Chinese Economics Thread

[mossen]

One very positive aspect of the real estate routing is that household debt has stopped its explosive rise.

China (orange line in chart) saw a tremendous increase. Some amount of that was probably even healthy, as it stimulated the economy, but clearly the crisis came at the right time. Had it continued for the rest of this decade, we could have seen a 2008-style crisis that we saw in the US. Instead, it merely slowed down the Chinese economy somewhat without being a major crisis.

The recent announcements by the Chinese authorities that they intend to take over a greater share of the housing sector is welcome. I think the Singapore model works pretty well. I question how much value that companies like Evergrande ever contributed to the economy.

 

[siegecrossbow]

In earnest, I think deflation is a worry only if China has an unemployment issue.

Despite the so-called high unemployment among the young, this is not yet the case.

Kids are being picky about jobs or simply not working until they feel like it. Chinese parents have more means than ever before to indulge them.

True, there is a mismatch in the type of college graduates. Too many general/liberal arts majors and not enough technicians. But sooner or later this will be resolved.

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China already has the world’s largest vocational education system. More than 8,700 schools enrolled around 10 million students in 2022, according to the Ministry of Education (MOE).

But it still lacks skilled workers after spending the past few decades focusing on the expansion of access to

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– a system that now produces over 5.5 million graduates a year with academic degrees who struggle to find work during China’s slow economic recovery.

As a result, China is expected to face a shortage of 30 million skilled workers in the manufacturing sector by 2025, according to data from the Ministry of Human Resources and Social Security.

Further more, in any society -- especially a nominally communist/socialist country -- more goods leading to lower prices is a good thing.

What brings down countries historically has always been inflation. No government has ever fallen when goods are abundant and prices are cheap.

The China "deflation" angle is cope at best.

There is a ridiculous stigma against blue collared work in China. One of my cousins didn’t do well on the college entrance exams so he went to trade school instead and got into construction. He worked really hard, passed a lot of certification exams, and is now a chief architect making probably 10x salary of the average white collar worker of his age. He married a college graduate too, but she didn’t work or study as hard and failed the same certification tests that he passed so she is stuck at a lower rank.

College is only one part of your life, and the longer your career is the less important your degree is no matter how prestigious it is. I personally have an open mind about it. If my son is not strong academically I will not push him but instead investigate professional blue collar avenues. But this is a major mental hurdle for a lot of older generation Chinese to overcome.

 

[pevade]

There is a ridiculous stigma against blue collared work in China. One of my cousins didn’t do well on the college entrance exams so he went to trade school instead and got into construction. He worked really hard, passed a lot of certification exams, and is now a chief architect making probably 10x salary of the average white collar worker of his age. He married a college graduate too, but she didn’t work or study as hard and failed the same certification tests that he passed so she is stuck at a lower rank.

College is only one part of your life, and the longer your career is the less important your degree is no matter how prestigious it is. I personally have an open mind about it. If my son is not strong academically I will not push him but instead investigate professional blue collar avenues. But this is a major mental hurdle for a lot of older generation Chinese to overcome.

Yeah, this is a pretty big issue. There is a pretty big stigma against non-STEM work to the point that people are refusing to work in a factory in an engineering position and taking code-monkey job which is significantly less well paid.

 

[siegecrossbow]

Once again, deflation is simply misinformation. Pork prices continued collapsing but non-food prices increased by 0.5%. China needs to update the CPI basket so that a single highly volatile item like pork doesn't skew the numbers so much. It's basically the same story as with the very broad definition of youth unemployment that resulted in an overly scary number when compared with the more narrow definition in other countries.

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Pork price sky rocketing in 2019: lmfao Chinese can’t afford to eat meat go eat grass.
Pork price collapsing in 2023: lmfao deflationary pressure on Chinese economy.

 

[resistance]

Yuan shouldn't get internationalize. I would rather find middle man like HKD SGD or AED.

