Chinese Economics Thread
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True. I wanted to save myself the trouble of doing these calculations, it would have taken me too long and I was writing the text on my cell phone, which limits me in many ways.
That's the main point. Not only would China have to become an industrial superpower on its own, because only China itself could produce what they themselves would consume, because no other country would have the labor force and capacity to do so, the problem is how all these trade policy guidelines were conducted, which benefited the exporters and did not help society as a whole any more than it could.
This is a conflicting concept. If we take data on the trade balance of Singapore, Japan and South Korea, the last two mainly only began to turn to exports as the enrichment and growth of the internal economy began to become less and less, thus resulting in the reorientation to the foreign market with greater earning potential and this has a very simple reason: all three countries have small populations.
In reality, the first development plans emphasized the installation of a self-sufficient economic structure. On the contrary
in Hong Kong and Singapore, where the lack of natural resources made outward industrialization the obvious option, in South Korea this orientation is only taking shape gradually, as restrictions on the continuity of economic growth impose a pragmatic adaptation of the model Korean to the opportunities opened up by international trade. In other words, the export option, before being idealized, was being imposed as a matter of survival of the economic model.
The reorientation of the Korean model occurred under the clear influence of the Japanese post-war experience. The geographical proximity and the strong historical link between these two East Asian countries, as well as the spectacular Japanese development, exerted a strong influence on the definition of the Korean development strategy, especially after the mid-1960s when relations between these two countries were normalized. In Japan, the industrialization process, initially oriented in the post-war period to meet domestic demand, is gradually being redirected to the foreign market. South Korea, with a lag of approximately 10 years, follows a similar trajectory, which is reflected both in high growth rates and also in changes in the industrial structure that occurred from the 1960s onwards. The similarity also extends to the mechanisms used to implement the export model in both countries. In both cases, economic redirection was driven through strong state intervention operationalized through economic development plans that showed the private sector the direction in which the government wanted the economy to move.
I don't have time to analyze each country, I'll just take one case, let's take the example of South Korea:
Foreground (1962-66)
Annual growth: 8.5%
Trade balance: ($ billion) 24.7
Exports 8.0
Imports 16.7
Second plan (1967-71)
Annual growth: 9.7%
Trade balance: ($ billion) 40.4
Exports 15.1
Imports 25.3
Third plan (1972-76)
Annual growth: 10.1%
Trade balance: ($ billion) 63.3
Exports 28.3
Imports 35.0
Fourth Plan (1977-81)
Annual growth: 5.5%
Trade balance: ($ billion) 76.4
Exports 35.4
Imports 41.0
Fifth plan (1982-86)
Annual growth: 7.5%
Trade balance: ($ billion) 84.5
Exports 40.6
Imports 43.9
Source: Economic Planning Board (EPB); Federation of Korean Industries (FIG).
Under the government of General Park, the first five-year period of economic development was created (1962-66) which, instead of being export-oriented, essentially sought to promote import substitution. The objective was to reduce external dependence and achieve a balanced economic structure. Insufficient internal savings, however, make growing dependence on external capital inevitable for the installation of import substitution industries. Basic input industries, such as fertilizers, oil refining, synthetic fibers, cement and PVC, were established through joint investment with foreign capital, which was attracted by cheap labor, tax exemptions and incentives associated with the repatriation of profits. . Light consumer goods industries, mainly linked to food and clothing, were also established through American loans. In all of the first five five-year plans, imports rose more than exports, imports still represented the majority of the trade balance, which was in deficit. The statement that other countries cannot run trade deficits is not empirically proven, when we have several examples of countries that became rich when their trade balance was still in deficit.
