Chinese Economics Thread

[mossen]

Worth noting that measurements of Chinese consumption are undercounting actual consumption because a lot of it is "in-kind" (e.g. subsidised by the state) and thus doesn't show up in GDP accounting as it isn't private consumption per se. A good example are subsidised lunches but there are many others.

China's problem is very rapid debt accumulation. Right now it isn't a major problem but it will be 10-15 years from now unless there is a radical re-orientation. Note that when Xi took power it was only 34% of GDP. Now it will hit 100% of GDP within a few years. This is on him. It was also pretty stable, even after the GFC. So this is clearly his policies.



Given how poor China still is (per capita GDP lower than Mexico and Bulgaria) there is simply no justification for why the state should accumulate this much debt at a comparatively modest level of development.

 

[Jiang ZeminFanboy]

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.

No. Pettis is a grifter and groomer of bad ideas for China's future.. There's no place for Pettis in China's economic debate and especially on sinodefence.

https://twitter.com/i/web/status/1701911580374335752

https://twitter.com/i/web/status/1707665126994878623

https://twitter.com/i/web/status/1686638721012310016

https://twitter.com/i/web/status/1707658959224754383

Please, Log in or Register to view URLs content!

Please, Log in or Register to view URLs content!

Please, Log in or Register to view URLs content!

 

[Jamie28]

Worth noting that measurements of Chinese consumption are undercounting actual consumption because a lot of it is "in-kind" (e.g. subsidised by the state) and thus doesn't show up in GDP accounting as it isn't private consumption per se. A good example are subsidised lunches but there are many others.

China's problem is very rapid debt accumulation. Right now it isn't a major problem but it will be 10-15 years from now unless there is a radical re-orientation. Note that when Xi took power it was only 34% of GDP. Now it will hit 100% of GDP within a few years. This is on him. It was also pretty stable, even after the GFC. So this is clearly his policies.

View attachment 120983

Given how poor China still is (per capita GDP lower than Mexico and Bulgaria) there is simply no justification for why the state should accumulate this much debt at a comparatively modest level of development.

I think you are hyperventilating too much about debt, it might be rising but if you consider the cost of not taking the debt (eg no infrastructure development, no r&d on cutting edge science and technology, ecc.) sometimes it is better be indebted rather than not.

 

[Wrought]

No. Pettis is a grifter and groomer of bad ideas for China's future.. There's no place for Pettis in China's economic debate and especially on sinodefence.

https://twitter.com/i/web/status/1701911580374335752

https://twitter.com/i/web/status/1707665126994878623

https://twitter.com/i/web/status/1686638721012310016

https://twitter.com/i/web/status/1707658959224754383

Please, Log in or Register to view URLs content!

https://twitter.com/i/web/status/1698967599315620301

Please, Log in or Register to view URLs content!

I am well aware of the fact that he has been wrong in the past, especially w.r.t. predictions. Most economists are. It is a hard profession to predict. As I said already, just because he is not right about everything does not mean that he cannot provide any insight. The problems he articulates regarding overinvestment and quality of growth are the same as those articulated by the government at senior levels. They are very much real problems the government is actively working to address, as demonstrated by the three red lines and continued deleveraging efforts.

I do not believe that it is productive to dismiss people out of hand on the basis of their character. If you dispute his specific hypothesis here, which is to say, the underlying data on the investment flows to different sectors or the resulting effects on output, exports, and debt, then by all means provide an alternative explanation. But to say someone can never be right because they were wrong in the past is intellectually lazy.

 

[Blitzo]

I am well aware of the fact that he has been wrong in the past, especially w.r.t. predictions. Most economists are. It is a hard profession to predict. As I said already, just because he is not right about everything does not mean that he cannot provide any insight. The problems he articulates regarding overinvestment and quality of growth are the same as those articulated by the government at senior levels. They are very much real problems the government is actively working to address, as demonstrated by the three red lines and continued deleveraging efforts.

I do not believe that it is productive to dismiss people out of hand on the basis of their character. If you dispute his specific hypothesis here, which is to say, the underlying data on the investment flows to different sectors or the resulting effects on output, exports, and debt, then by all means provide an alternative explanation. But to say someone can never be right because they were wrong in the past is intellectually lazy.

I think your argument would have a stronger base by making isolated arguments on your own reasoning rather than citing him, in that case.

His notoriety means that simply by cutting a position held by him causes understand reflexive caution due to the extent of bad takes that he's held before (and many which he still holds today) on a variety of adjacent matters.

