Chinese Economics Thread

[HighGround]

Which is why stocks (statistically owned only be a few) is always sacrificed by China to feed worker owned/non-stock trading companies (statistically benefitting many).

@HighGround this your explanation why China always has a low stock market compared to countries stuck in non-growing income traps.

This explanation doesn't make any sense. That's not how a stock index works.

Also, with all the bashing people like to do on "non-growing" economies, those economies are growing. I don't know why people can't just be happy with, the quite frankly amazing economic growth in China and accept it as extraordinary and refrain from calling other economies mismanaged.

Having a high 1% income is worth much much less than a high bottom 50% income, even if the income expansions are the same in absolute numbers. Outlining all economical decisions after correct foundations towards long term growth is why China, not Brazil, nor US or India, is the largest and best performing world economy.

Wealth inequality doesn't have much to do with why the stock market gains value. The price of a stock is determined by the supply and demand on the market for that stock. Demand for that stock is affected by lots of things, chiefly among them, the performance and expectations of future performance of the company that issue that stock.

In a very idealized situation, the value of the stock market will gradually rise because in a good economy the peformance and growth of individual firms will generally be on an upwads trajectory. Which is also good for investors who are encouraged to invest, creating, what many people in this forum like to call, a "virtuous cycle". This is also good for normal people and workers. In theory, the workers benefit from a good economy in the form of job security and pay rises. Furthermore, they can invest their savings into a healthy stock market that will generate solid returns for them that they can then live off of once they retire.

So no, the "recent" volatility of China's stock market is not a good thing. In fact I would say it's actually a bad thing for the average person. Rich 1%ers have other ways to invest their wealth to generate solid returns. I'm also not saying this is necessarily a horrible thing as the stock market is not the economy. This is especially true when it comes to China, a country with a unique economy and a very peculiar set of circumstances (economically and geopolitically).

Haivng said that, a healthy stock market that can generate consistent returns is a desirable thing.

 

[HighGround]

that's a strange thing to say. If you are theory is that China is not hitting back more, because its economy is weak, then why is it hitting back now on this issue. When it didn't do it in 2021 when its economy was hitting all cylinders?

It's a low quality Business Insider article, it doesn't have to make sense.

 

[fishrubber99]

The 0,5% cut in RRR only releases less than 150 billion dollars in to the economy. And maybe there will be another 150 billion dollars released before years end. And that for a 18 trillion dollar economy.

The reduction of interest payment on existing mortgages come to about 21 billion dollars a year worth of savings for mortgage holders.

A 10 to 30 basis point cut to some of the MLF rate is going to do jack for loan demand.

I don't think there is any real value in analyzing this change in terms of the overall Chinese economy, the stimulus is more meant to be targetted to certain groups of people (households with mortgages) and help buttress but not completely alleviate some of the housing market weakness we've been seeing for the past few years.

As always, there's a Glenn thread about this:

https://twitter.com/i/web/status/1838952136765211132

Ultimately, I think the government just wants to hit around 5% growth this year, not necessarily a huge amount more than that. Freeing up about 0.12% of GDP through the RRR cut will help with that when most projections pre-recent stimulus was around 4.7% growth this year.

 

[supercat]

A lot of new manufacturing enterprises:

https://twitter.com/i/web/status/1838770288034464065

Newest projections from OECD:

https://twitter.com/i/web/status/1838867808559755313

 

[Michaelsinodef]

Great thread from Glenn

https://twitter.com/i/web/status/1839019702980362286

 

[Michaelsinodef]

Something else about Chinese stocks.

Forgot exactly which stream it was, but the podcast had a person from a Chinese investment company, that gave an example of some Chinese stocks that paid yearly dividend.

So for example, x stock might not rise all that much (and in fact fall), but the company would pay yearly dividends.

So if one held the stock for say 10+ years, one would actually be able to get quite the returns from just the dividends.

(although it does carry the risk with that the stock of x company needs to stay profitable and afloat, to be able to pay those dividends).

 

[Michaelsinodef]

Something else about Chinese stocks.

Forgot exactly which stream it was, but the podcast had a person from a Chinese investment company, that gave an example of some Chinese stocks that paid yearly dividend.

So for example, x stock might not rise all that much (and in fact fall), but the company would pay yearly dividends.

So if one held the stock for say 10+ years, one would actually be able to get quite the returns from just the dividends.

(although it does carry the risk with that the stock of x company needs to stay profitable and afloat, to be able to pay those dividends).

Found it

Please, Log in or Register to view URLs content!

NOTE: Not all stocks are like that, but not a small number either.

 

[Iracundus]

Something else about Chinese stocks.

Forgot exactly which stream it was, but the podcast had a person from a Chinese investment company, that gave an example of some Chinese stocks that paid yearly dividend.

So for example, x stock might not rise all that much (and in fact fall), but the company would pay yearly dividends.

So if one held the stock for say 10+ years, one would actually be able to get quite the returns from just the dividends.

(although it does carry the risk with that the stock of x company needs to stay profitable and afloat, to be able to pay those dividends).

The big SOE's like the big Chinese banks have been regular decent dividend payers even if their stock price has not risen by too much. I think average Chinese should be incentivized to hold these big dividend paying SOE's instead of parking their wealth in real estate so that if the economy does decently, wealth flows back to the average person via these dividends and recirculates in the economy. As big SOE's they are highly unlikely to go under, and the people then share in the wealth of the nation.

 

[Overbom]

The big SOE's like the big Chinese banks have been regular decent dividend payers even if their stock price has not risen by too much. I think average Chinese should be incentivized to hold these big dividend paying SOE's instead of parking their wealth in real estate so that if the economy does decently, wealth flows back to the average person via these dividends and recirculates in the economy. As big SOE's they are highly unlikely to go under, and the people then share in the wealth of the nation.

Actually some proposals have been floated in the past where each Chinese, gets a dividend cut from each SOE.

This would ensure continuous bottom-up public support for SOEs, accelerate income growth, and enhanced monitoring of SOE's financial and competitiveness performance ("we are talking about my money here!")

Of course as a counterpoint, it can be argued that this already happens in an indirect way by the SOEs funneling money to the Gov as taxes, or by supporting unprofitable projects for offering public goods.

It's a complex issue for sure, however I quite like the argument that it would ensure bottom-up support from the public. Everyone is aware of the private businesses hiring so many people and contributing so many taxes, they are more efficient etc, but sometimes it's difficult for the average Joe to understand the value of SOEs.
In the beginning it may not affect much, but who knows if in the future, public sentiment turns against SOEs? Such a measure would be a concrete real world benefit that every single person could enjoy and experience personally.

 

[abenomics12345]

To all the idiots who argued that there was no urgency for more stimulus policy I suggest read the politburo readout today. This is the first time economy was discussed at the September Politburo meeting:

会议强调，要加大财政货币政策逆周期调节力度，保证必要的财政支出，切实做好基层“三保”工作。

they can say they are open to many things. But it hasn't actually happened.

要促进房地产市场止跌回稳，对商品房建设要严控增量、优化存量、提高质量，加大“白名单”项目贷款投放力度，支持盘活存量闲置土地。要回应群众关切，调整住房限购政策，降低存量房贷利率，抓紧完善土地、财税、金融等政策，推动构建房地产发展新模式。要努力提振资本市场，大力引导中长期资金入市，打通社保、保险、理财等资金入市堵点。要支持上市公司并购重组，稳步推进公募基金改革，研究出台保护中小投资者的政策措施。