Precisely. It will be a tight rope to walk on for the US. But it's still dangerous to China and can't be dismissed out of hand. Especially in a hypothetical situation where a world event involving China and Taiwan is used by US to try to turn China into a political pariah. In a way, it might be a taiwan doomsday clock device. China being unlikely to try anything with Taiwan before USD ceases to be world's reserve currency. Even if it's decades. (Lots of stretchy definitions there, i know)
Chinese Economics Thread
- Thread starter Norfolk
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Most people don't understand the role finance plays in the economy.
I also think that, and I've been guilty of this, calling US "over-financialized" gives readers the wrong impression of what's wrong with the US economy. The problem isn't that United States has a very developed finance sector. The issue is that United States has not developed other parts of its economy well.
Just to give an example (not addressing this to abe, but to people generally), the root cause of high housing prices in United States isn't the low interest rates. The root cause is lack of housing supply and lack of alternative investment opportunities. If both conditions were satisfied, housing prices in United States would never be that high.
So, I hope people don't view further development of China's finance infrastructure as a bad thing, but as a very positive development instead.
China’s demographics are heading in the same direction as South Korea’s as its robots density is doing the same. Coincidence? Certainly not. As I’ve always said: South Korea is a preview of the future in a more exaggerated form because of its smaller size & insulated culture. What they experience now, China will experience in the near future.
Not necessarily
China’s population is much larger, more buffered against lower demographics. I’m pretty confident if the central govt wanted to, they would be more successful in reversing the fertility rate than South Korea. heck they already started with the controlled deflating of real estate.
Personally I think China will still prioritize high intensity work at the expense of the fertility rate at least for the next few years as they need Chinese companies to catch up and become dominant in high tech core technologies before Chinese companies are as dominant as US companies with higher revenue and higher margin products to give their workers more work life balance, higher salary, and more work life balance. then they may spend more resources on tackling the fertility rate.
There's also the fact that Korea's industrial sectors are getting eaten up by China and Taiwan. But for some reason people don't like talking about this point as much.
They only like going haha low births haha 4b
It is complete delusion.
Theoretically it may not be. Then when place side by side with facts, then that is total delusion.
Watch this video that has been posted in this forum before.
The world has moved on. To make a long story short.
There is no point for the Chinese to convince the Americans otherwise.
Larger population also means more retirement benefits to support. Programs like Social Security are better thought of in population ratio terms. The more inverted the pyramid, the harder it is to support social welfare, and the more likely to go into a debt spiral as Japan for example has done (with gross public debt of >250% of GDP).
Any way, Japanese companies lost the edge to South Korean companies decades ago (remember all the news about Samsung kicking Sony’s *** & Korean internet nationalism reaching its height around 2010), it wasn’t purely due to demographics but it certainly contributed as the short fall in Japanese workers & the need to support so many old people prevented the Japanese government from being able to invest as much as the Koreans in new industries.
I’m seeing a similar effect today with Koreans teeth gnashing about China & how they just don’t have the resources to keep up. But Korean demographics are short term better than Japan’s were when they lost the crown (Japan’s population dividend disappeared at exactly the wrong time with the Plaza Accords & rise of East Asian tigers) so I predict they will hold on for a bit longer. But the slope & pace of the collapse will be even worse because their TFR for the last decade has been far worse than Japan at its lowest. The Korean crunch is coming & I would not want to be them in the next two decades.
As for China, TFR if we believe government numbers really fell off a cliff around 2020. So we’re looking at a population crunch in 20 or so years when those cohorts come of age. China still has plenty of twenty year olds today (due to the ~1.7 TFR back in early 2000s), it just doesn’t have a great ratio to the boomers retiring because those people’s parents had 4 to 5 children each. So public welfare will become a challenge for the Chinese government and it’s one reason there’s such a high savings rate.
But I digress. The bottom line is that Korea will be extremely interesting to watch in the next 20 years as they struggle with the worst demographics in the world. The economic effects will be textbooks material for generations to come.
You're implying that Japan's loss of competitiveness was in part due to low TFR. Certainly possible.
I would say the loss of competitiveness was really a result of the plaza accords which caused the stock market and housing bubble crash.
When your currency suddenly increases in value by 46% in such a short amount of time, making their products much more expensive. This coupled with the fact that they had to implement an export quota and share their tech with US companies. Their domestic market was not big enough to support their companies which mainly relied on exports.
The BOJ then deceased interest rates and increased money supply which let to housing bubble burst and the housing bubble burst likely destroyed much investment by the Japanese citizens along with the Nikkie losing 80% of it's value after reaching highs in 1989.
With less money due to the crash in housing bubble and stock market, and their hands tied by the Americans, their companies had less money to spend on R&D and to innovate. Eventually beaten out by Americans companies. Their domestic market was not large enough to support their national champions.
China's population is still large enough to generate a large domestic market. The govt is actively bursting the real estate bubble with controlled deflation. They are slowly trying to stabilize the stock market. They see the writing on the wall.
Many of the reasons for the low TFR cited by Koreans themselves is not the 4b movement but more the long hours, low pay, expensive housing, too expensive to raise children.
I suspect thats because there is still a lack of many strong competitive Koreans companies. I mean there are very strong Korean companies like LG, Samsung, Hyundai, kia, but still not enough companies to be able to offer their workers higher pay and better hours. With many workers competing for lower number of good jobs, these companies can afford to not pay them well and make them work long hours.
Contrary to the US where they have many large companies, that make enough profit to pay their employees higher salary with better life style. It doesn't solve the TFR completely but it does help.
I suspect china has the same problem as Korea, hence why I speculate that china is still trying to work on making their companies more dominant so they can pay their workers better salary with better working hours. That would help with the TFR along with other government incentives.
I think china should consider free healthcare for all children under the age of 18. Children get sick a lot! That's normal but families are still concerned about medical costs form their children getting sick. With free health care for children, families will be less burdened by their children getting sick, and it would ease their monetary burden substantially. May also decrease the savings rate and increase consumption.
Nah, US is definitely 'over-financialized'.
It's to the point that it directly hurts other industries (five into Boeing as just one example)
China is continuing to grant tariff free treatment for certain American imports such as rare earths ore, medical disinfectant and nickel cadmium batteries.
Not really sure why they had these items in the counter section 301 in the first place. You definitely want to import rare earth ore and get them refined in China.