China´s inflation for 0.2% was 2023. Inflation was 3.1% for United States the same year and I adjusted for inflation. What I know inflation boost GDP in the short-run but the USA do not have extreme levels of inflation that would undermine U.S. economy in the long-run. It´s seem to me that something is strange about this. It does not seem to be China that is lying about it´s GDP growth but other countries. I cannot just grasp this. What is true is that the distance between the GDP (nominal) of China and the U.S. is growing but when looking at growth and the other metrics - China should be catching up but is not. Although not a detailed answer but Any explanations?
Chinese Economics Thread
- Thread starter Norfolk
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GDP is reported in USD and so the RMB depreciating (from Fed rate hikes, sentiment shocks in China, etc) cause the dollar value of China’s GDP to decline. Plus reported GDP is all nominal: it’s nominal in the previous year * (1 + real growth rate + inflation rate).
(Nearly) all activity in China is conducted in RMB, not USD. It's impossible to compare 2 economies with different currencies unless you equalize them by currency first.
Not doing that is like dividing by zero. If I proclaimed a country with just me and my roommate in it, then set 1 unit of its currency to be equal to 30 trillion USD and buy a cup of coffee from the roommate with 1 unit, does that now give me a larger economy than the US one?
Realistically obviously not, because the true value of my currency doesn't buy me anywhere near what the whole US government can buy. But hey, if you choose to just ignore that and do a straight conversion, then I guess I do have a bigger economy than US, realism be damned.
Having seen you before self proclaim to be an economist, you should know that economic theory is about creating a model to simulate real world conditions as closely as possible.
US grew by 2.5% and China by 5.3% in 2023. It's a small widening of the gap by China, not as big advancements as before covid.
That can be explained by poor global demand, increased polarisation in trade blocs and Xi's somewhat controversial agenda to crack down on easy bubble growth in favor of tech development.
What metrics did you review that would indicated that US (I assume you misspelled there because it's illogical to "catch up" from the other direction) would catch up? In almost all production and trade metrics I've seen, China's situation is stronger, not weaker, than what GDP shows.
I think you need to specify it before it can be explained.
manqiangrexue
Brigadier
What are you incessently harping on about? India's roughly 8% but a little under it; China's a little over 5% but the US 6%?? Where's that from? For the last 4 quarters, China did 4.5, 6.3, 4.9, 5.2 and the US did 1.7, 2.4, 2.9. 3.1. Where is 6%? Even India's almost 8% was only for the last 2 quarters; it was in the 4-6 range before that.One can always learn from major biscuit, that 5% growth in China is more than 8% of India and than 6% in USA, nevermind that China GDP is between both.
"Retail investors who have lost faith in the domestic equity market have coined a slogan: “put your trust in the fate of the nation, but put your money in the Nasdaq.”
Reading this i thought of you guys, always patriotic and positive and never one can spot a negative vibe related to the crashing Chinese economy on this forum. And of course no one cares about investing in China because *if* he earns something it's obvious where he will put his money
So India's PPP is like 40% of China's, nominal is like 20% so obviously, shaky unsustained sub 8 on the former is going to be much lower than over 5 one latter. America's PPP is like 80% that of China, but nominal it's about 50% more; for the whole year, the closest American growth every got to China's by percentage was 60%, in the last quarter, which means that China's growth was at minimum 5/3=50% higher at any time. The first 2 quarters China damn near tripled America's number.
This is on top of the fact that China's economy is mostly underestimated (large unofficial retail economy, which you'll understand if you were there and saw the streets) and down-to-earth, (with the exception of some corrupt officials who were caught inflating their numbers and those inevitably make headline news in the US for how China's entire economy is fake LOL). America's is vastly inflated with imaginary rent paid to oneself, sky high healthcare and education costs, etc...
Now if you were simply arguing that China's stock market is not a good long term investment, I'd have to agree with you. It's a short term winner take all gamblers' market. America's stock market is a much better long term investment. It's no secret that China's stock market barely grew any in the time that its economy tripled and America's economy barely grew any (relatively and comparatively to the robustness of the stock market, not absolutely) in the time that its stock market tripled. But that's an aside from the fact that China's overall economy is easily healthier and outperforming America's.
"equalizing the currency" - there's a thing called the foreign exchange market that does it.
As I've made the offer many times on this forum: if you believe RMB is undervalued (or the USD as overvalued) vs. the nominal exchange rate of 1 USD per 7.1778 RMB today on Bloomberg, I will happily buy USD off of you at the rate you believe CNY (3? 4? 5? 6? RMB per USD) should trade at.
Foreign exchange is when you're dealing with small sums.
You cannot exchange 1 trillion USD for 7.1 trillion RMB, the larger the exchange is, the more conditions, stipulations and royalties will be attached to it. So of course on a macro economic level, the different currencies are "overvalued" or "undervalued" relative to what foreign exchange price you get at an airport.
I do not need to "believe" anything. If you sincerely believe all of China's 35T $ economy can be translated directly to USD value without first adjusting for the different real values of the currencies, then you should walk out on a street in China, wait for a car to come and let it ram into you. According to your faith, the car will simply pass through you, because the person who brought the car with RMB, would, according to American pricing, not been able to buy the same car, since USD and RMB are 1:1 transferable according to whatever forex says... Ergo, the non existent car will simply pass through your body.
To have a meaningful discussion, you must base analysis on reality, not make belief. Maybe it is pleasing to your mind to imagine an alternate dimension where things in China are 1:1 to US, making the average Chinese much poorer. But if that does not reflect real conditions, you are just playing with hypotheticals.
That won't work. Chinese cars are much newer on average than Western counterparts, so they have autonomous emergency braking. That experiment is likelier to work in America where there are a lot of rustbuckets still on the streets.
Under the joke is an important point about GDP. You could have a product that is better and cheaper than its foreign counterparts, and it contributes less to your GDP precisely because it's cheaper. Your competitor is "wealthier" than you are in this scenario.
Do you have a trillion USD to exchange? Otherwise, let's stick to reality and not your imaginary world.
The regular guy in China who puts his pants on one leg at a time - deal with hundreds of dollars and thousands of RMB on a day to day basis. Try explaining that logic to him when his factory just announced that their import costs went up because of the RMB depreciation and therefore their operating profit margins, and bonus, just grew lower than expected.
Oh and that car you talk about, just got 20% cheaper for global customers to buy despite Chinese workers putting in the same amount of work.
Repeat after me (the way Bart Simpson does lines on the blackboard):
I will not live in an imaginary world where RMB is a globally accepted reserve currency in 2024.