Chinese Economics Thread

[tamsen_ikard]

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Nominal GDP growth (inflation) literally doesn't mean anything good in real world outisde the heads of some low-IQ Westerners.

And real GDP growth in China slightly slowed down (from 6% to 5%) due to the collapsing purchasing powers of their export partners in the West, and by the extension global economy as a whole.

Also it's worth pointing out that China in this year pretty much deflated its real estate bubble and stopped lending that sector so much,

Instead it turned financing more and more high tech sectors which pay greater divindents in the future, and are not short term engines of growth like the real estate sector is.

That's also geopolitically connected with the West. And it's their own decision, they could've grown 6% easier had they not done that.

Another thing worth pointing out is that China contributed to 1/3 of all global GDP growth in 2023, more than the entire West combined + India combined.



I explained exactly why are they doing this 2 times in my previous responses, but you are too concerned with trolling to read over that.

Nominal GDP is the only thing we can measure objectively. Everything else is just projection. Real GDP growth is nothing but a projection by taking price of previous year to this year, then calculating the inflation and then subtracting it from nominal growth to come up with real GDP growth.

But, price could have increased because quality of the product could be better. Quality of service could be better than last year. Is the hair cut in a poor salon equal to a hair cut done by trained professionals in a good environment? Ofcourse not. Real GDP growth does not take any of that account. So, having a solid nominal GDP growth is also important.

if you have 0% nominal growth but also also 5% deflation what is the real GDP growth? 5%. So, your economy actually didn't grow at all, but by manipulating the numbers you got 5% real GDP growth. That's not good for the actual economy.

As an economy get richer, it must have inflation cause the quality of goods will increase, quality of people are also increasing, their demand for wages for the same will be higher.

As China grows richer, it must also increase the wage of its people, and that will cause inflation. Chinese workers will not be happy with getting $1 for a haircut when the same workers can get $5 in Taiwan for example. So, inflation is extremely important to get rich.

 

[resistance]

Video is freaking weird so People bank of China lends(?) to other Chinese institutional banks who then uses the money to invest in projects at home and abroad around the Belt and Road. How can one say that China still owns those dollar if the dollars have been invested in projects....That like saying i bough this gaming pc, so i now own this gaming pc and i still own my money i needed to spend to buy the gaming pc.

Sounds like a copium video to me, don't worry the dollar isn't being attacked because China's dollar reserves is 3 times bigger.

I know this is a bit copium, but what I really mean is there's shouldn't be yuan circulate too much internationally. The video describe well about how currency help development and prevent global financial crisis damage for Chinese domestic industries.

 

[Staedler]

The latest studies indicate that even 5% inflation isn't noticeable.

And isn't some inflation desirable, as it prompts consumption now instead of waiting for prices to fall?

You know i once heard the 2% eternal inflation came from a new zealand experiment that somehow worked. So now we are stuck with eternal inflation target of 2% in the west. Its a good way to make the bottom of gdp growth always 2% in a mostly service based economies.

Well production and consumption are intimately linked. One is just biased for the short term and the other for the long term. Investment is necessary for the PPF to expand which is what we need if our economy is to grow. Consumption doesn't expand the PPF, just our current utility. Without consumption, investment can't be made sustainably. Ideally consumption and investment would move in lockstep, where each unit of production is immediately consumed without excess demand or supply. Of course, this ideal situation can never occur.

Inflation and deflation biases the economy towards consumption and investment respectively. Inflation discourages investment which impacts the expansion rate of our PPF. This is not desirable. Deflation discourages consumption and instead encourages investment. However due to the production-consumption linkage, discouraged consumption will also lead (eventually) to lower production because investment becomes unsustainable.

PPF expansion is where wealth is created, so we always want to maximize this as much as possible.
If the government had infinite money to subsidize companies and companies were 100% efficient, we would actually want 100% investment (aka deflation) to maximize the PPF expansion rate. But companies need money to not go bankrupt in reality and companies fossilize (in innovation terms) all the time.

So the actual ideal rate is 0% inflation/deflation. But because deflation can cause investment to become unsustainable and thus consume itself (losing the point of focusing on investment), we want a little bit of buffer above 0% to avoid it. How they came up with 2% as that ideal buffer is a story for another day.


A country that is catching up (undeveloped/developing) is by definition not on the edge of the PPF yet. Compared to a developed nation (already on the edge of PPF), the constraints are different. Investment's effect on a mature economy is limited to the PPF expansion rate. Not so for a developing nation, where it can be PPF expansion + the catch-up to the PPF edge.

