Chinese Economics Thread

[Biscuits]

China will survive without publishing these data to the outside world. This information is being gathered by foreign intelligence agencies to formulate their containment strategy of China.

That is just conspirational thinking. The data is more important for private actors to access so that they can plan their expansions accordingly.

What makes you think such basic information is a threat? How can someone smaller than China in the first place "contain" us? If they want to cut themselves off, it's not possible to stop them, but that will only make them weaker in the long run. They are powerless, and the data will continue to be released in service of the public and private sectors.

With a strong economy even as demand is terrible due to recession in NATO, China is in no particular economic risk. Demand would return when NATO begins to recovers from the war in Ukraine. And as long as the enemy is being hurt more than we are, we keep our lead. Doesn't even matter if China contracts 10% as long as NATO contracts more.

 

[Jiang ZeminFanboy]

But China youth unemployment rate definition is wider than in the west, not comparable, the only thing you can say that in pandemic and now after it this unemployment rate has risen to some point.

https://twitter.com/i/web/status/1666045773471940608

 

[FriedRiceNSpice]

Because it is necessary to publish economic data for firms to decide expand or reduce business. Let say I am operating a child care business and I don't know birth rate, how can I know the demand? I may built a lot of child care centers just to waste it coz there is a lot less chidren than anticipating.

Birth rate could be computed by number of graduates each years.

As long as the % of youth pursuing education beyond high school is available (which increases yoy in China). Otherwise insufficient data points.

They're also used by multinationals to decide whether China is still a good place to invest and do business. F

No. Any analyst that attempts to use youth unemployment to make investment and business decisions would they themselves quickly find themselves unemployed.

Youth unemployment is actually a symptom of a larger phenomenon in China, which is deflation.

Basic living necessities are so cheap in China that young people can live without working. Whether it's off of their parents, or off of odd jobs here and there, young people in China have a choice, where as in the US, they don't - because inflation has made everything so expensive that if you didn't work in the US, you'd go homeless or even starve.

I'm not saying this is a great situation, mind you. It's obviously not great for businesses or for industry that young people are choosing to lay flat or can't find jobs. But a critical difference between the US and the rest of the world - and why US unemployment is, on average, so low - is that the US has barely any social safety net, especially when you consider its level of development. People who don't work in the US are treated with contempt and forced to the streets. That is how ruthless US society is, even as they claim it's China that doesn't care about human lives.

Actually the trend of large amounts of young people not working started sooner in the US - I believe the "30yr old living in mom's basement" trope has been around for at least a decade in the US. I think some people may underestimate just how many of those types exist in the US. Basically your statement about China also applies to the US as well, in fact even more so. Work itself is not intrinsically valued in the US. While freeloading or being homeless is looked down upon, the ultimate dream for most Americans is to be financially independent without having to work, hence the whole FIRE movement and American's obsession with, "residual income."

I think it would be important to explain how exactly youth unemployment is calculated, so that people can understand why its not relevant. By definition, unemployment in the US is defined as, "an individual that want's to work, and has actively applied to a job within the past 2 weeks." Already, it becomes evident that part of this definition is subjective and non-quantitively, and another part is overly restrictive. More importantly, we need to examine how the data is collected. In order to compute the unemployment rate, the US Census Bureau will send out a poll to 60,000 households. Note that poll is used to collect unemployment data on all age groups, not just youth. The Census Bureau selects households using a process that aims to ensure a relatively representative sample is chosen, but the particular methods used results in only a moderately representative sample. The small sample size, combined with high variance as well as sample variance means the CI for the computed statistic is going to be quite low. Furthermore, the results are further skewed by the fact that not everybody polls will respond, and the poll relies on the head of household to provide accurate data. The definition for youth unemployment coupled with the mechanism for how the data is collected guarantees an essentially useless result. Hence the Chinese Bureau of Statistics position of voicing a need to revisit the accuracy, reliability, and usefulness of the statistic is justified.