Dependence on foreign capital led to a gradual redefinition of objectives in the second five-year development plan (1967-71). The initial emphasis on import substitution industries was partially diverted to the export of light manufactures. Promoting exports based on labor-intensive industries was the option consistent with the country's resource availability, characterized by a workforce that, in addition to being abundant, was disciplined and reasonably educated. Outward industrialization thus began to materialize, based on the need to plan an increase in exports that would mitigate the external imbalance. In practice, this meant increasing government financial support for export industries and the adoption of a flexible exchange rate system, which allowed reasonable fluctuation of the real exchange rate. Private financial institutions also played a central role in making the export sector viable, helping to mobilize external savings by granting guarantees for international loans.
As a result of this economic reorientation, the average growth rate jumped to around 10% per year, driven mainly by exports, which increased by almost 500% compared to the beginning of the decade. Gross investment practically doubled, reaching 26% of GDP in 1969, financed by an increase in domestic savings and foreign loans that replaced declining American aid. To encourage private companies to meet their financing needs by raising funds abroad, the government created a system of incentives that reduced the risk and cost associated with these loans. Despite the gradual reorientation towards exports, the external imbalance continued
getting worse. Industrial expansion proved to be heavily dependent on imported raw materials, machinery and equipment. Imports grew rapidly, more than doubling the trade deficit. As a result, external debt jumped from just US$0.4 billion in 1966 to almost US$3 billion in 1971.
The expansion of exports, which jumped from an annual average of US$0.7 billion between 1967-71 to US$4.5 billion between 1972-76, is, however, insufficient to balance the balance of payments. This is because imports continue to increase faster than exports, which causes the trade deficit to practically double in relation to the previous period. This increase in imports is partly due to the explosion in oil prices in 1973. But not only because of this. Imports of raw materials, machinery and equipment also continue to grow rapidly, despite the import substitution effort carried out in the heavy and chemical industries under the government's leadership. The imported component of exports increased, making it increasingly clear that the role reserved for Korea in the international division of production was that of subcontract exposing counlry, that is, selling products only partially processed domestically.
Unlike the South Korean or Japanese model, although in the Japanese case it is much more focused on exports, the trade balance was balanced between exports and imports, in the case of Singapore it is even better, as the country followed a deficit trade balance until the second half of the decade 1990, which indicates another country that can continue to run a trade deficit and, at the same time, grow economically and become richer, although such deficits can lead to other disadvantages and intrinsic problems that I will now refrain from commenting on.
I will no longer explain the comparable cases because the topic is related to China's economy and I don't want to distort it here. However, see that, unlike other countries, China has recorded consistent trade surpluses since 1995, beginning to intensify strongly in the 2000s, when it was still a low-income economy, when it still had and still has a long way to go be able to be self-sustainable. When other countries were in the same socio-economic situation as China, they did not seek to please the export lobby, they looked for ways to increase domestic demand and, therefore, increase the standard of living, encouraged by external capital and then starting to be self-sufficient. in internal investments, after the economy entered the middle income and reached high income, they began to orient themselves towards the export market. All these comparative study cases are problematic for a model for China, as China has a population many times larger than any of these compared countries and this is the problem: the population of China has not taken advantage of these surpluses, because this is advantageous for exporters and groups associated with it, society does not benefit from it.
When the Chinese sell more products to foreigners than they buy from them -- that is, when exports are greater than imports --, the country is said to have a trade balance surplus. When Brazilians buy more than they sell -- that is, when they import more -- there is a deficit in the trade balance. For some obscure reason, the press and academics recurrently warn about the "dangers" of having a deficit in the trade balance, implying that an economy is only healthy when it has a trade surplus -- that is, when it sends more products to foreigners than that you acquire from them. Continuously, practically every year the government announces a new "industrial policy" to stimulate the export sector and repress imports. What almost no one says is that, for the inhabitants of a country, the only benefit brought by exports is precisely imports; The only function of exporting is that, with that, you can import.
