Chinese Economics Thread

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tacoburger

Junior Member
Registered Member
I don't think westerners understand that when China's real estate market collapsed that just meant that there was a lot of money floating around that could be invested into actually productive industries and technologies rather then the endless black hole of real estate. Sure it's gonna be a drag on GDP growth, but in the long run it's gonna be better for the nation as a whole.

I have read a lot of articles on China's recent economic woes and housing bubble and even legitimate economic journals or articles fail to mention this little factoid. Bloomberg and the Economist and their ilk talk about the downfall of the real estate market where the overall tone of the articles are so smug and condescending and it's basically about "how China is done for good this time for real" and they never ever mention how the real estate bubble popping also means that investors and local governments are forced to actually invest in high tech industries of the future like clean energy, semiconductors, space etc etc and how this will change the nature of China's technology landscape.

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The clean-energy investment boom in 2023 is the outcome of a major pivot in China’s macroeconomic strategy. As this analysis shows, investment flowed from real estate into manufacturing – primarily in the clean-energy sector.

Total investment in the manufacturing industry increased by 9% year-on-year in 2023, while investment in the power and heat sectors climbed 23%. These increases were entirely due to growth in investment in clean energy, with investment in other areas falling. Therefore, China’s pivot into manufacturing was, in reality, a pivot to cleantech manufacturing.

The reason for this pivot was the contraction in the real-estate sector, where investment fell by 10% year-on-year in 2022 and another 9% in 2023. While this drop was in line with the government’s aim to address financial risks and excess leverage in the sector, it left a major hole in aggregate investment demand and in the revenue of China’s local governments.

Local governments were under pressure to attract investment, meaning that they offered generous subsidies and helped arrange financing.
The central government, for its part, eased private-sector access to financial markets and bank loans during the Covid-19 pandemic, facilitating the growth of the clean-energy sector.

Unlike the state-owned firms dominating traditional industries, the low-carbon sector, largely composed of private companies, gained access to previously constrained credit. The significance of this economic shift is reflected not only in the figures revealed by this analysis but also in the language being used by Chinese media. The three largest of clean-energy sectors by value, namely solar, storage and EVs, are being referred to as the “new three”, in contrast to the “old three” – clothing, home appliances and furniture.
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This was one of the few articles that actually got it correct. It's not like China undergoing a recession unlike say the UK, Germany or Japan, it's just a period of slower growth while the investment priorities shift. China is still processing the fallout from deflating the housing bubble, so we will likely see further movement in this area over the years.

Government mandates and market forces are converging just like how the American sanctions on semiconductors forced the government and tech companies to work hand in hand. No more real estate for quick pump and dump, rising labor costs means that investing in low end manufacturing that has been China's bread and butter for the last 4 decades is also out. So there's no choice but to go all in in high end manufacturing, services and other high tech industries that have traditionally been dominated by Western/developed nations.

I always see people commenting on how China's ambitions in high technology areas like space, clean energy or semiconductors will have to take a back seat due to the recent economic woes, but this will be the opposite effect. China really has no choice but to go all in on the technologies of the future to ensure future economic growth.
 
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gelgoog

Lieutenant General
Registered Member
China did the right thing in popping the housing bubble. Japan let it grow until it burst and it led to a decade of stagnation in the 1990s. That basically never ended.

China needs to grow these sectors to spur its next phase of development. "Clean energy" is basically a way to further reduce energy imports and reduce city air pollution. Oil and coal imports will decrease. China imports roughly as much value in semiconductors as in oil and all of these imports are pretty much at risk of being sanctioned by the West. China needs to be self-reliant in semiconductors too. As for space it will be a major driver of future growth as new applications become available.

Another sector you didn't mention that China is making major strides into is the civilian aircraft manufacturing sector.
 
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Randomuser

Randomuser

Senior Member
Registered Member
tacoburger said:
I don't think westerners understand that when China's real estate market collapsed that just meant that there was a lot of money floating around that could be invested into actually productive industries and technologies rather then the endless black hole of real estate. Sure it's gonna be a drag on GDP growth, but in the long run it's gonna be better for the nation as a whole.

I have read a lot of articles on China's recent economic woes and housing bubble and even legitimate economic journals or articles fail to mention this little factoid. Bloomberg and the Economist and their ilk talk about the downfall of the real estate market where the overall tone of the articles are so smug and condescending and it's basically about "how China is done for good this time for real" and they never ever mention how the real estate bubble popping also means that investors and local governments are forced to actually invest in high tech industries of the future like clean energy, semiconductors, space etc etc and how this will change the nature of China's technology landscape.

Please, Log in or Register to view URLs content!


This was one of the few articles that actually got it correct. It's not like China undergoing a recession unlike say the UK, Germany or Japan, it's just a period of slower growth while the investment priorities shift. China is still processing the fallout from deflating the housing bubble, so we will likely see further movement in this area over the years.

