COVID has caused far more permanent scarring of China’s economy than of any other large economy and due to behavioral changes surrounding capital investment, consumption, etc - has sent China’s trend growth path permanently lower
Chinese Economics Thread
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COVID has caused far more permanent scarring of China’s economy than of any other large economy and due to behavioral changes surrounding capital investment, consumption, etc - has sent China’s trend growth path permanently lower
I thought economics is your area of expertise. Surely it can't be because there's other non-covid factors that's affecting the economy?
Housing restructuring and other cyclical factors is something independent of COVID happening, surely....
And it's already common knowledge that the 'retail sales' statistic includes construction materials but excludes growth industries like tourism, or movie tickets.
Even if was due to China’s severely underdeveloped financial sector leading to all kinds of allocative distortions, that would also result in China’s trend growth to be pushed down permanently. COVID or financial distortions or both -> they point in the same direction
Eh. Both aggregate consumption and GDP both point to the same story
No it's mainly the controlled deflation of the real estate bubble. The real estate increase in 2019 was still quite high. Falsely attributing to COVID is disingenuous.
Blaming COVID is a cop out unless one believes a housing readjustment would never have occurred without COVID.
The trackers are fundamentally inaccurate because they are heavily weighed towards a specific type of economy which has significantly shifted in recent years. Less rebar and fridge purchases but more domestic tourism and train ticket purchases means the proxy people use won't even register the latter. So we get garbage in, garbage out.
It's the same reason why people don't rely on a PMI tracker that over-samples SOEs as the single source of truth for business sentiment.
Where's the comparative analysis?
Housing readjustment just reflects China’s severely underdeveloped financial markets in which there is no other channel for household savings (and related, a lack of financial intermediaries that are capable of allocating between savers and borrowers on valuable projects)
GDP/NIPA tables do not use the “retail sales = consumption” proxy
Did you skip the fact you quoted a tweet and blamed everything on COVID permanently scarring the economy?
Or was that a throwaway line we should disregard? It was extremely disingenuous as we pointed out.
We're criticising the limits of using the charts in that tweet/substack article because that's what you provided. Unless you're saying the data you present has no bearing on what you argue here.
And yes, everyone uses this retail sales graph as a proxy for consumption, you included..... since you shared the tweet and thought it was relevant information.
What slowing economy grows its electricity consumption at 7%?
Consumption is trending at 8% in 2024:
It's true that China's slowdown this decade is more about the housing slump than Covid per se, and the housing slump was likely going to happen sooner or later anyway; however it's also true that Xi needs to get over his hangups over "welfarism" and enact some stimulus in the form of transfer payments to boost domestic demand. Heck, they can even through in some pro-natalist bias such as national-level payments for marriage and childbirth. Such policies aren't in conflict with promoting new productive forces; on the contrary, they support them.