When China sells its products abroad, the foreign buyer pays the Chinese exporter in dollars, which is the international currency of exchange. When a farmer in the interior of Brazil sells soybeans to a company in Shanghai, the Chinese pays the Brazilian exporter in dollars. He deposits dollars into the Brazilian's account. But since, by government decree, the only currency in China is the renminbi, this Brazilian will then have to exchange these dollars for renminbi in Brazil. And who will buy Brazilian dollars? Almost always, banks, through their brokers. And what will banks do with these dollars? They will sell to importers, who will use them to, obviously, buy products from abroad. What matters, therefore, is that, in the end, these dollars that were sold by Brazilians will be used to import foreign products. Without these dollars it would be impossible to import. For Brazilians who are not in the export sector, this is the only function of exports: they allow imports to occur. It's exporting that matters.
However, things start to get murkier when we see economists totally obsessed with exports and fanatically opposed to imports. What would be the point of exporting without importing? From the Brazilian citizen's point of view, the country's exports of soybeans, oranges and steel are only good for them because they bring in dollars that allow them to import iPads, notebooks, books, cars and several other things. Other than that, exports are not at all advantageous. On the contrary: the more a country exports, the smaller the supply of these exported goods will be on the national market. The greater the export of soybeans, oranges, coffee and steel, the smaller the supply of these products will be for Brazilians, which means that their prices on the domestic market will be higher than they could be if they were not exported. In general, whenever the trade balance presents a record surplus, this means that the Brazilian citizen was deprived of a greater supply of goods, both those produced nationally and which were exported, and those produced abroad and which could not be imported by government restrictions.
There are some explanations. Firstly, as the export sector has a very well organized lobby, and as the government needs dollars to compose its international reserves and to intervene in the exchange market, it is not necessary to be a great political scientist to imagine that both (government and exporters) will work in deep symbiosis. Each needs the other's help. On the other hand, importers are diffuse and do not have an organized lobby (to tell the truth, I don't even know if there is an importer lobby). Additionally, imports mean outflow of dollars. And the outflow of dollars means the government losing the ability to implement exchange rate policy to help the export sector. Again: you don't need an academic degree to realize that importing goes against the interests of both the government and the export sector.
If a country -- for example, China -- adopted a non-inflationary monetary policy, its exchange rate would continually appreciate. This stable currency environment, with growing exchange rate appreciation, is extremely attractive for foreign investments. Imagine, for example, that US$100 is invested in China when the exchange rate is 1.50 renminbi. Upon arriving in China, 100 dollars turns into 150 renminbi. At a profit rate of, let's say, 10%, 150 renminbi turns into 165 renminbi. As during this period the renminbi continually appreciated against the dollar -- because of the non-inflationary monetary policy --, suppose that, when it comes time to repatriate profits, the dollar is costing 1.30 renminbi. Therefore, 165 renminbi turned into US$127. Therefore, 100 dollars became 127 dollars, which gives a real profit rate of 27%, much higher than the initial 10%.
In other words, the investor benefits twice. This continuous exchange rate appreciation, together with the guarantee of respect for private property and contracts, would make the country exceptionally attractive to international investors and ensure the flow of foreign investments, which would consequently guarantee the necessary imports for the country. In the case of China, this applies in the period 1993-2014, where the exchange rate operated in a semi-fixed regime, with the flow of FDI heading to China and, at the same time, China oriented towards exports, which ended up leaving the country's consumers without a back seat in economic policy.
The country would have foreign currency without the need to accumulate reserves. The country would not need to accumulate large international reserves because investors would have nothing to fear. A large volume of international reserves is only necessary for countries that operate with an exchange rate anchor or countries that do not have macroeconomic stability. Even in the event of an outflow of dollars, the country's non-inflationary policy, combined with the exchange rate policy, would guarantee prompt exchange rate stabilization. Inevitably, foreign investments would return.
In other words, a country can perfectly obtain the foreign currency it needs without needing to have large export industries. In this scenario, such industries could perfectly turn to national demand. And if there is no demand for your products, whether in the national market or abroad, then it is because no one wants them. And it would make no sense to insist on this, subsidizing such industries.
