Chinese Economics Thread
- Thread starter Norfolk
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China is often saying they want price stability, what western economists think that means is a steady and low rate of inflation, what I think it means is prices stay the same.
what’s more, as the factory gate prices are reducing at 5% a year, while consumer prices stay the same this gives plenty of opportunities for companies to improve profit margins and become really healthy.
It is the deflation.
It happened in Japan and Germany the past decade(s). People would not spend, and just saved their money, because obviously a lot of stuff will be cheaper sometime down the road.
This 5G and AI revolution, will make everything cheaper again.
There could be persistent deflationary pressure in the Chinese economy for a very long time.
Probably the best thing to do is inflate the property prices, inflate the stock prices. By doing that, it creates the wealth effect, and wealthier people tend to spend more.
If the deflation is not handled properly by CCP, it will consume the entire Chinese economy.
The problem with that statement is China has already passed the US as the world's largest economy around 2014. An economy that uses half the world's steel, produces and buys almist twice as many cars as the US and uses twice as much electricity as the US is a bigger economy than the US no matter what the exchange rate says.
Agreed.
If there's a time for helicopter money, this might be it.
Interestingly enough, one of the features of a central bank digital currency is an expiring date, to encourage people to spend and not hoard. See, e.g.,
You don't want to do that if there is one reason to dispose of the CPC it's them touching peoples hard earned savings would be it.
Consumer behavior can be manipulated in different ways like using influencers and creating a sort of product hype and fomo feeling.
I don't think we are all on the same page here, just to clarify what I believe what we are talking about.
What Moonscape is referring to should be like a UBI, a universal basic income, but in small amounts, issued directly by the central bank electronically to individuals, but this small sum has an expiry date so this money must be spent.
The PRC already ran experiments like this in the past. The CCP thought of everything.
FriedRiceNSpice
Captain
I'd caution against inflating property prices, development of the stock market sounds promising though, as it would bring added benefit of directing capital towards domestic high tech firms.
antiterror13
Brigadier
I am not aware it happened in Germany that ppl didn't want to spend, really?
China is on track to reach 5% growth this year. On an $18.3 trillion economy. That's almost adding $1 trillion to the economy. What China must decide that is this the time to appreciate an undervalued yuan?? Because if China does decide to allow yuna to reach its actual value, then the nominal GDP will rise even further. However, I would argue that China will keep the yuan undervalued as long as it can milk its exports engine which is a huge part of the Chinese economy.