 

[lube]

I am well aware of the fact that he has been wrong in the past, especially w.r.t. predictions. Most economists are. It is a hard profession to predict. As I said already, just because he is not right about everything does not mean that he cannot provide any insight. The problems he articulates regarding overinvestment and quality of growth are the same as those articulated by the government at senior levels. They are very much real problems the government is actively working to address, as demonstrated by the three red lines and continued deleveraging efforts.

I do not believe that it is productive to dismiss people out of hand on the basis of their character. If you dispute his specific hypothesis here, which is to say, the underlying data on the investment flows to different sectors or the resulting effects on output, exports, and debt, then by all means provide an alternative explanation. But to say someone can never be right because they were wrong in the past is intellectually lazy.

Not just being wrong. He also never brings up when he's wrong or why he was wrong. All conveniently ignored.
How do you engage with his ideas if that's the case? Maybe it's just Twitteritis.

Other economic commentators on Twitter actually do point to things they predict that turn out wrong, if only as a conversation starter. Hate them or love them, that's infinitely more respectable and useful because it provides a framework in understanding the shortcomings in someone's theory.

 

[Wrought]

I think your argument would have a stronger base by making isolated arguments on your own reasoning rather than citing him, in that case.

His notoriety means that simply by cutting a position held by him causes understand reflexive caution due to the extent of bad takes that he's held before (and many which he still holds today) on a variety of adjacent matters.

I already did? I previously explained why I believed that his definition of "bad" was too narrow despite being technically correct within the framework of maximal economic efficiency, and why what he calls bad may in fact be both intentional and beneficial in terms of international competition.

Caution I can understand, but I maintain that it is lazy to dismiss arguments outright especially when they are backed by official data. Healthy skepticism is one thing, but people should be able to ground their refutations in facts. It's not like this is a fringe interpretation either; he is not the only person talking about the shift in investment flows.

 

[Michaelsinodef]

I already did? I previously explained why I believed that his definition of "bad" was too narrow despite being technically correct within the framework of maximal economic efficiency, and why what he calls bad may in fact be both intentional and beneficial in terms of international competition.

Caution I can understand, but I maintain that it is lazy to dismiss arguments outright especially when they are backed by official data. Healthy skepticism is one thing, but people should be able to ground their refutations in facts. It's not like this is a fringe interpretation either; he is not the only person talking about the shift in investment flows.

Just take a look at some of the tweets pointing out the shit he, for example, says about HSR.

Basically, he FAILS to even have BASIC FACTS correct.

 

[Blitzo]

I already did? I previously explained why I believed that his definition of "bad" was too narrow despite being technically correct within the framework of maximal economic efficiency, and why what he calls bad may in fact be both intentional and beneficial in terms of international competition.

Caution I can understand, but I maintain that it is lazy to dismiss arguments outright especially when they are backed by official data. Healthy skepticism is one thing, but people should be able to ground their refutations in facts. It's not like this is a fringe interpretation either; he is not the only person talking about the shift in investment flows.

It isn't about caution, but rather that he deserves to be laughed out of the room as a default, and that any portrayal of an argument by him as if it is worth people's time should be done so in a highly manner which recognizes his reputation for what it is.

Equating him as if he is just another economist or someone who's been wrong in the past is somewhat underselling him, instead he should be recognized as one of the loudest voices out there who tries to curry (through the lens of economic credibility), a near religious belief that the CPC is unable to carry out economic policies which are for the benefit of the PRC as a nation, and indeed does not seem to view systemic nation building in the PRC for the purposes of domestic socio-political security and domestic technological and industrial strength and geopolitical advantage as something which is damaging if it doesn't adhere to a specific definition of economic theory.
One interpretation could be it is a case of genuine consistent incompetence, another interpretation is it is a Fukuyama-esque case of believing in the triumph and superiority of a specific politico-economic system.


Of course there's nothing wrong with him holding that belief and writing about it, but it does mean that his arguments will be met with overwhelming skepticism here, and if there's a specific argument of his relating to the aforementioned topic you want to portray as valuable or sensible, then being less charitable to him and instead harsher to him may be a better way to drive home what you think is a valuable idea.

 

[Overbom]

Pettis is like the economic version of Gordon Chang (and far more unlikeable actually...lol)

Anyone who cites him, for any reason at all, even if one of his points is correct, deserves to be challenged on that.

To conclude,
"Mr."Pettis has been heralding China's collapse for decades and will continue to do so in the near/medium/long-term future. There is absolutely nothing of value that can be gained out of any of his Twitter posts