Government mandates and market forces are converging just like how the American sanctions on semiconductors forced the government and tech companies to work hand in hand. No more real estate for quick pump and dump, rising labor costs means that investing in low end manufacturing that has been China's bread and butter for the last 4 decades is also out. So there's no choice but to go all in in high end manufacturing, services and other high tech industries that have traditionally been dominated by Western/developed nations.

I always see people commenting on how China's ambitions in high technology areas like space, clean energy or semiconductors will have to take a back seat due to the recent economic woes, but this will be the opposite effect. China really has no choice but to go all in on the technologies of the future to ensure future economic growth.
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I never trusted MSM to be very knowledgeable about long term plans. They are catered towards hedge funds and whatever who demand results after only 2 years. You can't get any long term planning with that mentality.

And now they got paid $800m to shill for the US makes them even less trustworthy
 
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Serb

Junior Member
Registered Member
I would not dunk on building the national housing stock (real estate sector) as it is done here. After all, it is the most fundamental socio-economic interest of any developing nation alongside infrastructure.

There is a reason why it's such a large chunk of China's overall GDP since the early 2000s. China needs to urbanize first like every other developing nation, and it realized its best to do it the fastest as possible.

If not for that much real estate investment in the past decades, you wouldn't be able to invest in sci-tech at all like now or get such results. The rural population isn't aligned with those goals due to a myriad of logical reasons.

Also, it's always way smarter to build the majority of your national housing stock and infrastructure when you have such low labor costs and a huge and mobile blue-collar workforce as China did/still does.

Imagine having to build all that 20 years from now when the labor costs get multiple times higher than those right now. Imagine all the chaos that could arise in the system in that case too if you do it so late in the development cycle.

That's why China went figuratively "all in" on GFCF and real estate investment first unlike Japan, Taiwan, and South Korea, during their development because it learned lessons through them. It learned the most optimal order of country-building.

During similar periods of development, Japan had a 20% real estate to GDP ratio, whereas China had around 26%. It is not that far off, and as I said, it is best to introduce maximum order in your development trajectory.

China is still currently decades away from reaching its peak-optimal urbanization rate. So the relatively high real estate investment and involvement in GDP probably won't subsidize completely until then.

However, it will slowly lean down until then (it started a few years ago), following the shrinking blue-collar migrant population, rising tertiary-level educated population percentage, and rising blue-collar labor costs.

What was "bad" in the Chinese real estate sector so far wasn't "overbuilding", but higher housing costs stemming from HH speculation and local govs corruption. It all increased vacancy rates more than those that would've otherwise led to even faster urbanization.

So, now you will have less total housing built after absorbing all this current excess supply, but those that are built will have lower vacancy rates due to cheaper market prices, and government-led affordable housing creation initiatives.

And why didn't the government make nearly all housing public in China like in Singapore from the start? It is because this is a cosmically larger country, so it is harder to manage that entire sector by the government, and it was needed to finance LGFVs (infrastructure).

But as their infrastructure development is also slowly coming to an end, and the total needed housing pool shrinking it will also allow for the government to build more and more public housing itself next.

Therefore, to conclude, the real estate heavy economic model until now wasn't as "bad" as suggested here, but even necessary, or else you wouldn't have all those recent technological investments and achievements.

Also to add, real estate and infrastructure aren't about productivity, it is about investment and building your national ICOR needed to achieve higher productivity down the line, it is the most essential step there is.
 
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Michaelsinodef

Senior Member
Registered Member
For people who wants to know about Chinese manufacturing, including just how much of an advantage it has over that of others (such as japanese, german etc.).

Here is just 1 video stream were stuff is brought up about it:

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Others, are also from this channel 迷宫干饭人 such as
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and
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tacoburger

Junior Member
Registered Member
xypher said:
This means that the economy is doing good according to some of the trolls that recently became active there, so recession must be CCP fake news.
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Bitcoin is at a 2 year high and is doing so well in Texas that it's currently making up 2% of America's entire power demand. Imagine if Bitcoin's price went up another 40 times and also made up >80% of America's power demand. America would instantly become 40 times more powerful overnight.

We should also get other countries like India to "invest" dozens of gigawatts and tens of billions on bitcoin. Fast route to superpower status
 
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henrik

Senior Member
Registered Member
tacoburger said:
Bitcoin is at a 2 year high and is doing so well in Texas that it's currently making up 2% of America's entire power demand. Imagine if Bitcoin's price went up another 40 times and also made up >80% of America's power demand. America would instantly become 40 times more powerful overnight.

We should also get other countries like India to "invest" dozens of gigawatts and tens of billions on bitcoin. Fast route to superpower status
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China should starting mining bitcoin again, since there is so much profit to be made.
 
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