 

[Serb]

Nominal GDP is the only thing we can measure objectively. Everything else is just projection. Real GDP growth is nothing but a projection by taking price of previous year to this year, then calculating the inflation and then subtracting it from nominal growth to come up with real GDP growth.

But, price could have increased because quality of the product could be better. Quality of service could be better than last year. Is the hair cut in a poor salon equal to a hair cut done by trained professionals in a good environment? Ofcourse not. Real GDP growth does not take any of that account. So, having a solid nominal GDP growth is also important.

That's coping because quality could rise, but the price could still fall. And it's impossible for quality to rise for all products in the economy at the same time.

Those price increases brought by individual product quality enhancements are called 'value additions', and they are not subtracted by the GDP PPP ("real" GDP) calculation method, they are factored in - only the general inflation (CPI) is.

So it just means that your goods and services are more expensive due to inflation coming from various possible sources but not because of your "better quality".

It just means that you still produce one car, but that car is many times more expensive now due to inflation.

Just because your US 1 car is now hypothetically more expensive than Chinese 10 cars, doesn't mean that you are economically stronger, it means that only low IQ people of your country and political block can now stupidly boast that you are economically stronger. It's basically a "paper tiger".

And this is all without voicing the concern of currency rates in nominal GDP calculations,

And we know that currency can be artificially skewed in multiple directions due to different monetary policies. Like it is being skewed against China, for the US.

if you have 0% nominal growth but also also 5% deflation what is the real GDP growth? 5%. So, your economy actually didn't grow at all, but by manipulating the numbers you got 5% real GDP growth. That's not good for the actual economy.

As an economy get richer, it must have inflation cause the quality of goods will increase, quality of people are also increasing, their demand for wages for the same will be higher.

As China grows richer, it must also increase the wage of its people, and that will cause inflation. Chinese workers will not be happy with getting $1 for a haircut when the same workers can get $5 in Taiwan for example. So, inflation is extremely important to get rich.

I'm having trouble understanding this part in total.

 

[tamsen_ikard]

That's coping because quality could rise, but the price could still fall. And it's impossible for quality to rise for all products in the economy at the same time.

CPI measures in proportion, if it detects increases, well that's inflation.

GDP PPP for example decreases only price increases coming from inflation, not market dynamics price increases.

Those price increases brought by product quality enhancements are called 'value additions', and they are not subtracted by the GDP PPP ("real" GDP) calculation method.

So it just means that your goods and services are more expensive due to inflation coming from various possible sources but not because of your "better quality".

It just means that you still produce one car, but that car is many times more expensive now due to inflation.

Just because your US 1 car is now more expensive than Chinese 10 cars, doesn't mean that you are economically stronger, it means that only low IQ people of your country and political block can now boast that you are economically stronger.

And this is all without voicing the concern of currency rates in nominal GDP calculations,

And we know that currency can be artificially skewed in multiple directions due to different monetary policies. Like it is being skewed against China, for the US.




I'm having trouble understanding this part in total.

If all things are equal than the price of goods and services between two countries will vary because price of labor is different. In the US, labor much more expensive than China for example. Why is that, its because of US has plenty of high tech companies and industries that also need people, so there are more options for people to choose from when it comes to having a job. A worker that cuts hair could have also worked in another profession for example and probably make the same money. This high demand for labor is what makes rich countries much easier to live. So, when you say prices are high in the US because of monetary manipulation, that is wrong.

People in rich countries are more educated, their companies have more capital, more reputation, more knowhow, more relationship with existing customers. So, they can demand more for their labor compared to a poor country.

So, you cannot just bring down a rich country's nominal GDP or boost a poor country's PPP GDP by just using price differences alone. Those price differences have actual reason behind it.

That's why I have concerns about using PPP to try to play down the west's economic power or try to boost China up. The west is rich because it has many advantages in terms of education, knowhow, relationships and capital. You cannot play down those advantages just by doing math between prices of goods and saying west is actually not as rich as the nominal GDP says.



Now coming back to my earlier point that you didn't understand. What I mean is that since high cost of labor is must for an economy to be rich, so if China wants to be rich, if its workers want to make more money per for hour for cutting hair or flipping burgers for example, then China needs to have inflation each year. 0% inflation is not good thing for China if wants to get rich.

