Chinese Economics Thread

[Minm]

Nominal GDP doesn't matter much, but the nominal size of the market matters a lot for international power. Many countries want access to the American market because they can sell a lot of stuff which is converted at nominal exchange rates into their home currency, not at the theoretical PPP exchange rates. As long as China keeps the RMB undervalued, the Chinese market remains less attractive for international exporters than the American one. China's imports have almost caught up with American ones, but if the RMB was allowed to rise just a little, those imports will rise above American imports, making China the most attractive market for other countries.

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Obviously, if you're looking at the economy in terms of the ability to fight an industrial war, you should really look at industrial production and volumes of production rather than price weighted GDP, whether it's PPP or nominal. And if you're thinking about wellbeing, PPP per capita is probably best and yes, developing countries tend to have a much larger informal sector, which is not counted in official GDP numbers

 

[tamsen_ikard]

My biggest concern regarding the Chinese economy is the substantial level of debt across the entire economy. This issue arises from multiple factors, including local government indebtedness due to increased spending during the COVID-19 pandemic and extensive investments in infrastructure. Moreover, the general public has accumulated significant debt due to their strong belief in the property sector, leading to excessive investments in real estate. Consequently, the property market became overbuilt, while insufficient investments were made in the stock market and other business sectors. As a result, the stock market is currently undervalued.

The combined focus of both the government and the public on debt repayment rather than investment has resulted in a significant economic slowdown. What is the best way to get out of this cycle?

 

[Serb]

My biggest concern regarding the Chinese economy is the substantial level of debt across the entire economy. This issue arises from multiple factors, including local government indebtedness due to increased spending during the COVID-19 pandemic and extensive investments in infrastructure. Moreover, the general public has accumulated significant debt due to their strong belief in the property sector, leading to excessive investments in real estate. Consequently, the property market became overbuilt, while insufficient investments were made in the stock market and other business sectors. As a result, the stock market is currently undervalued.

The combined focus of both the government and the public on debt repayment rather than investment has resulted in a significant economic slowdown. What is the best way to get out of this cycle?

Why are you so 'concerned' for China when all the major international organizations and banks (also from the West) predict that China will grow 5-6% this year in real GDP and that the majority of Western countries will probably stagnate and have sub-1% growth with their zombified dead economies? Shouldn't you be concerned for them instead first? Not to mention nearly double-digit inflation all around the EU and nearly non-existent inflation in China. Why on Earth should you be 'concerned' for China then? You should look around the EU for God's sake, it's collapsing.

 

[tamsen_ikard]

Why are you so 'concerned' for China when all the major international organizations and banks (also from the West) predict that China will grow 5-6% this year in real GDP terms and that the majority of Western countries will probably stagnate and have sub-1% growth with their zombified dead economies? Shouldn't you be concerned for them instead first? Not to mention nearly double-digit inflation all around the EU and nearly non-existent inflation in China. Why on Earth should you be 'concerned' for China then?

2022 had China locked down repeatedly for months. Then you had the massive layoffs in the tech sector and the collapse in the property sector. So, its GDP was already depressed. So, achieving even 5-6% in 2023 seems like a massive slowdown when 2022 already had a lower base.

China now has the opposite problem of deflation. You had the price cuts in the Car sector. That's deflation. Its also probably happening in some other sectors as well.
The best way to counter that should be fiscal stimulus but China's local govt are already indebted. So how can they provide more stimulus?

Monetary policy and rate cuts could be another option, but that will depress Yuan further. So, overall China's economy is in big trouble.

 

[Serb]

China's current interest rates are around 3.5%, and its inflation is nearly non-existent. It means that if China experiences some kind of recession due to the over-leveraged economy and the bubble popping, you theorized about, it could just lower the interest rates to restart the economic cycle, unlike countries from the West which experience both high inflation and recessions together, some kind of a hyper-stagflation, they have literally no way out. China could also lower interest rates at any time and it won't affect them as badly as it would any country from the West because they are also not 80% consumption-based economies. However, I don't see any recession happening, for that to happen you would probably need some external shock as currently all of China's economic indicators are healthy. It has a high GDP growth, consumer confidence rising, employment rising, etc. Meanwhile US’ total debt, government, corporate, and household, is 370% of GDP, whereas the Chinese is 275%.

