Chinese Economics Thread

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MortyandRick

Senior Member
Registered Member
KYli said:
Most countries especially those export oriented aren't doing so well in PMI due to the economy slowdown in the West. It is just that when Chinese number is not as rosy, MSM such as Bloomberg tries to depict like the end of the world. Just look at German PMI, that is truly catastrophic.
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PMI readings for Japan and South Korea remained mired in contraction at 48.7 and 49.8, respectively, little changed from the prior month. A reading above 50 indicates an expansion in activity, while anything below suggests contraction.

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The HCOB Global Purchasing Managers' Index (PMI) for Italian manufacturing came in at 46.8, up from 45.4 in August but still well below the 50 mark that separates growth from contraction.

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The HCOB final Purchasing Managers' Index (PMI) for manufacturing rose to 39.6 in September from 39.1 in August, below the 39.8 of the flash estimate and still far below the 50 level separating growth from contraction.
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Wow. Germany is getting hit hard. That's crazy bad numbers.

Look at the cope they put in for Germany

"

German manufacturing stays mired in downturn in Sept - PMI​

Reuters
October 2, 202312:58 AM PDTUpdated a month ago




Steel worker at furnace of ThyssenKrupp's steel plant in Duisburg

A steel worker in heat protection gear is silhouetted against the fire of a furnace at the steel plant of ThyssenKrupp in Duisburg, Germany, July 26, 2023. REUTERS/Wolfgang Rattay//File Photo
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BERLIN, Oct 2 (Reuters) - Germany's manufacturing sector, which accounts for about a fifth of its economy, remained mired in a downturn in September on weak demand and rapidly falling output, a survey showed on Monday.
The HCOB final Purchasing Managers' Index (PMI) for manufacturing rose to 39.6 in September from 39.1 in August, below the 39.8 of the flash estimate and still far below the 50 level separating growth from contraction.






awaited the Federal Reserve's latest
Output fell at the fastest rate since May 2020 - when the COVID-19 pandemic was hammering business activity worldwide - amid a further sharp drop in new orders, the survey showed.
Reports from surveyed businesses highlighted a number of headwinds to demand, including customer uncertainty, widespread efforts to reduce stocks and weakness in construction activity.
Weaker demand across the sector meanwhile fed through to lower prices, with September seeing further declines in both input costs and output charges, according to the report.
"The HCOB Manufacturing PMI of Germany is still signalling a quick slide downhill in terms of output. Nevertheless, we see glimmers of hope that the sector is starting to turn the corner," said Cyrus de la Rubia, Hamburg Commercial Bank (HCOB) chief economist.
He explained that in past phases of weak growth or recessions, the new orders index stayed in contractionary territory for less than two years and after that, it moved above 50, signalling growth again.
"As of today, the new orders index has been below 50 for 18 months. Therefore, there is a decent shot that the order situation will start to improve by the start of next year," de la Rubia said.
This optimism hasn't reached good producers yet though. "


What the f**k kind of mental gymnastic reasoning is this? Just because previous recessions lasted 2 years, this one should too? Like is this actually a true financial fact?
 
S

Stierlitz

Junior Member
Registered Member
The Caixin China General Service PMI rose slightly to 50.4 in October 2023 from September's 9-month low, pointing to the 10th straight month of growth in services activity as Beijing continued its efforts to stabilize the economy. Foreign sales grew for the second consecutive month due to an easing of travel curbs that attracted more tourists from abroad while employment stabilized after growing in the prior 8 months. Outstanding business grew further, with the rate of accumulation being the most since January. Meantime, new orders grew the least so far this year due to persistently weak demand. On the cos side, input price inflation hit its lowest since June 2022 as the rises in costs of labor, raw materials, and transport were limited. Meantime, prices charged increased the most since May, as firms sought to pass on higher input costs to clients. Finally, sentiment was less upbeat, weakening for the fourth straight month to a 3-1/2 year low, on concerns about the economic outlook.

source: Markit Economics
 
supercat

supercat

Major
escobar said:
China is succeeding at building indigenous manufacturing. Autos, electronics, and pharma are areas for further gains. Japanese and US firms are losing in electronics and German firms in autos.
https://twitter.com/i/web/status/1720416830206996717
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Yes, reducing real estate speculation and increasing investment in hi-tech manufacturing and R&D is the way forward for China.

China hunts for new industrial ‘pillars’ to replace a wobbly property market​

  • With the property sector, formerly a steady driver of GDP growth, no longer able to deliver, new industries will have to take its place
  • But there is no one sector which can be simply swapped into the role – multiple areas, now on the rise, must be combined to carry the same heft
Some emerging industries such as tech, new energy, advanced manufacturing and biological engineering, have the potential to serve as new economic pillars – but bundled together, they said, not as individual substitutes.
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Party members will be banned from buying stakes in private companies.

China’s Party Cadres Banned From Private Equity Investments​

  • Officials found to have made ‘huge gains’ from investing
  • Xi’s anti-corruption campaign has rocked financial sector
Party officials were found to have set up PE funds after they learned of key information of firms seeking to go public, and made “huge gains” after their initial public offerings, it said. Others were found to have provided financing support for firms they indirectly held via their investments. They also became the secretive channels for bribery, according to the article.
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Wrought

Wrought

Junior Member
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supercat said:
Yes, reducing real estate speculation and increasing investment in hi-tech manufacturing and R&D is the way forward for China.

