Chinese Economics Thread

[Serb]

No, he can't. But he can purchase Chinese products in bulk in the form of exports. And that's the reality of the analogy - the value generated by Chinese workers is being deflated globally (but especially relative to the US since it is their currency that is the main exchange medium).

This could very well be a strategic decision by the Chinese government, but it is a meaningful decision regardless. It means Chinese individuals and companies are incentivized to sell to the West and to immigrate to the West, since they get a much better deal for the value of work.

Yeah, they can import more, in theory, no one denies that. The US is the strongest import market globally after all.

That's one use of looking at nominal GDP. But that's nowhere near the JUSTIFICATION needed to bring it ahead so much from all the other more useful economic indicators.

In fact, the reason it is used so much is that it is best used by the US gov. to whitewash its failures in the real economy.

BECAUSE, yes, John from California can theoretically import more now, but in the process, he lost the ability to do so, since his real wage and disposable income fell now due to the US poorly managed real economy.

In the end, all that nominal GDP excess is just some inflation, and excess profit of some company on some book.

By actually paying for stuff more, John increased nominal GDP but DECREASED his ability to import from China.

 

[Serb]

Cherrypicking yet again. What matters is the aggregate economy.

Otherwise what you're saying is effectively the Chinese equivalent of "as long as Google employees and Amazon employees do well, the homeless and poor people can go fuck themselves".

Not true, because profit/value gains gained from high-tech advancements alone are enough to push the whole economy forward even though they are just one sub-set of the current manufacturing landscape. This is easily seen from this:


AGGREGATE real wages:

In the first half of 2024, the nationwide per capita disposable income stood at 20,733 yuan, a nominal increase of 5.4 percent over the previous year, and a real increase of 5.3 percent after deducting price factors.

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AGGREGATE real wages IN MANUFACTURING overall:

Urban Annual Average Wages in Private and Non-Private Manufacturing Sector
	Private		Public
Year	Salary (RMB)	Growth Rate (%)	Salary (RMB)	Growth Rate (%)
2023	71,762	6.5	103,932	6.6
2022	67,352	5.3	97,528	5.5
2021	63,946	10.4	92,459	11.7
2020	57,910	9.6	82,783	5.9
Source: National Bureau of Statistics

Edit: Now please remember your original first 2 points about how China exports only "cheap" products, and how value added is not tied to increased profits see how foolish you were. Admit the mistake, and move on brother. No doubt there is still a great deal of lower-value-added industries' participation in China's economy, but it is slowly rooted out in favor of more profitable advanced manufacturing as you can see.

 

[abenomics12345]

AGGREGATE real wages IN MANUFACTURING overall:

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People are working longer hours. This isn't productivity growth. This is grinding people harder.



It's pretty fucking clear who enjoys more consumer surplus and welfare here.

Edit: Now please remember your original first 2 points about how China exports only "cheap" products, and how value added is not tied to increased profits see how foolish you were. Admit the mistake, and move on brother. No doubt there is still a great deal of lower-value-added industries' participation in China's economy, but it is slowly rooted out in favor of more profitable advanced manufacturing as you can see.

The dumbest accusation you've made yet - nowhere did I ever say China only exported low-value added products.

A product can be cheap or expensive relative to its value. China can export the most 'value added products' and have it SUPER cheap vs. its value and still get screwed over. In simple words you can understand, what I am saying is that China is selling dollars for 80 cents - regardless of if its a 3 dollar Temu toy, or a 30000 dollar BYD car (and I believe this also gets to the crux of what @Eventine has been saying).

If you somehow believe that is a good deal, then you should come work for me while I pay you peanuts and for you to do all my work for me.

 

[HighGround]

The dumbest accusation you've made yet - nowhere did I ever say China only exported low-value added products.

A product can be cheap or expensive relative to its value. China can export the most 'value added products' and have it SUPER cheap vs. its value and still get screwed over. In simple words you can understand, what I am saying is that China is selling dollars for 80 cents - regardless of if its a 3 dollar Temu toy, or a 30000 dollar BYD car (and I believe this also gets to the crux of what @Eventine has been saying).

If you somehow believe that is a good deal, then you should come work for me while I pay you peanuts and for you to do all my work for me.

It has been amazing for developing China's industry.

I suppose the question should be, when is the right time to finally focus on consumer, rather than producer value? Do you believe now is the time?

 

[abenomics12345]

It has been amazing for developing China's industry.

I suppose the question should be, when is the right time to finally focus on consumer, rather than producer value? Do you believe now is the time?

It depends on the status of the industry. There is absolutely zero reason why CATL should sell 'cheaply' just to 'win market share' because it's already at a stupid high market share globally.

 

[HighGround]

It depends on the status of the industry. There is absolutely zero reason why CATL should sell 'cheaply' just to 'win market share' because it's already at a stupid high market share globally.

To be fair, I do believe they capture quite a bit of the value in the EV chain.

There's also the question of how to go about this. China could raise minimum wages, increase social spending, raise taxes on producers, etc. This will obviously have an inflationary impact (arguably good), but it'll also make exports less competitive.

There's also the question of whether China's economy wants to do this at the moment of great technological change. General electrification of the economy is arguably not yet complete, and there's still plenty of infrastructure to be built.

 

[SanWenYu]

John Smith flips burgers at McDonalds in California. He earns minimum wage, $16.50/hour. Putting aside taxes, etc., and assuming standard work month of 173 hours, at current exchange rates of 1:7.33, this comes out to $2859.45 or 20,923 yuan/month.

