Chinese Economics Thread

[Serb]

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According to a UN analysis, China, Russia, and Mexico were the only top economies with positive real wage growth in 2023.

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Growth in salaries will continue next year, with India (5.1%), Indonesia (4.3%) and China (4.1%) being the top three performers.

• Jan – Nov 2023 retail sales: RMB 42.8 trillion (US$6.04 trillion); +7.2%
• Jan – Nov 2023 industrial added value*: +4.3%

From January to November 2023, fixed asset investment increased by 2.9 percent year-on-year, lower than the 5.1 percent growth in 2022. Among them, investment in the manufacturing industry increased by 6.3 percent year-on-year, which is lower than the 9.1 percent growth in 2022.

But it is encouraging that in manufacturing investment, the electrical machinery and equipment manufacturing industry grew by 34.6 percent year-on-year, the instrument and meter manufacturing industry grew by 21.5 percent year-on-year, the automobile manufacturing industry grew by 17.9 percent year-on-year, and high-tech industry investment grew by 10.5 percent year-on-year.

So we can assume that less fixed asset investment is probably in the low-end manufacturing and service sector, but more in the high-end.

Overall government infrastructure spending grew by 5% as well. Consumer spending also grew overall and showed strong recovery capability.

China's consumer spending trends have seen a positive upturn as consumer spending contributed 83.2 percent to economic growth during the first three quarters of 2023, the Guangming Daily reported.

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To finalize this, delusional, illiterate critics in the West don't seem to realize that the Chinese fiscal deficit to GDP ratio for 2023 was 3.8%,

Whereas, for example in the US, it was 6.3% during the same period. And it will keep on rising. And this is all in nominal terms, unfavorable to China.

So China in effect has an even bigger space to increase that ratio in the future. Most analysts call 4%, and some even call 5% for 2024 if needed.

So, if China says that it will grow 5% in GDP, it will certainly grow that much. Because fiscally it safely can boost spending by that much.

5% GDP was more easily attainable due to the slump in 2022, but continuing 5% for the future, in the next few years also won't be a problem.

Just raise the fiscal deficit to 4-5% of the nominal GDP if needed and it will happen. Officials also already announced a more aggressive fiscal policy.

This makes it almost certain that they will continue to leapfrog over the West in the following years like they did in this one too.

And this time, the real estate-inducing growth transformed into high-tech-induced growth. Expect more and more crying from the West.

 

[antiterror13]

its obvious you guys have not studied economics if you say deflation is good or 0% inflation is good. That's a sign of a an economy that is stuck and not moving forward.

Inflation is not just price growth, it is wage growth as well. It keeps economy moving and active. A low and positive inflation rate can encourage spending and investment. If people expect that prices will generally rise over time, they may be more inclined to spend and invest rather than hoarding money. This contributes to economic growth.

That's why you see in China that people are hoarding money instead of actually spending it for investment or consumption. They are too afraid to spend. That's not good for economic growth.

Government needs to step up and increase the money supply, raise people's greed for gains. That's when they will invest, start businesses and do stuff with their savings.

have you studied economics? Since when that "wage growth" is part of the inflation ? where did you learn that?

 

[Biscuits]

That nominal GDP measure they like so much have no influence or outcome on the real world whatsoever, outside of their bragging.

Someone who hypothetically produces 10 cars will always be more powerful than someone who produces only 1 car at prices of those 10.

And regarding the standards of living, their nominal per capita GDPs seemingly don't result in anything positive for them either.

Ok, so you have higher nominal GDPs than us? But what benefits do you extract from that exactly when you have these kinds of data?

Yes, you can import more products foreign products in international currency dollars and find more immigrants than others, but so what?

This doesn't result in any improvement on the happinesses of the people. It can only barely keep you afloat from not collapsing already.

When you measure growth for the Chinese economy, you do have to use a nominal, baseline measure though.

However, that measure is in RMB, not USD, just like when you say measure Germany you'll have to use Euro.

The ideal is to keep wages high while prices are low or at least controlled. That creates the conditions for even more wage growth, as people can now makes investments to their life quality using the controlled prices.

 

[GiantPanda]

When you measure growth for the Chinese economy, you do have to use a nominal, baseline measure though.

However, that measure is in RMB, not USD, just like when you say measure Germany you'll have to use Euro.

The ideal is to keep wages high while prices are low or at least controlled. That creates the conditions for even more wage growth, as people can now makes investments to their life quality using the controlled prices.

This has been China's pattern for the past four decades.

Consistently low inflation while wages grew. This is how you end up with a developing economy that has the world's largest consumption of homes, cars and pretty every major consumer item on earth from cellphones to large screen TVs to refrigerators to ACs. People could make major purchases because the cost of everything is within reach.

