As I understand it, if there is downward pressure on the RMB, China can just sell more of its US treasuries in order to offset and generate upward pressure on the RMB to keep the rate stable. It would also allow more rapid unwinding of China's position.
Chinese Economics Thread
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As I understand it, if there is downward pressure on the RMB, China can just sell more of its US treasuries in order to offset and generate upward pressure on the RMB to keep the rate stable. It would also allow more rapid unwinding of China's position.
There are these two reports that I have come across regarding the gap between labour productivity and wage growth in China. These papers show that Chinese wage growth has not kept up with productivity increase, and its labour share of income is below global average.
The labour share of income had been declining in China until 2012, there are no studies beyond that point(2012 is an eternity ago in China considering the rapid pace of development). Does anyone have data or a hint of a reversal in this dynamic?
This is essential because it essential to the argument that Chinese domestic demand is suppressed.
The labour share of income had been declining in China until 2012, there are no studies beyond that point(2012 is an eternity ago in China considering the rapid pace of development). Does anyone have data or a hint of a reversal in this dynamic?
This is essential because it essential to the argument that Chinese domestic demand is suppressed.
It's going to be hard or impossible to interpret what a separation between productivity and wage means, because no other economy has reached a comparable productivity efficiency level. It's unexplored territory what advancing further onwards will mean for workers, entrepreneurs and companies.
By gut feeling, one can guess that the 4th industrial revolution should cause productivity to expand much faster than worker wages, because the factories of tomorrow largely don't rely on workers anymore, the gain in productivity is also not going to be due a difference that workers can make.
Germany and Japan were supposed to be some of the first to enter 4th industrial revolution together with China, but instead of also experiencing rapid productivity growth, they tanked/stagnated in both productivity and wages. So at the moment I don't see any other country that would work as control group to interpret China's growth pattern.
Chinese domestic demand should be pumped up by printing a lot more money and then injecting into the economy.
This does not contribute anything to the argument of labour compensation lagging behind productivity growth in China. I asked if there were new statistics or papers regarding this topic because a lot has changed in China since the previous studies. Has common prosperity campaign led to a decrease in the gap?
Labour compensation has to catch up to labour productivity, this is essential for continuous growth of economy and improvement in the livelihood of citizens.
Manufacturing labor costs have increased dramatically from the early 2010s in China, when they were lower than Malaysia and in-line with the Philippines:
This doesn't exactly answer your question but it could indicate that real wages are in-line with productivity growth.
After tax compensation as % of GDP is also in-line with some OECD economies like Germany and South Korea in 2019:
This doesn't exactly answer your question but it could indicate that real wages are in-line with productivity growth.
After tax compensation as % of GDP is also in-line with some OECD economies like Germany and South Korea in 2019:
Labour productivity increase when there's more machinery added (machines help worker make more stuff) which also means higher % spend on machines rather than labour.
I never got the Chinese "domestic demand is suppressed by giving them low wages" thing. Like are people saying Chinese people get to low wages and that's why they save up so much? that doesn't even make sense since low wages mean there should be nothing to save up.
You have not presented an argument for either direction, because we don't have enough sample size to see what the productivity - worker wage relation "should ideally" be like in a 4th industrial revolution economy.
I haven't presented argument in either direction because I didn't have a position. I came across the ILO paper and the other one, since I couldn't come across any recent studies on the topic I came here to seek assistance. The previous two replies were enough to dispel by concerns. Although labour compensation lagged behind labour productivity in the 2000s(when China was undoubtedly way behind western nations in productivity, and definitely not undergoing 4th industrial revolution), over the past decade compensation has exceeded productivity which is good for DD.
This 'savings' concept is the cause of major confusion in economics. It is actually calculated as gross profits + private savings. The profits part dominates by far. Then further on the national economy is a mostly closed system where expense for one party is income for another. When the formulas are written we get the Kalecki-Levy profit equation, which says that in a year:
Profits = Investments + StateDeficit + ExportSurplus - PrivateSavings
In China they have huge creation of new money via lending. That money is used for huge investments which shows off as large profits. Then Western economists count that as savings and complain that China has too much savings as the figures are totally off-limits when compared to other countries. Yes, the classical economists in 19'th century wrote about savings being equal to investments and the New Classicals of today repeat it. That's rubbish.