Chinese Economics Thread

[GiantPanda]

Oh no, no VCs means no one is starting bizness in China!

Oh no, too many Chinese startups in new tech!

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You know what? Tens of thousands of Chinese startups in just the fucking chips and EV eco-systems alone are driving these twin opposing idiotic narratives from the West.

1) China collapsing

2) China building overcapacity

If it is collapsing, there is no money for the second. It is that simple.

What collapsing economy engages in capital intensive high tech, high value supply chains that spans the whole spectrum?

Without doubt the RE unwinding has impacted China. But unlike 2008 in the US, this Chinese economy is still growing and is at the same time pivoting from the old RE driven model.

There is a lot of money going into firms right now. Basically everything we saw going into RE at its height are being poured into high value sectors:


It is already paying off with EVs overtaking ICE.

Economies that are stagnant do not attack and lead in practically every new and high value technology like China.

 

[proelite]

@abenomics12345 Do you trust the GDP growth rate estimates and target? The figure of 5%.

If you trust this figure, does this mean that the growth rate could have been 7-8% if the economic fundamentals are strong. I.e no property downturn.

 

[curiouscat]

I think the main reason is competition in China. If your company is in tech there is no amount of growth in India in the next decade or two that can catch up to even the current demand in China. China's market for chips is around 50% of the global total.

If it could compete and expand market share then staying in China is a no-brainer even if China simply stood still and not grow. But most Westerns firms won't be able to compete against local firms -- any not only because of efficiency or the state of the product but because of geopolitics too.

Also, the adaptation and evolution of technology in China is so fast that a lot of today's leading tech -- like in ICE manufacturing -- can literally be overtaken and rendered obsolete within a few years.

As I mentioned earlier, for my specific industry we know there is no competition from China and there is unlikely to be any in the foreseeable future. We aren’t shutting down our China operations but from what I’ve heard we’re not planning any further expansion now either.

 

[abenomics12345]

View attachment 135604
Is not like is going to drop like stone in 2024. This is probably not counting private deals that not appear in China media.

What's the source of this? Percentages also do not show absolute dollars?

 

[abenomics12345]

@abenomics12345 Do you trust the GDP growth rate estimates and target? The figure of 5%.

If you trust this figure, does this mean that the growth rate could have been 7-8% if the economic fundamentals are strong. I.e no property downturn.

Real GDP is going to be likely in the 4.5-5.0% range at the run-rate for 2024. But as I've said multiple times, deflation makes everything feel a lot worse - so nominal GDP with a deflator of 1.x% is likely in the 3.x range - which is consistent with all other indicators:

For example, Komatsu release real time data of the hours of operations of their existing fleet of machinery - and those are down 3.5% YTD. Sure you can argue that Sany/XCMG have crushed them - but FAI is growing at 3.6% YTD but lets assume that's real.

Retail Sales is up low single digits at 3.5%.

Exports are doing well and up 6.7% - meaning global demand has been strong - as much as people here talk about how ASEAN is the biggest trading partners - with the Yangcheng Lake Crab effect, many ASEAN countries are simply a transfer hub for Chinese goods shipped to the US:



Ergo, Chinese exports doing well is contingent on Americans continuing to buy shit. So I really don't see how you people can believe that the US is in recession and Chinese exports are doing well at the same time.

Net/net I have no reason to assume the 5% real GDP is fake, but it feels more like 3.5% than 5%. Which is drastically different than 5 years ago when it was 8% with a positive deflator (meaning it felt like 10%).

So to answer your question, I don't believe real GDP would be 7-8% even if the real estate wasn't this bad, but nominal GDP would've been 6% or 6.5% if there wasn't this deflation that for some reason people here seem to love.

 

[gelgoog]

I already said this. The price of iron ore was going through the roof. Then the Chinese government popped the construction bubble and it went down to manageable levels.



At its peak the iron ore price was over double its usual level. You can expect this reduction in price to apply to steel, and also other construction materials. Which will make what construction is still left much cheaper to execute. After those iron ore mines in Africa start delivering their ore I expect the Chinese government to start inflating the construction sector to finish whatever non-executed projects they still have left over in their pipeline.

 

[abenomics12345]

Oh no, no VCs means no one is starting bizness in China!

Oh no, too many Chinese startups in new tech!

Please, Log in or Register to view URLs content!

You know what? Tens of thousands of Chinese startups in just the fucking chips and EV eco-systems alone are driving these twin opposing idiotic narratives from the West.

1) China collapsing

2) China building overcapacity

If it is collapsing, there is no money for the second. It is that simple.

What collapsing economy engages in capital intensive high tech, high value supply chains that spans the whole spectrum?

Without doubt the RE unwinding has impacted China. But unlike 2008 in the US, this Chinese economy is still growing and is at the same time pivoting from the old RE driven model.

There is a lot of money going into firms right now. Basically everything we saw going into RE at its height are being poured into high value sectors:
View attachment 135605

It is already paying off with EVs overtaking ICE.

Economies that are stagnant do not attack and lead in practically every new and high value technology like China.

I love how you repeatedly use 1 single chart (like notwithstanding its a year old) to justify your CURRENT and FUTURE outlook on China.

The industrial automation industry in 1H24 is down 2.8%. This is directly from the biggest company in this space in China. They are growing 10% but Siemens is like -40%. They *were* growing at 30% in 2022/2023. And they are the absolute leader, meaning the small/medium companies are likely -20% or -30%.

If you want to celebrate that as a win, I mean sure, you do you, but that's major grade 5 "I know I'm bad but what about you" playground energy.



Meaning, yes 2023 was great in this space, but 2024 is shit because that credit impulse significantly slowed down.

 

[HighGround]

How is this substantially different from US collapse in IPO or VC activity?

Weird graph.



And globally



But sure, in US capital has certainly slowed down due to interest rates, but it didn't "die".

 

[gelgoog]

The industrial automation industry in 1H24 is down 2.8%. This is directly from the biggest company in this space in China. They are growing 10% but Siemens is like -40%. They *were* growing at 30% in 2022/2023. And they are the absolute leader, meaning the small/medium companies are likely -20% or -30%.

Western incumbents going down in market share in China. Boohoo.

Those pricks at Siemens pulled out from the Russian market after being there for 170 years. Had to join the anti-Russian sanctions bandwagon after their invasion of Ukraine. Siemens are not reliable as a supplier, depend on Western government whims, and their products are overpriced. Good riddance.

 

[GiantPanda]

I love how you repeatedly use 1 single chart (like notwithstanding a old) to justify your CURRENT and FUTURE outlook on China.

The industrial automation industry in 1H24 is down 2.8%. This is directly from the biggest company in this space in China:

View attachment 135612

Nope.

The first chart was the massive amounts of Chinese startups in the chips eco-system.

The second was a Sept 11, 2024 article complaining of the massive amounts of Chinese startups in EVs.

Which shows us -- contrary to your China doom VC story -- that startups are exploding in those very high tech sectors that VCs are supposed to have biggest effect.

And I actually repeatedly used these charts with the 7% growth in the demand for electricity in China to show CURRENT and FUTURE outlook of the Chinese economy:




That growth plus worst headwinds of the RE crisis being already behind