Chinese Economics Thread

[Michael90]

Rather than accept this macroeconomic recommendation, the Chinese government has responded to the growing signs of deflation with a misleading narrative about the need to regulate excessive competition. The clearest example of such "excessive" competition, especially for journalistic commentary—here the term "hook" is truly appropriate—is found in the Chinese electric vehicle industry. BYD, a world leader, recently surprised its competitors with the introduction of a new entry-level model, the Seagull, to which it is applying unprecedented price discounts.

Containing BYD's efforts to crush competition would not eliminate the deflationary risk in the Chinese economy. However, it is equally clear that for deflation to occur, companies must lower prices; therefore, to prevent deflation, companies must be convinced that they do not need to continue to reduce prices.

The problem is that It’s not just in automobile industry where this is happening (if it was on one or two sectors then I don’t think the government will be that worried), the issue is It seems to be the case in almost every(or vast majority) industry in China at the moment. Just recently for example in the food delivery sector the government had to intervene again lol

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China’s State Administration for Market Regulation (SAMR) convened a meeting on Friday with prominent online food delivery companies, including Alibaba Group Holding’s Ele.me, Meituan, and JD.com. According to a statement from the regulator, the purpose of the gathering was to urge these firms to adopt more “rational” competitive practices amid an ongoing price war that has dominated the market for months.

Per a statement issued by SAMR, the meeting focused on the need to “further regulate promotion behaviours, encourage rational competition, and foster a healthy ecosystem and win-win situation for consumers, merchants, delivery riders, and platform operators.”

 

[TPenglake]

Kind of goes without saying it seems most people living in Tier 1 cities today be it Beijing, Shanghai, Guangzhou etc. don't exactly have great things to say about the economy. From youth unemployment, to slower private sector hiring, to the enduring fallout of the property bubble, people are reigning in spending and tempering their expectations with respect to their finances. Even those with jobs don't really considers themselves lucky considering the poor work life balance of China's work culture.

However, the story seems to be different in China's heartland. Long considered a part of China ignored by the government in favor of the nation's East Coast cities, inland China is finally in the spotlight as economic optimism still persists and attracts not just investment but also Tier 1 and 2 dwellers either out of the job or fed up with the corporate rat race.

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[FriedRiceNSpice]

Kind of goes without saying it seems most people living in Tier 1 cities today be it Beijing, Shanghai, Guangzhou etc. don't exactly have great things to say about the economy. From youth unemployment, to slower private sector hiring, to the enduring fallout of the property bubble, people are reigning in spending and tempering their expectations with respect to their finances. Even those with jobs don't really considers themselves lucky considering the poor work life balance of China's work culture.

However, the story seems to be different in China's heartland. Long considered a part of China ignored by the government in favor of the nation's East Coast cities, inland China is finally in the spotlight as economic optimism still persists and attracts not just investment but also Tier 1 and 2 dwellers either out of the job or fed up with the corporate rat race.

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Raising incomes in underdeveloped regions will stimulate a far greater increase in aggregate demand due to higher marginal propensity to consume. This in turn will create more jobs in tier 1 and tier 2 cities as well, leading to the creation of a virtuous cycle. This is the polar opposite to the "trickle down economics" bullshit that contributed to the ruin of the American economy.