Chinese Economics Thread

[GiantPanda]

I don't think that the government is burying their head in the sand for sure. I think they are still measuring up how things will play out. Right now the effects are fairly soft, this is why I think people in this thread aren't too concerned. That being said, there are many financial indicators as others point out that are not great.

The other thing I sense, I think people are pooping on financialization a bit too much, like "the stock market doesn't matter" etc. One of the reasons why the US economy can basically ride on value-add vs. hard goods is that the flow of capital is really efficient. Only the HK stock market is good at measuring company value and even then, it is more focused on attracting foreign investment. That being said, as you mention, this is a bit of a generational shift being as the stock market is decades old vs. centuries in the west.

The financial market in China, unfortunately, really doesn't matter as an indicator of the Chinese economy.

China's fastest growth period -- the entry into WTO and the immediate years that followed was basically the trough of China's stock market.


Now if China had listened to the economists using the market as proxy then they would have adversely impacted the policies of the greatest period of growth China (or any large economy) had ever seen.

This period where China was growing massively between 8 and 14% (until the US financial crisis struck in 2008) also coincided with the absolute nadir of China's modern stock market:


The stock market in China, again while unfortunate, really does not reflect the Chinese economy.

What the US could do with its stock market simply can't be done in China because the maturity was never there and like most developing nations it hadn't yet created the financial gravity (which includes reputation created over time) needed to pull in international funds and at the same time limit the chaos created by hot money.

Furthermore, the financialization of companies in like the US is definitely not something that China wants or can afford at this stage.

China is looking at long term health in its top firms while stockholders are looking to maximize annual profits and share prices. Capex uglifies the ledger books and the profit margins but that is what China Inc. does best. That is how China as a developing nation catches up. It can't afford to be paying excessive dividends. It needs its firms to invest for the future.

 

[TK3600]

I am in China, ShenZhen right now. I can definitely feel the 'economic problem'. Many business went down. I think it is actually 3 very different cause together. I think the biggest thing is business side is fucked, but less so the people.

1. You can meet the demand with less money, but no desire to spend more to increase demand. I mean why would you, thats wasteful. Look at the potential money sinks:

Average car on street is really new. No point keep buying. Also you may not want car anymore due to traffic jam, subway, no parking spot.

Buy bigger house? You gonna lose money if it drops.

You eat same stuff by habit.

Guess you can have more kids, but thats kindof risky to bet. Culture is also getting used to anti family materialism. Even with money you dont feel like spending energy and time. (Another nail among hundreds to the coffin of "no kids cuz life expensive" theory) Saving go up to historical level, birth rate plummets.

2. Online business shuts off most small business. There is a mass centralisation. Like, half of small business closed. Nobody want stores when online delivery exists. Nobody want to eat your 1 star dirty resturant/stand when you can order high review resturant 20km away. Your shitty resturant being closer is no longer a compelling argument.

3. Culture change. People just dont spend on a whim anymore. Old people lived in harsh time, spend little. Boomers spend the most. To us young people, go out to unfamaliar place 'just buy things' is retarded. Like, it is not even about money. You want a good headphone. Do you buy good headphone for 1000 online or go to local retailer, spend 1200 on a mediocre one, only to find out it dont fit you well? You would be more angry at your stupid decision more than the 200 yuan wasted.

 

[TK3600]

I don't think "actively popped" is accurate. I doubt China wanted Evergrande to implode. If I'm reading the news correctly (or having it translated correctly), China's initial policy was to curb over-leveraging and they were hoping that the RE companies would take the hint and start de-leveraging themselves.

The ideal situation would be that everyone would de-leverage themselves successfully and RE companies would massively scale down their ambitions.

The problem was lack of regulation. The solution is regulation. Let me explain. Why the fuck are dev charging money before deliverying houses? Thats asking for problem.

New regulation enforce all buyers downpayment locked in bank until developer finish. There will be no more evergrande overleverage problem today. It would be impossible.

