Chinese Economics Thread

[Quan8410]

Every couple of years, Westerners have to make up some bullcrap about China's economy facing incredible problems. Housing bubble, hard landing, inflation, deflation, youth unemployment, demographic collapse, etc... And then these problems disappear and they move on to some other made up bullshit problem to make themselves feel better. And in the meantime, China just keeps beating them all.

I don't care what the west thinks. I care about what the government think. There is a recognized needs from the government talking about stimulus to prop up demand and help firms survive. If we don't do anything the problem will not magically dissappear. Housing bubble is real. Young employment is real. Demographics problem is real. It is not as bad as the western say but we need to do something. It's not about the westerner. It is about China. Stop talking about the westerner. The western is done for. Why care about something already dead?

 

[manqiangrexue]

I don't care what the west thinks. I care about what the government think. There is a recognized needs from the government talking about stimulus to prop up demand and help firms survive. If we don't do anything the problem will not magically dissappear. Housing bubble is real. Young employment is real. Demographics problem is real. It is not as bad as the western say but we need to do something. It's not about the westerner. It is about China. Stop talking about the westerner. The western is done for. Why care about something already dead?

Because you're talking like a Westerner, acting like deflation is such a danger to China while inflation is easy for the West. Like I said, China will have it controlled far faster than the West at inflation or pretty much any other problem.

 

[SanWenYu]

There is a recognized needs from the government talking about stimulus to prop up demand and help firms survive

As far as we can see, the governments, high and low, have been trying their best to put the economy back in good shape. Care to elaborate what they have not done or not been doing correctly?

 

[Quan8410]

Because you're talking like a Westerner, acting like deflation is such a danger to China while inflation is easy for the West. Like I said, China will have it controlled far faster than the West at inflation or pretty much any other problem.

Don't need to use personal attack. Who care about the west? When a problems arises, we need to talk about them, don't need to compare to the west to make us feel good. This forum is established to do that. Defining "talking like a Westerner". Presenting evidence that I am talking about China collapse 24/7? Just look at my post history will prove you wrong. Mostly positive news. Btw, tphuang shares some of my opinions, are you accusing him talking like a westerner now?

 

[mossen]

Companies are becoming much more productive and are cutting prices due to competitive markets functioning. How can you not see the problem?

When Japan begun to have its deflation episode in the 1990s, was that because its firms were suddenly becoming supercompetitive? Deflation happens for more reasons than you think but ultimately long spells of deflation is bad for the economy.

Personally, I think China should not panic. A brief episode with deflation isn't a bad thing. It will help recover's people's real incomes and savings. However, if it persists into next year then @Hadoren is right to say that you can easily fix it by just moneyprinting. And you could also do targeted moneyprinting like aiming at households to increase purchasing power. Another way to increase inflation would be debt jubilees, which would free up money otherwise paying down debt.

I think ultimately, people have to get out of the habit of accusing everyone of being a Western spy for simply pointing out that the Chinese economy has problems that need to be dealt with. The youth unemployment issue is overblown for reasons I've written about before. More problematic is the huge debt overhang in the private sector and the real estate sector in general. As I've said before: the two biggest policy failures of the CCP was the 1 child policy and the real estate sector. The former has now been fixed, but the latter is just now beginning to get the attention it should have gotten years, if not decades, ago.

 

[FriedRiceNSpice]

The next solution is typically to print money. Problem: when you print money, the currency depreciates, and China's currency is already weak against the dollar. Having the currency depreciate further will affect China's ability to import raw materials, discourage FDI, and also compromise its attempts to make the yuan a reserve currency.

Relationship between printing money and exchange rates are not as simple as that. Given the current macroeconomic situation in China, China can print a significant amount of Yuan without worrying about currency depreciating. Likewise, dollar appreciated over last few years despite US printing massive amounts of dollars. Of course, the exact reasons for why dollar did not depreciate is different from why Yuan will not depreciate.

 

[Biscuits]

Deflation is as bad as inflation but the thing it is more tricky to control. Inflation too high? Raise interest rate, problem solved. Deflation? No economic tool is really effective. Deflation is also coupled with unemployment because firms will cut people off to cut cost. That's why you see massive young unemployment in China. And with more unemployment, it's even harder to prop up demand, lead to more deflation. And the cycle continue.

This so called "youth unemployment" issue was already addressed earlier in the thread. US mouthpieces were caught counting Chinese high schoolers as "unemployed". Without these extra "unemployed", youth unemployment in China was the same percentage as the US.

So if you will talk about China's massive unemployment, you will also talk about America's massive unemployment, because the numbers are the same.

 

[Minm]

I don't think you quite appreciate the complexity of the problem in China's case.

Lowering interest rates is typically the first solution to deflation. Problem: China's interest rates are already low. Lowering them further would depreciate the currency and also encourage more bad investments in the property sector.

The next solution is typically to print money. Problem: when you print money, the currency depreciates, and China's currency is already weak against the dollar. Having the currency depreciate further will affect China's ability to import raw materials, discourage FDI, and also compromise its attempts to make the yuan a reserve currency.

Another solution is to export your way out. The way Germany got past the deflation crisis resulting from the Plaza Accords was, ironically, to actually keep interest rates high, and just tank the deflation while exporting more to make up for lost domestic demand. Problem: global demand is slowing down, and Western demand is further compromised by trade wars and tariffs, so China is not able to export as much as it used to.

If I had to guess, should deflation get worse, China will likely have to spend its reserves to support the yuan while stimulating consumption via helicopter money. This isn't a great situation to be in, but it's the consequence of the virus lock downs wiping out so many small to medium businesses, the war in Ukraine, and also the US's obsession with bringing down inflation via higher interest rates, all of which have come together to cause a demand squeeze in global markets.

Lowering interest rates is the old way, which has been comprehensively shown to raise asset prices but not consumer prices

China probably won't do helicopter money, hoping to achieve 2% inflation with salary increases. But if that doesn't work to stop deflation, there is a very easy way out of the deflationary spiral

The currency has already depreciated recently even though China isn't actually printing. If the Chinese economy is perceived to be strong compared to the global average then the RMB will go up. And yes, you can use the reserves to support the currency if necessary. What better use is there for them than to support the domestic economy? There's no point in just accumulating western assets

 

[Overbom]

First the doom talk about the, now debunked, exports disaster, now we got the deflation doom talk.

I predict that by Q4 or Q1 deflation will be gone. Lets see what the next doom talk will be after inflation returns. For now we will have the deflation scare articles

 

[Quan8410]

This so called "youth unemployment" issue was already addressed earlier in the thread. US mouthpieces were caught counting Chinese high schoolers as "unemployed". Without these extra "unemployed", youth unemployment in China was the same percentage as the US.

So if you will talk about China's massive unemployment, you will also talk about America's massive unemployment, because the numbers are the same.

The number 21.3% is from the Chinese National Bureau Of Statistics. And it is record high, sir. You don't trust Chinese statistics?