The bureaucrats who manage the Chinese government have determined that it is good for China to sell valuable goods they produce to foreigners, thus reducing the supply of these goods to the Chinese themselves and, therefore, depriving their population of a higher standard of living. . Obviously, this is a bad deal for most Chinese citizens, but a great deal for the sheltered export tycoons. It is also a great deal for American citizens who buy good and cheap Chinese products. The Chinese government is subsidizing Americans' lifestyles. Meanwhile, Chinese citizens, who would be happy to be able to consume the goods produced by Chinese industry, end up being deprived of these same goods, as the preference is for them to be exported to foreigners. This is the basics of mercantilism. Everything good that a country produces must be sent abroad with government subsidies, leaving its population with a smaller amount of goods that they could consume. The export sector wins and government bureaucrats win. Such an arrangement does not bother the bureaucrats who run the PBOC in the slightest. It's not their money. They receive salaries to create electronic renminbis at the request of the Chinese government and set this entire cycle described above in motion. There is no reason to reverse this.
Mercantilists have always been convinced that having a Central Bank subsidizing the export sector is extremely beneficial for a nation, and that the reduced quantity of goods and services that will be available to domestic consumers (both as a result of more domestic products being exported and due to lower imports due to the more devalued currency) is something of no importance. As long as this subsidy coercively extracted from a majority to a minority is not seen as a program to transfer wealth from the poorest (ordinary consumers) to the richest (barons in the export sector), the entire arrangement will maintain itself.
When the Chinese sell more products to foreigners than they buy from them -- that is, when exports are greater than imports --, the country is said to have a trade balance surplus. When Brazilians buy more than they sell -- that is, when they import more -- there is a deficit in the trade balance. For some obscure reason, the press and academics recurrently warn about the "dangers" of having a deficit in the trade balance, implying that an economy is only healthy when it has a trade surplus -- that is, when it sends more products to foreigners than that you acquire from them. Continuously, practically every year the government announces a new "industrial policy" to stimulate the export sector and repress imports. What almost no one says is that, for the inhabitants of a country, the only benefit brought by exports is precisely imports; The only function of exporting is that, with that, you can import.
When China sells its products abroad, the foreign buyer pays the Chinese exporter in dollars, which is the international currency of exchange. When a farmer in the interior of Brazil sells soybeans to a company in Shanghai, the Chinese pays the Brazilian exporter in dollars. He deposits dollars into the Brazilian's account. But since, by government decree, the only currency in China is the renminbi, this Brazilian will then have to exchange these dollars for renminbi in Brazil. And who will buy Brazilian dollars? Almost always, banks, through their brokers. And what will banks do with these dollars? They will sell to importers, who will use them to, obviously, buy products from abroad. What matters, therefore, is that, in the end, these dollars that were sold by Brazilians will be used to import foreign products. Without these dollars it would be impossible to import. For Brazilians who are not in the export sector, this is the only function of exports: they allow imports to occur. It's exporting that matters.
However, things start to get murkier when we see economists totally obsessed with exports and fanatically opposed to imports. What would be the point of exporting without importing? From the Brazilian citizen's point of view, the country's exports of soybeans, oranges and steel are only good for them because they bring in dollars that allow them to import iPads, notebooks, books, cars and several other things. Other than that, exports are not at all advantageous. On the contrary: the more a country exports, the smaller the supply of these exported goods will be on the national market. The greater the export of soybeans, oranges, coffee and steel, the smaller the supply of these products will be for Brazilians, which means that their prices on the domestic market will be higher than they could be if they were not exported. In general, whenever the trade balance presents a record surplus, this means that the Brazilian citizen was deprived of a greater supply of goods, both those produced nationally and which were exported, and those produced abroad and which could not be imported by government restrictions.