As China gets richer, all goods and services will get more expensive. Right now maybe you get can get bowl of Noodles for $1 dollar in China. But a rich China will not sell the same noodle for $1 because the workers will have more options and will demand more wages for that same restaurant job.


So, for that scenario to happen, you need solid inflation each year. In fact you need more inflation than the west. So, that eventually Chinese workers can have equal wages compared to US workers.

 

[Michaelsinodef]

@Staedler @Serb

Don't bother talking with this troll, the last 2 posts of his are a major lmao.

Also, everyone, report him for not having facts straight and being a negative influence on the thread.

(Mods can delete this post and some other posts to clean up as well if needed)

 

[tamsen_ikard]

@Staedler @Serb

Don't bother talking with this troll, the last 2 posts of his are a major lmao.

Also, everyone, report him for not having facts straight and being a negative influence on the thread.

(Mods can delete this post and some other posts to clean up as well if needed)

People spewing comments that have no basis in economics like deflation is good for the economy and if I try to argue against that using established economic theory and I become the troll. Sad to see the level of delusion from you. Anyways, if you don't like my arguments, you can argue against that using actual facts instead of making personal attacks.

 

[Biscuits]

Growth at 5% is still huge relative to China's rivals. There is a global economic slowdown, expecting 10% isn't realistic.

When discussing gdp we are always discussing the "real" nominal GDP, which in China's case is in RMB... So it doesn't make a difference, except if wage growth stopped in China or is lagging behind inflation. Which shockers, it isn't.

The advantages of wealth the west exist, but they also apply equally to China, which has about as large middle/upper consumer class as the west... So in terms of education, knowhow whatever, you'd be hard pressed to say there is any major difference.

And through structurally, we are theoretically vulnerable to the same issues as the west, in reality, there is continued strong growth even as the major western countries are either outright in free fall (Germany, UK) or doing ok but not growing as fast as China (US).

Don't fix things that aren't broke.
China can live with NATO having a higher total gdp for now, because NATO isn't an unitary nation that can coordinate itself well. Even the individual NATO nations are often not that effective due to runaway corruption.

In the past, US alone had larger economy than China. But China still walked past them because it was better administered, less corrupt and more shrewd in international policy. China didn't implode just because it wasn't the no1 economy during all those years, and it's not going to spontaneously combust just because NATO is slightly larger than it in 2024...

 

[FairAndUnbiased]

If all things are equal than the price of goods and services between two countries will vary because price of labor is different. In the US, labor much more expensive than China for example. Why is that, its because of US has plenty of high tech companies and industries that also need people, so there are more options for people to choose from when it comes to having a job. A worker that cuts hair could have also worked in another profession for example and probably make the same money. This high demand for labor is what makes rich countries much easier to live. So, when you say prices are high in the US because of monetary manipulation, that is wrong.

People in rich countries are more educated, their companies have more capital, more reputation, more knowhow, more relationship with existing customers. So, they can demand more for their labor compared to a poor country.

So, you cannot just bring down a rich country's nominal GDP or boost a poor country's PPP GDP by just using price differences alone. Those price differences have actual reason behind it.

Simple counterproof: any country with very different GDP per capita but equal economic complexity index.

Economic complexity directly measures the "more capital, more reputation, more knowhow, more relationship with existing customers" that you claim is important.

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If the relative rank of economic complexity deviates from the relative rank of nominal GDP per capita, then it means nominal GDP per capita is not captured by measurable technological capabilities but by other factors.

 

[FairAndUnbiased]

People spewing comments that have no basis in economics like deflation is good for the economy and if I try to argue against that using established economic theory and I become the troll. Sad to see the level of delusion from you. Anyways, if you don't like my arguments, you can argue against that using actual facts instead of making personal attacks.

If established economic theory worked, how come it isn't working now and all sorts of exceptions and caveats have to be added?

People aren't coming up with exceptions and counterexamples to classical mechanics every other decade. If a rare event occurs that cannot be accounted for by classical mechanics, such as the mercury precession problem, classical mechanics was discarded for that situation, and we got general relativity.

If science functioned like "established economics" we would have coupled differential equations calculating relative spin rates of epicycles, think about the exact gear ratios of epicycles, and have detailed formulae for the fire/water/earth/air values of each element to try to do physics and chemistry, instead of discarding geocentrism and adopting classical mechanics, and discarding elemental theory for the periodic table.