Given that youth unemployment rate is an unreliable statistic, are there any other statistics that should be considered? Well, one measure that is reliable and consistent between nations is the percentage of youth participation in the workforce. That number was estimated to be 56% for China. And guess what the number is for the US? 55%. Hence, we immediately have a better picture of the real situation with youth employment in China and the US. So now we have a better statistic from which to base our comparison, but does this statistic paint the whole picture? Unfortunately no, a single statistic is insufficient to paint an accurate picture. In order to understand this statistic, we need a whole sleuth of additional statistics, many that we either don't access too or would take a great deal of effort to try to derive. We need to look at the percentage of youth enrolled in education, we need to know household incomes for youth that are not participating in the labor force (vs those that are). We need to know the trend for overall size of labor force, and available jobs by sector/region/education level/experience level. We simply don't have data to determine whether or not we should be concerned or not. However, we do know that looking at the reported youth unemployment rate and using that figure as a point of comparison would be extremely silly.

 

[tonyget]

The main reason China's economy is slowing and youth unemployment is high isn't due to the lock downs. Yes, the lock downs had an effect and contributed to the closing of many small and medium businesses. But even if it didn't happen, the property bubble was still going to pop, and with it, consumer confidence. The end result would have been similar, maybe a bit better, but at the cost of millions of additional deaths from not locking down.

You want a target to blame, blame the collusion between local governments and property giants, which was allowed to flourish for too long before Xi finally cracked down on it in 2020. Selling land was a necessary step in China's development, because it was the only reliable and abundant source of capital for infrastructure development - the only assert Chinese people were willing to invest in, domestically. Had local governments not done it, all that money would've been transferred out of China into the US, EU, etc., like was being done before China's property market took off. So the policy of selling land to build infrastructure wasn't, in and of itself, bad.

What was a problem was allowing it to be carried too far. Chinese property developers were essentially allowed to run Ponzi schemes and take on massive debt to fund more debt. This should have been controlled years ago, but wasn't, probably because of government-business collusion and entrenched interests. It took a hard socialist like Xi, who according to even CIA documents cared little for money, to finally put an end to it. But because it was allowed to carry on for so long, the damage is already done, and will take years to recover from. That's what China is dealing with right now.

The large portion of China's work force is in manufacturing sector，unfortunately the demand for manufactured goods are low in the global now. If you look at the US data，most of newly added jobs are in service sector，the tech sector is even cutting jobs.

So the unemployment in China is structural. China needs to create more jobs in the tertiary sector.

 

[Minm]

The perfect youth unemployment is not zero. You want to give graduates some time to find the job their most suited for. For university graduates that takes longer than people with little education who end up as factory workers. If you force people into the workplace immediately after graduation, you'll end up with underemployment, where workers' skills are underutilised. You don't want a software engineer to become a farmer because he can't get a job at Alibaba right now. It's better to wait for a year in temporary jobs or further education

Is the measured value of 21% using the Chinese method or 7% using the American method of counting too high? Probably yes, but the unanswered question is really, by how much?

Stopping the publication of the youth unemployment survey is a necessary decision. People are obviously not smart enough to realise that 20% in China is not the same as 20% in America and it's the government's mistake for coming up with such a bad way of measurement. But by now, the number is scaring off investors and consumers. Young people in China might fear that they won't find a job when such fear is unwarranted. Publishing a "bad" number just fuels a spiral of pessimism and further harms the economy

 

[tonyget]

Not really, China's priority is to resolve the debt crisis of the property sector and the local government debt. China needs to avoid liquidity trap and credit freeze which is lot more important than reviving the consumption. Both property sector and the local government employed many people. Keeping these people employed and ensured property developers repaid their debt would increase consumption. Making sure property developers completed their housing projects and delivered the apartment on time would also help consumption as new home owner usually spend a lot of money on big ticket items.

For consumption, the government needs to refinance all mortgage to lower the cost of mortgage payment and alleviate the debt burden of most Chinese household. Most Chinese people don't have debt problem except the mortgage that is why it is so important to cut the cost of mortgage payment.

As for wealth concentration, it is not the main reason why consumption is down. Consumption is down due to the fact that average people are uncertain of the direction of the economy and feel less confident. Both weak housing prices and stock market have become a drag of consumption. If the housing prices and stock prices have increased, people would spend more money and consumption would go up.

