a year, and had 4% inflation, it means that their nominal GDP number by the end of that year is now higher 5% than the last despite it not meaning anything positive and it actually being bad for the economy.
It doesn't differentiate between raising prices and actual economic output alongside many other things. I recommend everyone to stop watching over bullshit nominal GDP numbers, it is an inferior productivity indicator in around 5-10 ways.