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Click to expand...

https://twitter.com/i/web/status/1720309803799503050

Michael Pettis wrote an interesting commentary on that article, which I think has some valuable insight. While I don't agree entirely agree with his narrow view about consumption reforms, he is still correct about identifying the problem of excess investment (esp into property) which has also been repeated by Chinese economists, officials, Xi Jinping himself, etc.

Anyways, he believes that shifting the focus from property into manufacturing will not reduce bad* investment per se but rather shift the burden of absorbing those inefficiencies from the domestic Chinese economy (in the form of real estate speculation) onto the entire global economy (in the form of demand for manufactured goods). Which will of course do nothing to resolve the imbalance between supply and demand within the Chinese economy, and is therefore a bad** solution.


*The definition of "bad" is critical here. Pettis, as an economist, believes that economically inefficient investment is bad by definition. Which is a fair way of looking at it if your priority is to maximize economic efficiency, as economists are wont to do. But if your intention is to outcompete rival nations in the global economy, especially in strategically important sectors, then inefficient investment is exactly what you want, because your goal is political-economic as opposed to purely economic.

**Again, the definition of "bad" is the important part. Pettis believes that an economically imbalanced China is an economically unhealthy China, and to be fair he is not entirely wrong. But he is once again approaching the problem from a purely economic angle of maximum efficiency, and so neglects to consider the political-economic factors of global competition. Excessive investment in ships, or cars, or chips, or whatever may not be economically optimal but they are of immense strategic importance. And if China can establish and maintain dominant positions in important sectors of the global economy, it will be well worth the inefficient money spent.

Now, Pettis is of course an economist and so should be expected to speak from an economist's point of view. But I think his insight is still valuable because he describes the process by which existing policies will lead to a certain outcome. He believes that such an outcome is "bad," and under his own framing that is perfectly correct, but I would argue it may in fact be exactly what China wants and needs.
 
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D

Deleted member 24525

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Alright humor me for a moment
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Let me say at the outset this article isn't very good. It's full of ambiguous language and factual errors, pretty par for the course with SCMP. However, it does have two very important factually correct figures:
At the end of 2022, China had a stock of operational industrial robots that stood at 1.5 million.
At the end of 2022, China had 392 operational industrial robots per 10,000 manufacturing workers.
With a bit of algebra we can use this to solve for the total manufacturing workforce in China. It comes out to......
38 million.
Now this number is not as absurd as it may seem at first glance; it's about 3 times the American number. It comes out to 5% of the total Chinese workforce, which again is not as absurd as it may seem, with the American figure being 7%. However, while not impossible, they do strike me as definitely implausible.
For instance, the manufacturing share of GDP for China is 27%. If the numbers above are correct, this means that labor productivity in Chinese manufacturing is a full 5.4 times the national average, and a whopping 7 times the average for all other sectors. This compares to the labor productivity in American manufacturing being 1.7 times the national average and 1.9 times the average for all other sectors.
So unless some unique conditions in China are causing this productivity differential to be extremely dramatic compared to other countries, something is clearly off here. I am honestly clueless as to what that something could be. Contrary to western perception the central government has never made a habit of cooking economic data so I am doubtful they would start with this one metric, and I cannot think of anything else.

I would like to clarify that if you google China's manufacturing workforce it will give you the industrial workforce, which is much larger, however the manufacturing sector is only one of several sectors that are grouped under industry. I don't know why google does this but it isn't accurate.

If this belongs more in the scitech thread I can move it there.
 
L

lzmfVw

New Member
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Wrought said:
Michael Pettis wrote an interesting commentary
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You are being too charitable toward Pettis. He has been regurgitating the same "don't invest; consume", and "something something must rebalance" memes for years.

I'll just quote
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:

Western economists were already pushing that line 30 years ago, when I became (for four years) chief technical adviser for macroeconomic reform to China’s State Planning Commission. “Invest less! Consume more!” – the mantra made no sense to me then, and it still doesn’t today. One wonders what it even means. Should China have more cars but worse roads and fewer gas stations (not to mention subways and high-speed trains)? Does it need more televisions, but fewer apartments to put them in? Does the population need more food and clothing, even though it was already mostly well-fed and decently dressed three decades ago?
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For what it is worth I'll give you my thought: an economy that is pushing the frontiers will not appear to be at equilibrium to any observer.
 
Wrought

Wrought

Junior Member
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lzmfVw said:
You are being too charitable toward Pettis. He has been regurgitating the same "don't invest; consume", and "something something must rebalance" memes for years.

I'll just quote
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:



For what it is worth I'll give you my thought: an economy that is pushing the frontiers will not appear to be at equilibrium to any observer.
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Whereas you are being too harsh. As I said in my original comment, while I don't completely embrace his proposed solutions he nonetheless correctly understands the problem of overinvestment into real estate, infrastructure, and so on. And those same imbalances have been well known to the government for years and years. Boosting consumption is a regular talking point from the
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and the
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. Xi Jinping himself has repeatedly talked about the dangers of real estate speculation. Wen Jiabao warned about imbalanced growth ten years ago. If senior officials talk about the same things Pettis does, you should not be so quick to dismiss his views.

The fact that Pettis is not right about everything does not mean he is stupid or ignorant, and his commentary can still provide valuable insight. I don't agree with his conclusions here either, but he is still correct about the shift in investment flows.
 
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