There are some explanations. Firstly, as the export sector has a very well organized lobby, and as the government needs dollars to compose its international reserves and to intervene in the exchange market, it is not necessary to be a great political scientist to imagine that both (government and exporters) will work in deep symbiosis. Each needs the other's help. On the other hand, importers are diffuse and do not have an organized lobby (to tell the truth, I don't even know if there is an importer lobby). Additionally, imports mean outflow of dollars. And the outflow of dollars means the government losing the ability to implement exchange rate policy to help the export sector. Again: you don't need an academic degree to realize that importing goes against the interests of both the government and the export sector.
If a country -- for example, China -- adopted a non-inflationary monetary policy, its exchange rate would continually appreciate. This stable currency environment, with growing exchange rate appreciation, is extremely attractive for foreign investments. Imagine, for example, that US$100 is invested in China when the exchange rate is 1.50 renminbi. Upon arriving in China, 100 dollars turns into 150 renminbi. At a profit rate of, let's say, 10%, 150 renminbi turns into 165 renminbi. As during this period the renminbi continually appreciated against the dollar -- because of the non-inflationary monetary policy --, suppose that, when it comes time to repatriate profits, the dollar is costing 1.30 renminbi. Therefore, 165 renminbi turned into US$127. Therefore, 100 dollars became 127 dollars, which gives a real profit rate of 27%, much higher than the initial 10%.
In other words, the investor benefits twice. This continuous exchange rate appreciation, together with the guarantee of respect for private property and contracts, would make the country exceptionally attractive to international investors and ensure the flow of foreign investments, which would consequently guarantee the necessary imports for the country. In the case of China, this applies in the period 1993-2014, where the exchange rate operated in a semi-fixed regime, with the flow of FDI heading to China and, at the same time, China oriented towards exports, which ended up leaving the country's consumers without a back seat in economic policy.
The country would have foreign currency without the need to accumulate reserves. The country would not need to accumulate large international reserves because investors would have nothing to fear. A large volume of international reserves is only necessary for countries that operate with an exchange rate anchor or countries that do not have macroeconomic stability. Even in the event of an outflow of dollars, the country's non-inflationary policy, combined with the exchange rate policy, would guarantee prompt exchange rate stabilization. Inevitably, foreign investments would return.
In other words, a country can perfectly obtain the foreign currency it needs without needing to have large export industries. In this scenario, such industries could perfectly turn to national demand. And if there is no demand for your products, whether in the national market or abroad, then it is because no one wants them. And it would make no sense to insist on this, subsidizing such industries.
The bureaucrats who manage the Chinese government have determined that it is good for China to sell valuable goods they produce to foreigners, thus reducing the supply of these goods to the Chinese themselves and, therefore, depriving their population of a higher standard of living. . Obviously, this is a bad deal for most Chinese citizens, but a great deal for the sheltered export tycoons. It is also a great deal for American citizens who buy good and cheap Chinese products. The Chinese government is subsidizing Americans' lifestyles. Meanwhile, Chinese citizens, who would be happy to be able to consume the goods produced by Chinese industry, end up being deprived of these same goods, as the preference is for them to be exported to foreigners. This is the basics of mercantilism. Everything good that a country produces must be sent abroad with government subsidies, leaving its population with a smaller amount of goods that they could consume. The export sector wins and government bureaucrats win. Such an arrangement does not bother the bureaucrats who run the PBOC in the slightest. It's not their money. They receive salaries to create electronic renminbis at the request of the Chinese government and set this entire cycle described above in motion. There is no reason to reverse this.
Mercantilists have always been convinced that having a Central Bank subsidizing the export sector is extremely beneficial for a nation, and that the reduced quantity of goods and services that will be available to domestic consumers (both as a result of more domestic products being exported and due to lower imports due to the more devalued currency) is something of no importance. As long as this subsidy coercively extracted from a majority to a minority is not seen as a program to transfer wealth from the poorest (ordinary consumers) to the richest (barons in the export sector), the entire arrangement will maintain itself.
