Chinese Economics Thread

[FairAndUnbiased]

An Apple iPhone is about the same price in China as it is in the US. But fast food workers are paid much less in China than in the US.

In other words, luxury products scale to currency exchange rates, but basic services do not. This is the observation you are making. The US has such a large % of its GDP tied up in basic services because labor is very expensive in the US, and that's almost entirely due to the exchange rate differences. Other industries just cannot compete.


There is an argument to be made that, at the high end, US services are of higher quality than China's - for example in health care, where the US has access to better technology, equipment, high end medicine, etc. But there's also a great deal of waste.

The better comparison, to not get into trivial arguments over the quality of service, is in basic services. Because anyone can see that the guy working at a fast food restaurant in the US isn't producing better quality service than his equivalent in China. But he's being paid much, much more for it.

This is how you ultimately realize the reason American GDP is so high - it's because average Americans working average jobs generate so much more nominal wealth than average Chinese, even though the work is the same.

As @AndrewS pointed out the US charges more than other countries for the same surgical procedures and worse health outcomes.

Comparison of survivorship to age 65 by gender:

Please, Log in or Register to view URLs content!

Please, Log in or Register to view URLs content!

Comparison of overall mortality rate:

Please, Log in or Register to view URLs content!

So are their healthcare services actually better or just more expensive?

Yes it is obviously related to exchange rates but the prior trend that inflation means currency devaluation has been broken. A RMB devaluation in 2022 and 2023 was unexpected because usually high US inflation means a strong RMB like in 2008. Yet in just 1 month from April to May 2022 the RMB fell off a cliff and then kept falling to November 2022.

 

[AndrewS]

@Eventine

---

Please, Log in or Register to view URLs content!

Health care spending, both per person and as a share of GDP, continues to be far higher in the United States than in other high-income countries. Yet the U.S. is the only country that doesn’t have universal health coverage.
...
The U.S. has the highest rate of people with multiple chronic conditions and an obesity rate nearly twice the OECD average.
...
Americans see physicians less often than people in most other countries and have among the lowest rate of practicing physicians and hospital beds per 1,000 population.


----------------

If Americans receive higher quality healthcare by paying a lot more money, how can they have such measurably bad outcomes in the healthcare system?

 

[Maikeru]

Caixin Manufacturing PMI 50.8

Please, Log in or Register to view URLs content!

Strangely the western media trumpeting the NBS PMI showing very mild contraction are silent on this, although no doubt will be trumpeting Eurozone's much improved (sic) 46.6 manufacturing PMI.

All the S&P PMIs here:

Please, Log in or Register to view URLs content!

 

[AndrewS]

@Eventine

Ok, this is the last one.

Urgent surgery to remove an appendix is the most common surgical procedure in the US and UK for example.

1. In the USA, the average cost was $33K according to a 2009 study
2. The cost in a private British hospital is literally 100x less at $330 roughly.

In other words, US hospitals charge 100x more than a private hospital in the UK.

---

The only way you can describe such a situation is legalised price-gouging by the privatised US healthcare system. And that much of the GDP generated by the healthcare system in the USA is entirely fictional, exploitative and/or outright parasitic.

 

[caudaceus]

@Eventine

Ok, this is the last one.

Urgent surgery to remove an appendix is the most common surgical procedure in the US and UK for example.

1. In the USA, the average cost was $33K according to a 2009 study
2. The cost in a private British hospital is literally 100x less at $330 roughly.

In other words, US hospitals charge 100x more than a private hospital in the UK.

---

The only way you can describe such a situation is legalised price-gouging by the privatised US healthcare system. And that much of the GDP generated by the healthcare system in the USA is entirely fictional, exploitative and/or outright parasitic.

I very much agree that British hospital costs should be way lower, but not 330$. Most of the costs are covered by the NHS.

 

[AndrewS]

I very much agree that British hospital costs should be way lower, but not 330$. Most of the costs are covered by the NHS.

You missed the part about this being the cost from a private British hospital.

You can literally call them up and ask them to do it on a voluntary basis

 

[Sinnavuuty]

And how did all of this exactly impact the Chinese economy, when it didn't even raise the Chinese inflation rate above 0.3%, not to mention slowing economic growth?

Shouldn't have weakening of the RMB against the USD exchange rate result in impacted imports of those firms, especially in such crucial sectors firms that you listed which are also central to the economy, hence transferring some of the costs to consumers and the increasing inflation level in the broad economy?

