Chinese Economics Thread

[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.

 

[HighGround]

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.

Is it really $4,000 USD though.

 

[mst]

PBOC Halts Bond Buying to Defend Yuan as Economic Gloom Worsens

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[supercat]

This is a fantastic news ..

China's per capita electricity consumption is now 8MWh/capita.. surpassed developed/high income countries like France , JAPAN, Germany.

View attachment 143028

USA - 13MWh
Korea - 11MWh
China - 8MWh
Japan - 7.3MWh
France - 7.19MWh
Russia - 6.9MWh
Germany - 6.06MWh

compare only industrialized countries..

Note- although China is the world's factory consume more electricity in industrial sector but still this is significant.

David P. Goldman suspects that the US is the one that is faking its GDP.

https://twitter.com/i/web/status/1877272275730219258

 

[Xiongmao]

PBOC Halts Bond Buying to Defend Yuan as Economic Gloom Worsens

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Don't forget the PBOC only started bond trading in August 2024. Maybe they decided that they don't want to do it any more.

 

[doggydogdo]

This is a fantastic news ..

China's per capita electricity consumption is now 8MWh/capita.. surpassed developed/high income countries like France , JAPAN, Germany.

View attachment 143028

USA - 13MWh
Korea - 11MWh
China - 8MWh
Japan - 7.3MWh
France - 7.19MWh
Russia - 6.9MWh
Germany - 6.06MWh

compare only industrialized countries..

Note- although China is the world's factory consume more electricity in industrial sector but still this is significant.

where does it say China is 8MWh per capita this graph shows it's below 8

 

[GiantPanda]

David P. Goldman suspects that the US is the one that is faking its GDP.

https://twitter.com/i/web/status/1877272275730219258

It is kinda obvious in the real world. Remember, GDP means Gross Domestic Product.

The only thing you can produce without adding energy are thought exercises like inflation, lawyer fees or financial derivatives -- and even those last two you need some electricity for lighting and record.

If the GDP of the US doubled from 2010 without increasing the US usage of electricity then it basically created a lot of imaginary products.

There is no way in hell the US can possibly have a larger economy than China. Not unless they found some kind of magic where you can grow without energy. In that case, oil prices would gone to shit decades ago when the West began modernizing.

No, only when China has outgrown the US do energy suddenly become unimportant to growth. LOL

 

[tokenanalyst]

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.

The problem is that John Smith after that trip will be still flipping buggers in California... if the store hasn't burn down yet, even a week trip to China won't change that he will still flipping buggers in California and sleeping in his car because he can't afford the rent. In China Chinese engineers have to deal with Chinese prices and productivity, their salary allows them to buy a nice apartment, a nice EV, a lot of consumer goods and 3 good delicious food every day. So in term of Chinese prices Chinese engineers are richer than the average bugger flipper in California. Now John Smith may think that it flipping bugger abilities can make him worth more than the average engineer in China and he may apply for residency just to find that his abilities cannot afford him to buy an apartment in China but to rent. Still better than being homeless.

 

[tygyg1111]

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?

Once certain companies have achieved Huawei like status (top tech, top public support) then they would begin moving towards Huawei like pricing. It mostly depends on the ability for the majority of consumers to fork out that money though.

On a macro level, I believe it would be a couple decades depending on global circumstances. If China were to:
- Achieve conditions at home that allows the effective transition of labor that is or will become redundant to other sectors capable of giving a better standard of living
- Absolutely corner the majority of key industries in market share and tech stack dependency
- Stabilize her backyard (APAC region), and have Japan, SK, etc. return to China's orbit or at least have friendly policies
- Reduce / neutralize risk of outside interference or intervention (e.g. US)

Then I believe the conditions for higher 'personal purchasing power' can be met. Although, in reality, this is already happening at a slow pace (matches couple of decades time period) if you look at progress from 2008 onwards.

Most of the problems brought up (which are real gripes if you talk to people in China) just end up resolving naturally as development takes place.

 

[Michael90]

Do you guys really think China is an NPC buying worthless paper money for real physical goods? This paper money can be exchanged for Western firms, Western technology, Western assets. Under the lords of capitalism, who has the capital controls the workplace. Look at the many loyal workers treated like garbage because private equity can buy up the firms they work for. China takes advantage of this institution to buy out Western assets and transfer their know how to China.

I think that was before. Most western countries dont allow China to buy their tech companies anymore since the lockdowns and US-China trade war.