When the government of a country adopts mercantilism, it does so knowing that practically no one understands that that policy harms the vast majority of citizens and benefits only a minority who are in the export sector of the economy. So why exactly anyone believes that the Chinese government and its Central Bank would have any problem holding a mountain of US Treasury bonds is something that has never been explained.
This brings me to the contact I had with a Chinese exporter, buying directly from him, I spoke to him and how happy he was to be able to trade with other countries, even though he was a small trader, he was overflowing with happiness when contacting me over the phone. This is exactly what I want to emphasize, this arrangement works perfectly for those who are exporters, but it deprives the Chinese of purchasing products at the lowest price. To highlight, China's population is 1.4 billion people, so China should be a country that should import everything, from food to technological products, because of the country's demand with this mega population. This arrangement in itself is a transfer from the poorest to the richest, while poor Chinese consumers pay a higher amount than they should to maintain their standards of living, countries that import Chinese products live in a comfortable situation paying the lowest prices. that the Chinese market can practice. If the CCP bureaucrats abolished this arrangement, the Chinese would have a much higher standard of living, both due to imports and internal investments, see that by consuming at lower prices, there would be more savings left for future investments, and thus generating jobs and all the population became rich. I'm not going to repeat the same things in relation to this deflation environment that I've already discussed before:
China should be a country that should import as much as it exports, if not more, considering the amount of goods and services that should be created or imported to provide greater comfort to more than 1.4 billion people, thus improving the standard of living of the country population, the case of China is interesting because it is the only country with sufficient total capacity to produce this much is China itself, without caring as much as it should about the foreign market, considering the number of people available to consume in the domestic market. China reached the point of exporting 36% of its entire GDP, this is a monstrous and unimaginable amount of exports, which means that at least half of the entire production structure was focused on the export market, imagine the transport network, suppliers , spare parts, raw materials, logistics... this is surprising on all levels of comparison, considering the size of China's economy at the time and also the population. The Chinese economy emerged planned. And it was planned to be an exporter. Leaving this arrangement and adopting another, which is more in line with the demands of the population, is not simple. And much less painless. Even more so now with an ongoing housing crisis.
I find it very difficult to continue this conversation when most people don't even seem to understand what I'm trying to say here. What matters here is the export over the comparable period when China opened its market, all the amount of export that was sent to countries around the world could have increased the standard of living of the population itself if that was an economic orientation of China's politicians, it is more than clear that there is a need to create China in this super-exporting country, but at the expense of the entire Chinese society, which did not benefit completely during this period but completely benefited the export sector that earned dollars and sent products produced by the Chinese. It is not possible to measure how much this could have raised China's standard of living, but the history of other countries teaches that the standard of living would be much higher now than it actually is today, because goods were produced and sent abroad , where the population did not fully benefit from it. There is no point in denying China's progress in improving its standard of living, this is indisputable, because Chinese productivity has been constantly increasing throughout this period, thus generating a greater abundance of goods for the domestic market, but the question that remains is how much the standard of living would be higher if the productivity was higher each year and the exported products continued in China, it is not possible to believe that exporting 36% of the GDP would raise the standard of living of the entire population of 1.4 billion people, this is logically contrary to economic theory.
I will not continue in this attempt to extrapolate a parallel world with large variables to be compared and analyzed. Each one continues to think about what to believe.
This brings me to the contact I had with a Chinese exporter, buying directly from him, I spoke to him and how happy he was to be able to trade with other countries, even though he was a small trader, he was overflowing with happiness when contacting me over the phone. This is exactly what I want to emphasize, this arrangement works perfectly for those who are exporters, but it deprives the Chinese of purchasing products at the lowest price. To highlight, China's population is 1.4 billion people, so China should be a country that should import everything, from food to technological products, because of the country's demand with this mega population. This arrangement in itself is a transfer from the poorest to the richest, while poor Chinese consumers pay a higher amount than they should to maintain their standards of living, countries that import Chinese products live in a comfortable situation paying the lowest prices. that the Chinese market can practice. If the CCP bureaucrats abolished this arrangement, the Chinese would have a much higher standard of living, both due to imports and internal investments, see that by consuming at lower prices, there would be more savings left for future investments, and thus generating jobs and all the population became rich. I'm not going to repeat the same things in relation to this deflation environment that I've already discussed before:
American Economics Thread
400k at 25? Thats just out of Uni how did u manage to save that much Networth. And duo income. I finished my masters when I was 23 and had no debt. Wife had so many scholarships she came out from university with almost 100k. And like manquiangrexiue, we are good at saving. Don't spend money on...