In China, a person making 20,923 yuan per month is firmly considered upper middle class. But John Smith is strictly lower class in the US; in fact he can barely make ends meet and likely depends on welfare. This is because, as many people have observed, prices for living are much higher in the US, and especially so in California.

But let's say John Smith decides to take a trip to China. Now every dollar he brings is actually worth 7.33 yuan, and he actually can spend as though he is an upper middle class Chinese salary man. Hence the "loser back home" effect we see in so many Chinese cities.

What the above really means is that, from China's perspective (since China is allowing this to happen), the value John Smith generates flipping burgers in California is equivalent to a 80th+ percentile Chinese engineer/scientist working for BYD, Huawei, etc. Because after all, John Smith can buy just as much Chinese stuff with his McDonalds salary, as that 80th+ percentile Chinese engineer/scientist.

Sure, there's the tax of having to go to China with his savings (flight tickets, etc.), or alternatively, the tax of paying for shipping from China and whatever tariffs Trump put on Chinese products; but even if we account for that difference, John is still getting a great deal from exchanging his labor flipping burgers at McDonalds for upper middle class buying power in China.

This is also why nominal GDP is meaningful (and not irrelevant). If we agree that China is allowing Americans to purchase an inflated life style with the power of the exchange rate, then we should also agree that China is also, implicitly, under valuing (or deflating) Chinese labor. From the perspective of global markets, then, the value the average Chinese is generating is lower than that of the average American, despite the seeming absurdity of a burger flipper from California generating equivalent value as a Huawei engineer.

Your John Smith could only afford a trip to China if:

1. He could find a McDonald allowing him that many hours per month. And
2. He would have to sleep on streets and eat from dumpsters for the full month to save for the trip.

In addition to the tickets, he would have to pay for a shower, a haircut and/or a shave, some clean clothes, and a ride to the airport.

Let's say after all these he would still have about 1000 dollars left for his spendings in China. Yeah with that much, he could probably have the "80th+ percentile" lavish lifestyle in China for a week at the best. Then he would have to go back on the streets of California.

See what's the flaw in your hypothesis? Your John Smith would have to survive first at home before he could pretend being a lavish "80th+ percentile" person in other countries.

 

[Serb]

The dumbest accusation you've made yet - nowhere did I ever say China only exported low-value added products.

A product can be cheap or expensive relative to its value. China can export the most 'value added products' and have it SUPER cheap vs. its value and still get screwed over. In simple words you can understand, what I am saying is that China is selling dollars for 80 cents - regardless of if its a 3 dollar Temu toy, or a 30000 dollar BYD car (and I believe this also gets to the crux of what @Eventine has been saying).

If you somehow believe that is a good deal, then you should come work for me while I pay you peanuts and for you to do all my work for me.

No, they can afford to sell it for cheaper than for example some Western equivalents because they have better efficiency (they also made it for 'cheaper') during production. This is due to technological and business innovation, world-leading government support and policies, etc...

Just because they are selling it for cheaper, doesn't mean that they are getting "screwed over". Value creation is also about cost efficiency.

In fact, by pricing it cheaper, they attract more orders. But, at the end of the day, we still see that they are increasingly profitable, and taking over industry by industry. So, idk what are you about and what your problem is, it is clearly working. This is a standard good business practice btw.

 

[abenomics12345]

raise taxes on producers,

Exhibit A:

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Let's say after all these he would still have about 1000 dollars left for his spendings in China. Yeah with that much, he could probably have the "80th+ percentile" lavish lifestyle in China for a week at the best. Then he would have to go back on the streets of California.

Let's say after all these he would still have about 1000 dollars left for his spendings in China. Yeah with that much, he could probably have the "80th+ percentile" lavish lifestyle in China for a week at the best. Then he would have to go back on the streets of California.

See what's the flaw in your hypothesis? Your John Smith would have to survive first at home before he could pretend being a lavish "80th+ percentile" person in other countries.

English 'Teacher' can help John Smith survive in China. Especially if he's willing to be super bullish/pro China on Chinese social media regardless if he believes what he's saying.

 

[fatzergling]

Your John Smith could only afford a trip to China if:

1. He could find a McDonald allowing him that many hours per month. And
2. He would have to sleep on streets and eat from dumpsters for the full month to save for the trip.

In addition to the tickets, he would have to pay for a shower, a haircut and/or a shave, some clean clothes, and a ride to the airport.

Let's say after all these he would still have about 1000 dollars left for his spendings in China. Yeah with that much, he could probably have the "80th+ percentile" lavish lifestyle in China for a week at the best. Then he would have to go back on the streets of California.

See what's the flaw in your hypothesis? Your John Smith would have to survive first at home before he could pretend being a lavish "80th+ percentile" person in other countries.

Poor Little John can't even afford the $4000 one way ticket to China. If he can afford it he would struggle with affording the return flight. The fixed costs John must spend on his flights already eats up the cheaper Chinese accommodation, food and consumer goods.

But John probably doesn't think about China or exchange rates or arbitrage. John just wants to pay next months rent, his car lease and his credit card debt. If he can't pay off those obligations, it is unlikely he would go to China. For a hypothetical John to travel to China, he must be secure via homeownership, and jobs. Say, a $100k a year financial analyst. The problem with such Johns is that since employment is precarious, he cannot risk spending more than a week or two in China, which is not enough to deprecate the fixed costs of plane tickets. Unless you make even more or have access to cheap transportation, arbitrage in China is still difficult to achieve.