 

[FairAndUnbiased]

There is a ridiculous stigma against blue collared work in China. One of my cousins didn’t do well on the college entrance exams so he went to trade school instead and got into construction. He worked really hard, passed a lot of certification exams, and is now a chief architect making probably 10x salary of the average white collar worker of his age. He married a college graduate too, but she didn’t work or study as hard and failed the same certification tests that he passed so she is stuck at a lower rank.

College is only one part of your life, and the longer your career is the less important your degree is no matter how prestigious it is. I personally have an open mind about it. If my son is not strong academically I will not push him but instead investigate professional blue collar avenues. But this is a major mental hurdle for a lot of older generation Chinese to overcome.

Just remind him about the reality of semiconductor. Needs white collar degree to do blue collar physical work (and white collar mental work) and get paid lower than garbage man.

Lifting 50 lbs and working in chemical environments while having a degree in engineering is a requirement for employment as a lithography engineer.

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[resistance]

Oh no, china bad for manufacturing everything.

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[siegecrossbow]

Oh no, china bad for manufacturing everything.

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China wouldn’t have had to move up the value chain so fast if some idiot didn’t decide to ban tech exports…

 

[tamsen_ikard]

Once again, deflation is simply misinformation. Pork prices continued collapsing but non-food prices increased by 0.5%. China needs to update the CPI basket so that a single highly volatile item like pork doesn't skew the numbers so much. It's basically the same story as with the very broad definition of youth unemployment that resulted in an overly scary number when compared with the more narrow definition in other countries.

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i think this is just trying to cope a serious problem. Even if Inflation is 0.5% for non-food items. Why is it so low? That means there is a lot of deflationary pressure in the economy. That's cause China is not using its monetary and fiscal policy to increase the money supply.

They have the firepower to raise lending, money supply to such a level that inflation reaches the 2% target. But they are being too cautious. So, inflation is still too low. China needs to do a strong round of money printing and lending, hopefully in the right sectors such as chip making to boost economy and inflation to a respectable 2% level.

 

[Serb]

i think this is just trying to cope a serious problem. Even if Inflation is 0.5% for non-food items. Why is it so low? That means there is a lot of deflationary pressure in the economy. That's cause China is not using its monetary and fiscal policy to increase the money supply.

They have the firepower to raise lending, money supply to such a level that inflation reaches the 2% target. But they are being too cautious. So, inflation is still too low. China needs to do a strong round of money printing and lending, hopefully in the right sectors such as chip making to boost economy and inflation to a respectable 2% level.

They are already lending in historic amounts to high-tech industries like chip manufacturing. Lending more would be counterproductive.

And it seems to me that you don't actually know what the deflation means. It means falling prices, but prices are not even falling.

0.5% growth is still growth. And even if the prices were actually falling, there would be nothing bad. It would mean cheaper prices for consumers.

But I understand that coming from the high inflation, high real-wage decreases, EU environment, you struggle to cope with such concepts.

Deflation is only considered bad by some economists in theory because it could theoretically lead to deflationary spirals and slowing economic growth,

But that was never proven, and we see no signs of that happening inside of China. And if it happened, then the government could act on it.

The Chinese government is socialist in nature, it supports equality, cheap prices, and good living standards for all people, unlike the EU vassals.

And Chinese people are generally not living their entire lives in debt, like the US, they have the highest savings rates at their state banks in the world.

All that money then goes into financing high-tech sectors of the future, making China the technological and innovation leader in the world.

It's better for Chinese high IQ, patriotic officials at the state banks to invest that money, than for people to gamble on Wall Street Bets like in the US (or for the US investment funds to simply move money out of the country or invest in some non-strategic companies).

All those savings are not wasted, they are securing China's future domination of this world, who controls the incoming exponential technology will control everything else.

So, to also go back on your first point, it could be said that precisely because they are not increasing consumption too much, they could keep more savings at state banks and invest more in sectors such as chipmaking.