www.sinodefenceforum.com
American Economics Thread
The growth of an economy has to be accomodated by the growth of the monetary base. No, it's not. Price decreases due to production efficiency is completely different from price decreases due to an insufficient monetary base. When this happens, investment and spending is disincentivized. This...
www.sinodefenceforum.com
American Economics Thread
The growth of an economy has to be accomodated by the growth of the monetary base. No, it's not. Price decreases due to production efficiency is completely different from price decreases due to an insufficient monetary base. When this happens, investment and spending is disincentivized. This...
www.sinodefenceforum.com
American Economics Thread
The growth of an economy has to be accomodated by the growth of the monetary base. No, it's not. Price decreases due to production efficiency is completely different from price decreases due to an insufficient monetary base. When this happens, investment and spending is disincentivized. This...
www.sinodefenceforum.com
China should be a country that should import as much as it exports, if not more, considering the amount of goods and services that should be created or imported to provide greater comfort to more than 1.4 billion people, thus improving the standard of living of the country population, the case of China is interesting because it is the only country with sufficient total capacity to produce this much is China itself, without caring as much as it should about the foreign market, considering the number of people available to consume in the domestic market. China reached the point of exporting 36% of its entire GDP, this is a monstrous and unimaginable amount of exports, which means that at least half of the entire production structure was focused on the export market, imagine the transport network, suppliers , spare parts, raw materials, logistics... this is surprising on all levels of comparison, considering the size of China's economy at the time and also the population. The Chinese economy emerged planned. And it was planned to be an exporter. Leaving this arrangement and adopting another, which is more in line with the demands of the population, is not simple. And much less painless. Even more so now with an ongoing housing crisis.
I find it very difficult to continue this conversation when most people don't even seem to understand what I'm trying to say here. What matters here is the export over the comparable period when China opened its market, all the amount of export that was sent to countries around the world could have increased the standard of living of the population itself if that was an economic orientation of China's politicians, it is more than clear that there is a need to create China in this super-exporting country, but at the expense of the entire Chinese society, which did not benefit completely during this period but completely benefited the export sector that earned dollars and sent products produced by the Chinese. It is not possible to measure how much this could have raised China's standard of living, but the history of other countries teaches that the standard of living would be much higher now than it actually is today, because goods were produced and sent abroad , where the population did not fully benefit from it. There is no point in denying China's progress in improving its standard of living, this is indisputable, because Chinese productivity has been constantly increasing throughout this period, thus generating a greater abundance of goods for the domestic market, but the question that remains is how much the standard of living would be higher if the productivity was higher each year and the exported products continued in China, it is not possible to believe that exporting 36% of the GDP would raise the standard of living of the entire population of 1.4 billion people, this is logically contrary to economic theory.
I will not continue in this attempt to extrapolate a parallel world with large variables to be compared and analyzed. Each one continues to think about what to believe.
That's not how GDP calculations work. If ASML paid its suppliers $23 billion and sold their products for $27 billion, then those 2 transactions would've counted for $50 billion to GDP. This continues upstream to the suppliers of ASML's suppliers, and their suppliers, and so on. This would also continue downstream to a theoretical Chinese ASML's customers, as it would boost the value of output of SMIC, Huahong, etc., and then their customers like Huawei, Unisoc, etc. and so on and so on.
