Chinese Economics Thread

[LeeDaChu]

I mean, are we sure we need to deleverage? Deflation makes the company sentiment in China atrocious. The real estate has already fallen to about 18% of GDP from 25% and we don't need any more deleveraging in real estate. The floor sold is below the replacement level, so it will grow a bit higher anyway when the prices stop falling. And if we do stimulus we don't need to put it in real estate.

Years before I was advocating that more public debt is bad along with the Austrian School of Economics thought etc. however when I started reading more and more about the MMT theory and looked at its results, I said, damn, how the heck it's working, and the real-life show that's its working. If its working then do it.

Europe went with Austerity and its results are atrocious, The USA goes with "dollars go brr" and even though total debt is growing, as a debt percent of GDP is falling or staying the same.

My conclusion is that fiscal Austerity is not a good answer for China.

Does the US conduct any expansionary fiscal operation anymore? Roughly speaking printing money is a monetary operation. But the US EU and China don’t face the same challenge at all, I don’t think it is appropriate to conflate the three.

the housing bubble in China was the result of a massive expansionary fiscal operation by the Chinese government in 2008 at the request of the US government. For years, the Chinese economy was overheated because of all those hot money being trapped inside China, there were a lot wasteful projects during those years, like ghost cities and huge empty train stations in the arse end of nowhere. This is why the Chinese government is cautious about large fiscal operations, the Chinese economy is a semi closed economy due to the impossible trinity, it is more difficult for the economy to return to an equilibrium

 

[N00813]

Does the US conduct any expansionary fiscal operation anymore?

Closest thing is something like CHIPS act

 

[gelgoog]

For years, the Chinese economy was overheated because of all those hot money being trapped inside China, there were a lot wasteful projects during those years, like ghost cities and huge empty train stations in the arse end of nowhere.

Not really. At the rate China was urbanizing that was a viable approach. The "ghost cities" are largely a myth. Try reading about the Kangbashi District of Ordos City for example.

Another so called ghost city. This time in Tianjin.

Those kinds of megaprojects take time to pan out. It is as simple as that. Something that myopic capitalists focused on quarterly performance in the West cannot comprehend.

If you want to see a real ghost city try looking at the blight around Detroit in the US.

This is why the Chinese government is cautious about large fiscal operations, the Chinese economy is a semi closed economy due to the impossible trinity, it is more difficult for the economy to return to an equilibrium

I would say the government thus far has mostly done the right things.

 

[Quan8410]

the housing bubble in China was the result of a massive expansionary fiscal operation by the Chinese government in 2008 at the request of the US government.

Housing bubble got bad because local government for years had easy budget financed by land sales as well as China lack of property tax. The lack of property tax only benefits speculators and housing has been seen mainly as investment in China, not living. The most puzzling is China has not been implementing property tax yet. Who prevented them?

 

[Staedler]

Housing bubble got bad because local government for years had easy budget financed by land sales as well as China lack of property tax. The lack of property tax only benefits speculators and housing has been seen mainly as investment in China, not living. The most puzzling is China has not been implementing property tax yet. Who prevented them?

Property tax does not discourage speculators. In fact, property tax encourages house-flipping and low-duration holds. Increasing the economical capture of real estate "development". It further encourages low efficiency, low density housing (McMansions) creating expensive urban sprawl which drives up utility and infrastructure costs for local governments. It also encourages gentrification and destruction of local communities. It's a protective measure for low-density rural communities, not the dense urban environments that China is having issues with.

You can think of property as a form of capital gains (and that is indeed how they are taxed) and property tax is a form of unrealized capital gains tax. Which is not good.

IMO they should implement an appreciable land value tax not just sales, increase and make progressive property capital gains (flat 20% right now), and not allow any deferments on these taxes. High capital gains without possibility of deferments would go a long way to making owners hold their property as places to live rather than buy-sell as investments.

 

[GiantPanda]

Housing bubble got bad because local government for years had easy budget financed by land sales as well as China lack of property tax. The lack of property tax only benefits speculators and housing has been seen mainly as investment in China, not living. The most puzzling is China has not been implementing property tax yet. Who prevented them?

The thing about the Chinese government is that it is as loath to take money away from the laobaixing as it is to give them it. Not much direct payments of welfare but taxes for the masses are pretty low too (unless you have very high income --- about a million RMB -- and even there it is capped at 45%.)

It is a basic characteristic of China's economy. It encourages entrepreneurship and hard work. People are not given a safety net (though public transportation, mostly affordable health services, etc. are a kind of wealthfare) but they are also able to keep most of what they make. I think a lot of officials see changing that could fundamentally change the economy's animal spirit.

I believe that China does need a property tax and the national property registration is set up so that eventual implementation of property tax is possible but who knows?

A property tax right now is not possible when you've engineered a property unwinding. The bubble burst had already taken away incentives to buy homes to hold.

 

[JohnnyD]

It going be 2050 china passing all western gdp and you still going have western white people talking shit bout how China is going to collapse

 

[GiantPanda]

It going be 2050 china passing all western gdp and you still going have western white people talking shit bout how China is going to collapse

The Chinese population is very close to Western consumption pattern despite a nominal per capita income that is supposed be to 1/4th to 1/6th of that of the West.


The biggest difference between wealthy and poor nations is the availability of power to do work and enhance the quality of life which in turn enhances the productivity of work done.

The West beginning with combustion engine and then electricity had this advantage over everyone since the Industrial Revolution. They've never seen a developing country like China.

China is consuming at multiples what it should at this stage of development when you look at per capita income.

No country had ever led the world in high tech exports like electronics and EVs or dominate in new technology research when its per capita is still ranked 78th in world.

And the fact that its per capita income is 78th means there is still a massive amount left to be had.

If you are the West, you can either:

1) hold on to the old prejudices that a poor Global South can't really do this and it will eventually collapse from debt or other unsustainable means or,

2) know this is coming and that when China reaches the per capita income of Shanghai or Hong Kong on nationwide basis, it will dominate economically, technologically and financially like no country had ever before -- then you would do all you can to delay this inconvenient truth.

It is mostly number 1 among the general public. But enough people in power understands #2 that we see bans, tariffs and everything else to kneecap China before it matures.

 

[escobar]

The Chinese population is very close to Western consumption pattern despite a nominal per capita income that is supposed be to 1/4th to 1/6th of that of the West.
View attachment 135860

Statistic skewed by a huge china industrial sector. better to look at household energy use which is low vs West average

 

[GiantPanda]

Statistic skewed by a huge china industrial sector. better to look at household energy use which is low vs West average

Industrial usage is a part of energy consumption per capita. There is no "skewing."

When per capita income levels reaches Western levels then the consumption per holdhold will close in on the Western average and the consumption per capita will be far bigger as well.

Besides, the heavy industrial sector is a main actor when talking about the Chinese economy and the Western drumbeat about collapse. No economy whose per capita income is 78th is expected to have an industrial sector that bigger than the Western world combined.