If it didn't even manage to do that, then your point is even of lower significance. I'm not saying it's 100% insignificant, but it's closer to that.

However, how come we see none of that, and inflation remains at 0.3%? So, as you see, it's really not that significant matter, at least not here.

Well, one of the reasons is that you may also need to update your data, Chinese trade in yuan nowadays exceeds the dollar trade - it's at 49%.

The dollar dominates in three global monetary instances:

1) International exchange currency
2) Reserve currency
3) Global unit of account

1) International exchange currency
The dollar is used as an international currency of exchange by people, companies or governments.

2) Reserve currency
The dollar is used as an international reserve by people, companies or governments.

3) Global unit of account
The dollar is used as the unit of account for the vast majority of primary products that are traded in the world.

Even if China or any other country delinks from the dollar in item 1 and item 2, it will still be affected by item 3, which is used as a reference for the international market.

So, @abenomics12345 argument makes sense. China will be affected domestically by the dollar in a transaction involving Saudi oil because the unit of account for most primary items is still the dollar.

 

[Michaelsinodef]

The dollar dominates in three global monetary instances:

1) International exchange currency
2) Reserve currency
3) Global unit of account

1) International exchange currency
The dollar is used as an international currency of exchange by people, companies or governments.

2) Reserve currency
The dollar is used as an international reserve by people, companies or governments.

3) Global unit of account
The dollar is used as the unit of account for the vast majority of primary products that are traded in the world.

Even if China or any other country delinks from the dollar in item 1 and item 2, it will still be affected by item 3, which is used as a reference for the international market.

So, @abenomics12345 argument makes sense. China will be affected domestically by the dollar in a transaction involving Saudi oil because the unit of account for most primary items is still the dollar.

Eh.

All 3 points are being 'attacked' though, although to what level / how much progress has been made is hard to say (not to mention its different for each of those 3 points).

And also, while China's exports and imports are affected by rates and the dollar, a lot of trade and transaction is also done domestically, which are a lot less effected (although can still be affected, such as car oil prices which is affected by import prices of oil).

 

[Sinnavuuty]

Eh.

All 3 points are being 'attacked' though, although to what level / how much progress has been made is hard to say (not to mention its different for each of those 3 points).

And also, while China's exports and imports are affected by rates and the dollar, a lot of trade and transaction is also done domestically, which are a lot less effected (although can still be affected, such as car oil prices which is affected by import prices of oil).

Undoubtedly. In fact, they have been attacked since the last decade by China, I remember a price of gold on a stock exchange in China, but there still needs to be many more actions in themselves to affect the hegemony of the dollar in all three instances, the exchange currency and the reserve currency are the instances most likely to be attacked in the short and medium term.

The main monetary standard is the unit of account, and the dollar is the unit of account on the planet, this is the highest level of a monetary standard, even if the dollar still loses in items 1 and 2, the unit of account can still be sustained, albeit with decreasing strength, but this will also depend on the alternatives proposed, in fact, if the dollar loses this status, it would be the biggest commercial/monetary revolution since Bretton Woods.

 

[abenomics12345]

And how did all of this exactly impact the Chinese economy, when it didn't even raise the Chinese inflation rate above 0.3%, not to mention slowing economic growth?

If you read the book by Isabella Weber: How China Escaped Shock Therapy, there is a general concept in Chinese economic management (stemming from the days of Sang Hongyang) to use the state coffers as a way to partially offset short term volatility in prices of core factors of production.

Disinflation today is a function of added capacity and companies reducing margins to eat the costs - that there is no inflation/deflation in the end products does not mean that someone in the country does not bear the cost.

If you read the annual reports of the 3 oil companies you will see the state subsidy is big line item:

Please, Log in or Register to view URLs content!

Here is an article from 2015 where the retail price of gasoline was not changed to reflect the volatility in commodity inputs.

Specifically to LNG prices - if you read the annual reports of ENN Energy, China Resource Gas, or China Gas Holdings, you will quickly realize that they make/lose money based on the difference between city-gate pricing (set by the NDRC) and gas purchase prices (LNG/Pipeline/Local).

To be explicitly clear here: I think this is the right policymaking process - that being said, it would be foolish to not understand the tradeoffs and assume there is no cost of doing so.

All 3 points are being 'attacked' though,

I don't disagree, but let's be clear here, 'being attacked' is by no means the same as 'fully insulated'.