Every thing you mentioned are the surface problem，not the root problem. Just like in 1929 America，on the surface it's stock market crash and over production problem. But the deep underlaying problem is still wealth concentration.

The US has experienced high economic growth prior to 1929，the so called "Roaring Twenties". But during that period new wealth didn't evenly distribute，a small group of people owned most of that wealth，average worker didn't get much pay rise. So over time the consumption power of the public stagnant, thus future problem already seeded long before 1929. The stock market crash is just a trigger for the root problem，which cannot hide forever

 

[Daniel707]

China is exporting more cars than India manufactures in entire year

https://twitter.com/i/web/status/1691736104469467244

https://twitter.com/i/web/status/1691744267973398742

 

[aqh]

I'm not Chinese and don't live in China. Can someone who knows tell me how much an unemployed / low earning person is expected to get monthly/annually in China as a payment?

 

[tacoburger]

I will add my 2 cents on the current economical situation in China. I think what's happening in China and in part the larger world is that as labour gets more and more expensive, and robotics and A.I gets better and better, small business just can't complete. China manufacturing boom had a lot of small business powering it, and they usually relied on cheap labour. But today, with rising labour costs and A.I getting as good as it is, you need to get onboard industry 4.0 if you want any chance of succeeding. The issue is that robots and A.I will have large upfront investment costs, not to mention massive technical expertise to install and use. Lots of smaller business can't afford that, and are filled with boomers that don't even know how to use a computer properly, let alone mess around with A.I.

So what's happening now and gonna to happen is that lots of smaller business will just get eaten up or outcompleted by a handful of mega-corporation that can afford to pay billions to fully automate a factory and train it's custom A.I models. We see this happen in silicon valley where a handful of companies utterly dominate the tech industry and have grown so large that they basically do everything. Small teams just can't complete anymore, even billion dollar companies can't challenge a dominant competitor in it's field, even if said competitor is making the worse decision possible, see Threads vs Xitter. And that's software, where a handful of people can write a app and have it on a billion phones in a month. In manufacturing, you need the actual hardware to be build and installed. And we know that Chinese factories have been on a robot installing spree in the last 2 years, not to mention the A.I craze.

So yeah, in basically every field, there's gonna be lots of consolidation. This is not just China, every country will have their entire economy dominated by a handful of mega-corporations. Sad but that's the way that it is, a mum and pop shop can't build their custom 10 billion parameter A.I model to enhance their business, or build a fully automated factory.

I suspect that lots of the chaos/job loss in China is due to this very process driving lots of smaller traditional business that have been operating roughly the same since the early 2000s out of business just due to the sheer amount of change in the technological and geopolitical fields and that things will get back to normal once a handful of mega-corporations remain that have eaten everything. I'm not saying that it's a good or bad this, but that's just how it is.

We have seen this very exact thing in the past in America, the growth of mega-farms, where small scale farmers can't afford the upfront cost of heavy equipment, gets outcompleted and the growth of large mega-farms that result from this. The very same process is happening to small chinese farms right now. Or how Amazon more or less completely destroyed traditional bookstores, or how the internet is destroying is destroying traditional media.

The fact that all this automated factories and A.I solution needs less workers than normal isn't helping things. But again, demand for workforce might stabilize once things get back to normal.

 

[FairAndUnbiased]

Every thing you mentioned are the surface problem，not the root problem. Just like in 1929 America，on the surface it's stock market crash and over production problem. But the deep underlaying problem is still wealth concentration.

The US has experienced high economic growth prior to 1929，the so called "Roaring Twenties". But during that period new wealth didn't evenly distribute，a small group of people owned most of that wealth，average worker didn't get much pay rise. So over time the consumption power of the public stagnant, thus future problem already seeded long before 1929. The stock market crash is just a trigger for the root problem，which cannot hide forever

What more can Chinese consume without inflation or inventing new fees?

What specifically is China missing according to you?

Household appliances are near 100% saturation even in rural areas, cars have record sales already and are only limited by parking spaces which can't be created easily. University tuition is cheap and limited by test scores not finances. What, exactly, can be consumed more?