This is what every developing country wish it could do. But unfortunately, the pattern has almost always veered to uncontrolled inflation during periods of rise which eroded any real gain from growth in wages. Mainly because the amount of goods never matches aspirations.

People do not understand how hard it is to manufacture modern consumer items at an affordable cost. Without the production of China, the trappings of modern life -- cellphones, computers, TVs -- would be affordable only in developed countries.

 

[GiantPanda]

Growth in salaries will continue next year, with India (5.1%), Indonesia (4.3%) and China (4.1%) being the top three performers.


Inflation:
India -- 5.69% (Dec. 2023)
Indonesia -- 2.86% (Nov. 2023)
China -- 0.2% (Oct. 2023)

If you are a developing nation, wage growth that cannot match inflation leaves your people with very little mobility or advancement. You can't save for a big purchase and improve your standard of living if no matter how much more you get paid, you cannot get ahead of the price increase of the things you want.

 

[siegecrossbow]

Growth in salaries will continue next year, with India (5.1%), Indonesia (4.3%) and China (4.1%) being the top three performers.


Inflation:
India -- 5.69% (Dec. 2023)
Indonesia -- 2.86% (Nov. 2023)
China -- 0.2% (Oct. 2023)

If you are a developing nation, wage growth that cannot match inflation leaves your people with very little mobility or advancement. You can't save for a big purchase and improve your standard of living if no matter how much more you get paid, you cannot get ahead of the price increase of the things you want.

So in India wage growth essentially got wiped out by inflation?

 

[GiantPanda]

So in India wage growth essentially got wiped out by inflation?

In a broad sense, yes, obviously the needs and wants of individual households are different. This is not an Indian issue, it is the norm for most developing nations. Indonesia is doing better at the moment but from 1997 to 2023, it's average inflation rate was close to 9%.

Poor nations basically have to outstrip inflation to gain a little each year from wage increase. But in East Asia, production of household goods beginning with post-war Japan always kept inflation at bay while wage increased with productivity so the overall gains to households were much greater. This was even more extreme in China. Rent and food were cheap constants regulated by government but the aspirational items were made cheap by economy of scale. Big four household purchase items were a radio, a bicycle, a sewing machine and a watch at the start of reforms. Then they were the TV, refrigerator, washing machine, video tape player during the 1990s. All these things were manufactured in bulk by China and cheap for Chinese (and for people all over the world, for that matter.)

That is why manufacturing is important to developing nations and why only East Asia had crossed over from developing to developed. It was the only developing region to successfully build up its manufacturing sector.

 

[mossen]

I think Michael Pettis gets an unfairly bad rep sometimes, but I just can't defend him when he's posting really dumb stuff like his attacks on Chineve NEVs. A good Twitter thread taking him down.

https://twitter.com/i/web/status/1746605680566698438

P.S. Deflation is bad if it is prolonged and it's silly to pretend otherwise. However, Chinese core inflation is still positive so the aggregate CPI measure being in deflationary territory is mostly a function of food and energy costs going down (which is a good thing). I think we should look at core inflation as our primary metric.

P.P.S. Economic "complexity" rankings are very flawed. The best measure of productivity is nominal wages - with exceptions made for petrostates. China's highly competitive export sector in manufacturing is impressive, but it's really the service sector which is low-productivity, hence the relatively low wages. This is a problem in many other East Asian countries (e.g. South Korea). Too little attention is paid in East Asia to the service sector and this is also reflected in this thread. Manufacturing as a percent of GDP is just 28% in China's case (which is still fairly high by Western standards). If you want to raise the overall wage levels in the economy, you have to focus more on the 72% that isn't manufacturing.

 

[azn_cyniq]

I think Michael Pettis gets an unfairly bad rep sometimes, but I just can't defend him when he's posting really dumb stuff like his attacks on Chineve NEVs. A good Twitter thread taking him down.

https://twitter.com/i/web/status/1746605680566698438

P.S. Deflation is bad if it is prolonged and it's silly to pretend otherwise. However, Chinese core inflation is still positive so the aggregate CPI measure being in deflationary territory is mostly a function of food and energy costs going down (which is a good thing). I think we should look at core inflation as our primary metric.

P.P.S. Economic "complexity" rankings are very flawed. The best measure of productivity is nominal wages - with exceptions made for petrostates. China's highly competitive export sector in manufacturing is impressive, but it's really the service sector which is low-productivity, hence the relatively low wages. This is a problem in many other East Asian countries (e.g. South Korea). Too little attention is paid in East Asia to the service sector and this is also reflected in this thread. Manufacturing as a percent of GDP is just 28% in China's case (which is still fairly high by Western standards). If you want to raise the overall wage levels in the economy, you have to focus more on the 72% that isn't manufacturing.

In your opinion, what steps should be taken to boost productivity in the service sector?

 

[canonicalsadhu]

delete