Chinese Economics Thread

[interestedseal]

China is not an export driven economy, and it is hardly a trade surplus driven economy. While running a surplus in goods, China runs a deficit in trade of services.

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I agree that selling goods just to hoard paper dollars is a stupid idea. However, notice Chinas foreign reserve hasn’t increased for a long time despite running surplus every year, so I suspect a lot of the surplus money got spent on buying assets (resources mostly) abroad. These purchases don’t count as import but do create tangible assets.
Also dollar is losing its dominant position in China’s trade. About 30% of China’s international trade was conducted in RMB in Q1 2024, and this figure will keep rising fast.

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[Sinnavuuty]

China is not an export driven economy, and it is hardly a trade surplus driven economy. While running a surplus in goods, China runs a deficit in trade of services.

Take the data from the 2000s and be surprised by the amount of GDP exported when China was still a low-income economy. The standard of living increased a lot in the same period because productivity grew equally, but China would have a much higher standard of living at that time if it had not exported at that intensity and certainly China's standard of living would be higher today on a cumulative basis over the decade delayed. It was during this period that China reached reserves of 4 trillion dollars, when a large part of the GDP was still export-oriented.

 

[Wrought]

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.

The McNamara fallacy. If you want to understand what's going on with the Chinese economy, you need to look at the political externalities. $$$ exported on a balance sheet is an economic abstraction, but politically it matters very much what that $$$ actually is. If it's manufactured goods vs services, for example. And the strategic/security implications thereof. Everything does need to be accounted for, but not everything can be accounted for in purely monetary terms. Why do you think the US is suddenly going back to industrial policy?

Financialization is all well and good if you only care about the balance sheet. But the real world is more than that. Not to mention that arguing a counterfactual is unprovable by definition.

 

[interestedseal]

Take the data from the 2000s and be surprised by the amount of GDP exported when China was still a low-income economy. The standard of living increased a lot in the same period because productivity grew equally, but China would have a much higher standard of living at that time if it had not exported at that intensity and certainly China's standard of living would be higher today on a cumulative basis over the decade delayed. It was during this period that China reached reserves of 4 trillion dollars, when a large part of the GDP was still export-oriented.

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China’s export as percentage of GDP was also mostly below world average during that period

 

[Sinnavuuty]

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China’s export as percentage of GDP was also mostly below world average during that period

Compare the % of high income economies when they were still low and middle income. I talked about this in the last comments and I won't repeat it again, because it's getting tiring.

 

[interestedseal]

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.

China’s export import imbalance is exaggerated. China’s trade surplus is only 3% of its GDP. Also check out the export/import ratio. China’s trade imbalance is very moderate. 36 other countries have higher ratios.

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[interestedseal]

Compare the % of high income economies when they were still low and middle income. I talked about this in the last comments and I won't repeat it again, because it's getting tiring.

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South Korea is the only country that recently became developed. You can see here it’s % has always been higher than China’s, even during the same developmental stage

 

[Sinnavuuty]

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South Korea is the only country that recently became developed. You can see here it’s % has always been higher than China’s, even during the same developmental stage

I have already explained the South Korean case in previous comments and again I will not repeat the same arguments. Honestly, either I'm speaking another language here or it's really difficult to understand basic things that I explained in all the previous comments. This can't be normal. I quit.

 

[Bellum_Romanum]

@Sinnavuuty is it a fair observation for me to suggest and infer based on your posts regarding the Chinese economy and their "idiotic leaders/economists" that China's supposed current consumption challenge(s) wouldn't have been this troublesome if only the Chinese government allow its people a greater degree and flexibility to play/ place their money in the stock market and other financial mechanisms and institutions similar to that of your country, which is the U.S.

This way, the PRC and the Chinese people could have achieved upper middle income by this period if not more? You essentially advocate for China to copy the U.S. financialized economy wholesale without all the benefits of being the strongest military in the world to strong arm Oil producing countries to peg their commodities in USD thereby allowing your country the sole exorbitant privilege of having the ability to print money virtually out of thin air.

Why are you so certain that what you're advocating would have worked in China without any underlying and unforeseen unanticipated issues; while basing your non-expertise expertise on Chinese economy based off from your personal and most importantly anecdotal experience with a Chinese export seller. As if that's the barometer to be used and extrapolate on how to understand and analyze the whole sum of Chinese economy.

I am often quite perplexed as to the annoying habits most westerners and especially Americans like yourself exhibit, and that's supreme arrogance and know-it-all attitude. When you're not having the reception you thought and feel your assessment deserves you become quite indignant and dismissive of your critics as if they, myself included are nothing but a bunch of economic illiterate, ignoramus stuck in our own wishful bubble WUMAOS equivalent to MAGA type crowds and Bernie bros of your country.

 

[interestedseal]

I have already explained the South Korean case in previous comments and again I will not repeat the same arguments. Honestly, either I'm speaking another language here or it's really difficult to understand basic things that I explained in all the previous comments. This can't be normal. I quit.

You claim China’s trade surplus is disproportionally large, but it is not as a percentage of gdp. Its trade surplus is only 3% of its GDP. Also check out the export/import ratio. China’s trade imbalance is very moderate. 36 other countries have higher ratios.

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