 

[tamsen_ikard]

China's current interest rates are around 3.5%, and its inflation is nearly non-existent. It means that if China experiences some kind of recession due to the over-leveraged economy and the bubble popping, you theorized about, it could just lower the interest rates to restart the economic cycle, unlike countries from the West which experience both high inflation and recessions together, some kind of a hyper-stagflation, they have literally no way out. China could also lower interest rates at any time and it won't affect them as badly as it would any country from the West because they are also not 80% consumption-based economies. However, I don't see any recession happening, for that to happen you would probably need some external shock as currently all of China's economic indicators are healthy. It has a high GDP growth, consumer confidence rising, employment rising, etc. Meanwhile US’ total debt, government, corporate, and household, is 370% of GDP, whereas the Chinese is 275%.

Why do you think China is hesitant to do exactly what you mentioned. Because that will cause yuan to lose value even more. Yuan already went from 6.8 against the dollar to now 7.3. When US is raising rate, China will be lowering rates, that will make yuan lose value even more. Loss of value for the Yuan will cause a capital flight with many wealthy Chinese and foreign companies already trying to get money out of China.

What China needs now is more investment, not a capital flight. Due to lack of investment in the tech sector, there is this huge youth unemployment problem. The Chinese public needs to put more money in the tech sector, instead they put more money into buying 2nd, 3rd, 4th house. That's why you have this property bubble and yet youth unemployment due to lack of jobs in the tech sector.

 

[Serb]

2022 had China locked down repeatedly for months. Then you had the massive layoffs in the tech sector and the collapse in the property sector. So, its GDP was already depressed. So, achieving even 5-6% in 2023 seems like a massive slowdown when 2022 already had a lower base.

And despite all of that, in 2022, China also grew more than the US.

And you forget that the Chinese economy is based on exports,

So their economic slowdown is due to the West collapsing, so they export them less.

China now has the opposite problem of deflation. You had the price cuts in the Car sector. That's deflation. Its also probably happening in some other sectors as well.

Deflation is a myth. Brandon would currently sell his soul to bring America to that position.

Just think about it, what does deflation mean (it means average people paying less for stuff).

I know that it is hard to understand for perma money printing West, but that's how it should be.

For decades now capitalism should've also brought prices down in the West (deflation),

Of course, had not every politician printed money out of thin air to get elections for decades.

 

[Serb]

Why do you think China is hesitant to do exactly what you mentioned.

I mentioned they should do it only if they encounter a recession. But, for now, they grow 5-6 times faster than the West, so why should they do it?

 

[Biscuits]

Has no one thought that RMB can appreciate dramatically once China has its own independent semiconductor and jet airliner industries?

I optimistically predict that, around 2030, no later than 2035, China will be able to start pumping out fully indigenous ICT products and jet airliners.

I mean yeah, the central bank only push it lower so they can grift as much market share as possible. Being the largest economy alone isn't what confers China's economical might, it's the ability to hold entire sectors and the development in those areas hostage. That type of might is created by grabbing up dominant market shares and killing off international competitors.

At some point, China will have to end currency suppression at the cost of its exports, but the hope is that by then, most of the world will be hooked so that there's no real alternatives except buying cheaper variants that are also from China.

Ordinarily, this type of approach would hurt the domestic market's ability to absorb foreign exports due to currency suppression, but in China's case where near literally everything is domestically produced and consumed, the impact on the domestic market is minimal.

 

[Serb]

I mean yeah, the central bank only push it lower so they can grift as much market share as possible. Being the largest economy alone isn't what confers China's economical might, it's the ability to hold entire sectors and the development in those areas hostage. That type of might is created by grabbing up dominant market shares and killing off international competitors.

At some point, China will have to end currency suppression at the cost of its exports, but the hope is that by then, most of the world will be hooked so that there's no real alternatives except buying cheaper variants that are also from China.

Ordinarily, this type of approach would hurt the domestic market's ability to absorb foreign exports due to currency suppression, but in China's case where near literally everything is domestically produced and consumed, the impact on the domestic market is minimal.

Yes, it doesn't exactly matter what just the basic price of your exports is but the ratio of price and value. And if China is constantly climbing the industrial value-added, climbing into sectors with less competition, price wars, commoditization, and more high-tech, R&D, innovation, etc, it means that it can also raise prices (appreciate currency) and still find buyers abroad. Then it can move those low-tech sectors onto its friendly Global South countries for more influence while it keeps its economy running on just high-tech exports and consumption like the West currently does after it dethrones their currencies. That is the 'common prosperity' in my opinion. Not just full employment, but full employment on high wages and easier and more quality jobs for average citizens. However, another factor is customer perception as it doesn't always follow real value added right away but it will follow in a few years as well. This is a long journey of a few decades at least but I think that it already started.