Chinese Economics Thread

[Iracundus]

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Holy crap, Xu is so based. Great article
Exactly my thinking. Why reduce production when you can just give money to consumers and buy it out the so called "excessive" production. And nothing bad will happen cause:


A big beautiful growth will happen.

Would all the US Treasury holdings also be able to act as a brake in case of too much money supply expansion?

My understanding is that printing money pushes down the value of a currency (greater supply of it) and pushes up on the inflation rate (prices go up because currency worth less), while selling US Treasuries and then exchanging the other currency for RMB has the opposite effect (pushing up value of the RMB).

Couldn't the PRC try experimenting with this and hit the brakes if needed by selling US Treasuries (or selling off any other USD held in accounts for RMB)?

Obviously the great risk and temptation is that throughout history rulers with fiat paper currency have been tempted to solve budgetary problems by over printing money beyond what the productive capacity of society, leading to runaway inflation.

 

[W20]

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"Xu cites MMT in arguing that China needs to dial up its debt levels, instead of pursue a "beautiful deleveraging" as prescribed by Dalio"

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No, and no

China needs a Big dream: A patriotic dividend of, say, 500 yuan per month for each citizen, in freshly printed banknotes or the equivalent on a mobile phone.

The exact same amount of patriotic dividend for each citizen in the name of the motherland, with a nice message along with the transfer of the patriotic dividend.

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the transfer of the patriotic dividend of course from the Central Bank

 

[W20]

Patriotic Dividend

Patriotic Dividend = GDP x (Real_growth + Central_Bank_inflation_target + 0.02) / (Number of Citizens)

Other estimates can be made.

The idea is:

1) the Homeland is common and therefore suspected of being communist

2) it's a small amount that goes to national Demand

3) it supports demand from below in the People's ... Republic of China

4) it makes Macroeconomic sense

 

[Nevermore]

Would all the US Treasury holdings also be able to act as a brake in case of too much money supply expansion?

My understanding is that printing money pushes down the value of a currency (greater supply of it) and pushes up on the inflation rate (prices go up because currency worth less), while selling US Treasuries and then exchanging the other currency for RMB has the opposite effect (pushing up value of the RMB).

Couldn't the PRC try experimenting with this and hit the brakes if needed by selling US Treasuries (or selling off any other USD held in accounts for RMB)?

Obviously the great risk and temptation is that throughout history rulers with fiat paper currency have been tempted to solve budgetary problems by over printing money beyond what the productive capacity of society, leading to runaway inflation.

The situation in China is the opposite: deflation, insufficient consumption, and a government with enormous borrowing potential. Its powerful technology, industrial chain, abundant capital, and huge labour force can meet the demand for goods in any region of the world in a very short time.

 

[Maikeru]

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"Xu cites MMT in arguing that China needs to dial up its debt levels, instead of pursue a "beautiful deleveraging" as prescribed by Dalio"

---

No, and no

China needs a Big dream: A patriotic dividend of, say, 500 yuan per month for each citizen, in freshly printed banknotes or the equivalent on a mobile phone.

The exact same amount of patriotic dividend for each citizen in the name of the motherland, with a nice message along with the transfer of the patriotic dividend.

---

the transfer of the patriotic dividend of course from the Central Bank

Kill two birds with one stone - massive child subsidies. Have a kid, get $$$. Simples.

 

[W20]

And

5) does not increase Debt and improves banks' Balance sheets

 

[W20]

"Patriotic Dividend"

DeepSeek opinion:

Benefits

1. Stimulate Demand Directly
2. Reduces Inequality
3. Avoids Debt-Financed Fiscal Policy
4. Anchors Inflation Expectations

Risks

1. Inflation Risk
2. Currency Depreciation

In China case i don't see the risks with (A) a reasonable "Patriotic Dividend" and (B) the Big trade superavit, and (C) It is practically the same as what is usually done but redirecting 'the irrigation channel' through the population, and on the other hand, since it is a monthly transfer, it can be managed and modulated well.

 

[Iracundus]

The situation in China is the opposite: deflation, insufficient consumption, and a government with enormous borrowing potential. Its powerful technology, industrial chain, abundant capital, and huge labour force can meet the demand for goods in any region of the world in a very short time.

Which is why I think there is room for monetary expansion. Part of the claim about the PRC buying US treasuries is that if they didn't and tried to convert the USD to RMB, it would raise the value of the RMB too much and make industries uncompetitive. However couldn't the PRC print new money ex nihilio and offset this? The extra money could be used to stimulate consumption and birth rates if given to individual citizens. It could also be used to deleverage and pay off some of local government debts (with safeguards to ensure they don't just keep racking up new debt and end up as highly indebted as before)

 

[W20]

Chatting with Deep Seek ...

(which, by the way, is a fun invention! We have some tremendous discussions, haha) ...

The only argument i can see is whether the "patriotic dividend" could reduce the desire to work (?)

Well, okay, it's a matter of experts with a better understanding of reality determining whether 500 yuan a month is a lot (!?), and if so, then start with a smaller amount.

Anyway

This is my MacroEconomic Dream for the Confucian Party of China (CPC)

 

[Iracundus]

I would make it skewed towards desirable behavior and as a rebate to existing costs rather than just cash to spend however one wants, which may otherwise just spur asset price inflation. So for example, having children, childcare costs, medical costs related to having children etc... get 500 yuan as a rebate to incurred costs. For someone without any of those, they get 250 yuan cash.