Your analysis starts with a shaky premise, and shows your lack of understanding of mercantilism. What's the shaky premise? Measuring the value of imports and exports in purely monetary terms. That's a bean counter's way of looking at things, not a nation builder's view. You think that just because a country is exporting more in monetary terms than importing, then it means it's getting a bad deal, but that's not the case. Saudi Arabia has a massive trade surplus every year, but nobody cares, because what they produce is oil, using imported technology at that, and the knowledge and expertise they gain from that is next to nil.
China creates and maintains its trade surplus by producing increasingly more complicated (i.e. "valuable") goods with increasing efficiency (i.e. lower cost), this involves increasing the knowledge and expertise of its people en masse. In the end, this is what truly determines a nation's strength, and this is what a good mercantilist policy is designed to accomplish. If a mercantilist policy is designed to create and maintain a trade surplus by exporting coal, OTOH, especially if using imported mining tools, it would be a very poorly designed policy solely designed to benefit exporters as you mentioned. If the policy is designed to generate the surplus via exporting EVs and semiconductors, it would be a good policy because it requires increasing the true productivity (not just measured in monetary terms) of a large swathe of its population.
PikeCowboy
Junior Member
^thats double counting, most methods of gdp calculation does its best to avoid that.
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As for the other arguments, China’s path allowed it to industrialize and become moderately wealthy. All the other countries following these “economic theories” became what they are now. I would say empirically the path is correct. Having said that the new direction is dual circulation, so that should assuage some of the concerns raised
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As for the other arguments, China’s path allowed it to industrialize and become moderately wealthy. All the other countries following these “economic theories” became what they are now. I would say empirically the path is correct. Having said that the new direction is dual circulation, so that should assuage some of the concerns raised
Nailed it. I hear economy argument a lot on birth rate, but it is primarily culture. The best example is 1700 France. Had industrial revolution, had relatively succesful colonial era. Due to being the first to embrace liberal values it started decline long before revolution.
Good birth rate requires a level of traditional values, that sometimes run contrary to economic competitiveness.
We used to be religious and what not to limit our 'competitiveness', but we are too smart for that these days.
Women need to accept their limited role in career and value family, and same goes for men in some extent. Sounds kinda awful to say but it is a major contributor. We all gotta stop dream big, and go back to peaceul quiet lives. Seems economically impossible, and even more so culturally impossible.
As I said, there is a huge lack of interpretation here.
I didn't say that a country exporting more than it imports is doing a bad deal in itself and I'm not against exports, because each country is different. There are countries that have large surpluses in terms of capital and consumer goods that need to find demand in the foreign market, this is simply not the case in China.
The case of Saudi Arabia is a case to be analyzed, because they only have one product that the world demands: oil. Just it. They did not specialize or create high added value products or any other demanded product that would offer any compensation or use by the rest of the world, their entire surplus trade balance is made up of oil exports, which they consume by buying American weapons, in fact, the Petrodollar appears exactly in this context.
The case of Saudi Arabia is very different from the case of China. Furthermore, if you think the problem is what is exported, you didn't understand anything I said. Furthermore, there is no other way to measure exported and imported physical goods without needing to measure them in monetary terms, this is just a unit of account and it serves to compare the level of standard of living, because everything needs to be accounted for.
Dude, you didn't understand anything I said. China's production and export of high-value-added goods is even worse, which means fewer of these products are consumed by Chinese society. In other words, those who benefit from these products are not the Chinese, but to those who China is exporting to. As I said, those who benefit are the government who can create currency reserves and the exporters, Chinese society does not benefit when the products they produce are exported, they are sending physical goods and receiving currency in return, the standard of living does not It is measured by currency, but by goods produced and consumed and the only way to account for this is in monetary terms.
The problem is not what China is exporting, the problem starts with the reasons that lead China to prioritize the export market, because this means fewer of these goods available to Chinese citizens. There are few beneficiaries of exporting even high value-added products, even more so in the case of China with its large population, with millions still in poverty.
It seems like I have another language here. For God's sake.