At this point it is almost impossible to greatly boost consumption anymore. Rather than being overcapacity, China's superior productivity is actually driving western countries especially Europe off the cliff. Production growth is huge in China simply because production elsewhere is dwindling. China is already the largest consuming nation even without considering the large price discrepancies and its impossible to consume what is made for the entire world.
Chinese Economics Thread
- Thread starter Norfolk
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Consumption can obviously be boosted by loosening interest rates which will allow companies and people to borrow more cheaply thus boosting their consumption power. Again, its economics 101 to increase inflation using monetary policy. China is not doing it cause they are either saving the monetary power for some future crisis that they foresee is coming. Trump trade war is one such crisis. But if crisis is not why they are saving the monetary policy power, then the other reason is they are too afraid to see investors taking money out of China due to looser foreign policy.
Consumption is not the main problem in China. No country whose economy consumes twice as many cars -- the most expensive consumer items -- as the nominal "biggest" economy should have consumption as an issue.
The biggest problem is still production of the things that China currently doesn't make or make in self-sufficient volume like 2nm chips, DUVs, EUVs, airliners, civilian turbofans, spacecraft, etc. Things that are embargoed or could go into embargo.
You can tell by the continuing investment into manufacturing that China could give far less shit about deflation than to continue to make sure that China can produce everything it needs:
No country has ever fallen because it ran out of its own currency or had too many products. But if you want examples of inflation or shortage destroying economies then theres tons of examples: Rome, Ming, ROC, Germany, Zimbabwe, USSR, etc.
Yep. Deflation is strongly self-correcting. Because at some point prices stabilize and people start to buy things. Inflation on the other hand is the opposite. It is self-reinforcing with no upper bounds. Hence, less than a handful of times deflation caused an economic crisis. Inflation, on the other hand, causes crises in multiple countries every single year.
The reason for the Chinese deflation is this. 37% industrial output growth in 6 years...
Why not increase worker wages, provide benefits, enforce working hours for workers, make law for overtime.
Wouldn't that also be able to increase code for thees companies who are racing to the bottom in price by making it more expensive, and promote some inflation, better work life balance and maybe even increase births ?
I wonder why the govt hasn't done that yet?
Wouldn't that also be able to increase code for thees companies who are racing to the bottom in price by making it more expensive, and promote some inflation, better work life balance and maybe even increase births ?
I wonder why the govt hasn't done that yet?
Because that will make Chinese companies lose their competitive edge in the world.
FriedRiceNSpice
Major
Only if its overdone. The key is finding a balance and not going overboard. Given the current sorry state of the US and European economies, it would be much wiser to focus on domestic consumption. In the long term, relying on growing exports to the Europeans and Americans to drive growth is not sustainable.
The thing with benefits is that you can never find a balance with them, better build up productive capacity and delay it for later rather than the opposite. Actions are being taken to improve social benefits for the seniors and for children, that for now is more than enough, they are the most vulnerable.
CCP does not have unlimited control and restraint, once the floodgates of benefits open it would be really hard to close them. This shouldn't even be up for debate, how many developing and developed countries have we seen post 91' fall for this and ruin themselves.
China is the world’s factory. Her population can never consume all her outputs, like you can’t expect Ford workers to buy up all the Model-T’s.