Cant deliver the houses due to poor planning? Bank return money to buyer. Developer can eat its own medicine.

 

[TK3600]

To add on my previous post: this regulation feels like common sense instead of a big brain invention. Why should buyer eat developer's 'skill issue'? The solution is fuck that. No need to force everyone not overleverage. You just make sure right people eat the consequence of overleverage, not average folks.

Making capitalists solely eat consequence of their action? Might be too much to ask for in the west haha. They would be too busy scolding victim for falling for bad investment, instead of punishing the guy responsible for the scam.

 

[FairAndUnbiased]

I am in China, ShenZhen right now. I can definitely feel the 'economic problem'. Many business went down. I think it is actually 3 very different cause together. I think the biggest thing is business side is fucked, but less so the people.

1. You can meet the demand with less money, but no desire to spend more to increase demand. I mean why would you, thats wasteful. Look at the potential money sinks:

Average car on street is really new. No point keep buying. Also you may not want car anymore due to traffic jam, subway, no parking spot.

Buy bigger house? You gonna lose money if it drops.

You eat same stuff by habit.

Guess you can have more kids, but thats kindof risky to bet. Culture is also getting used to anti family materialism. Even with money you dont feel like spending energy and time. (Another nail among hundreds to the coffin of "no kids cuz life expensive" theory) Saving go up to historical level, birth rate plummets.

2. Online business shuts off most small business. There is a mass centralisation. Like, half of small business closed. Nobody want stores when online delivery exists. Nobody want to eat your 1 star dirty resturant/stand when you can order high review resturant 20km away. Your shitty resturant being closer is no longer a compelling argument.

3. Culture change. People just dont spend on a whim anymore. Old people lived in harsh time, spend little. Boomers spend the most. To us young people, go out to unfamaliar place 'just buy things' is retarded. Like, it is not even about money. You want a good headphone. Do you buy good headphone for 1000 online or go to local retailer, spend 1200 on a mediocre one, only to find out it dont fit you well? You would be more angry at your stupid decision more than the 200 yuan wasted.

sounds alot like the US. even bank branches are going out of business.

very sad if everyone just stays at home while walkable businesses close.

 

[TK3600]

sounds alot like the US. even bank branches are going out of business.

very sad if everyone just stays at home while walkable businesses close.

Again, skill issue. Chinese banks closed branch too, because people get service easier. Banks are smaller, rely on remote work station where clients use camera for ID verify. There are staffs onsite to assist in technology. In rare case face to face is needed, there is a few back ups.

There are still many managers, just not in local branch anymore.

 

[doggydogdo]

3. Culture change. People just dont spend on a whim anymore. Old people lived in harsh time, spend little. Boomers spend the most. To us young people, go out to unfamaliar place 'just buy things' is retarded. Like, it is not even about money. You want a good headphone. Do you buy good headphone for 1000 online or go to local retailer, spend 1200 on a mediocre one, only to find out it dont fit you well? You would be more angry at your stupid decision more than the 200 yuan wasted.

I feel like it's the opposite. Most old Chinese don't really spend much. All my grandparents spend less than 10000 RMB a year

 

[TK3600]

I feel like it's the opposite. Most old Chinese don't really spend much. All my grandparents spend less than 10000 RMB a year

Old Chinese dont spend, boomers do. Age 30-60 are wasteful bunch.

 

[Quan8410]

If I am a customer, why should buy anything unless it is broken to the point of no repair because thing will be cheaper tomorrow. I give no shit if producers run on razor thin margin. As long as they barely make end meet, I'm happy. I only want cheap products. I want to save as much as money as possible. To hell with investment because nothing works now. Real estate is pooped. Stock market is a dissaster.

 

[mossen]

That chart is for consumers, not businessness. The wording is a bit weird, so I assume investing just means spending in big-ticket items. Part of this is clearly the housing sector but you can see the slow decline even in 2018-19.

Chinese consumers are simply very unwilling to spend discrectionary income and it doesn't seem to be changing.