Chinese Economics Thread

[Eventine]

We joke about the 'but at what cost' but it literally is the cost of European deindustrialization which is why, as much as Chinese companies/technologies are increasingly competitive, the political consequence is simply not tolerable for any politician in Western Europe.

Which is why domestic demand (especially services demand) has to be the next leg of the growth (along with a moderate and acceptable amount of positive price at say 1-2% GDP deflator which will help nominal gdp even though not do anything for real gdp). The other thing is China can easily win more share on 'service' exports - like inbound travel into China - something that is virtually impossible for Western politicians to 'sanction' or 'be protectionist' against (like are they going to ban tourism to China? Lol)

Industry is not a static pie. New industries are emerging all the time (humanoid robotics being a recent example). It is neither necessary nor possible for China to monopolize every industry and indeed China has been and will continue to give ground on low technology manufacturing like textiles and cheap toys. While gaining in high technology industries.

Under cutting the West, Japan, South Korea, etc. is inevitable as they historically dominated high end industries. But it’s not a zero sum game. China can and should be more innovative in pioneering new industries instead of simply seeking to fast follow & monopolize existing ones. Create demand where none existed before - like Elon Musk did with EVs & Star Link. From these new industries will emerge new opportunities that lift global productivity as a whole.

That’s the key to dominating the 4th Industrial Revolution without de-industrializing everyone else (not that China should care too much about it, but it’s not a given that you have to shift towards services). Humanity is capable of so much more than they are currently doing - where are the flying cars & when do we start mining space?

 

[magmunta]

5% this year, 4.5% next year by imf. Quite solid if we consider the real estate downturn still present.

Please, Log in or Register to view URLs content!

 

[tphuang]

China has a lot of service deficit, right?

Please, Log in or Register to view URLs content!

China has a 766B RMB service sector trade deficit through October. This is actually down quite a bit, because the travel service export really increased a lot.

For goods, they are basically exporting $3 for every $2 they import. That's not going to win them a lot of friends.

60% of China's exports are in Electromechanical products. The biggest category growth are ICs and cars.

 

[abenomics12345]

indeed China has been and will continue to give ground on low technology manufacturing like textiles and cheap toys. While gaining in high technology industries.

Do you hear European politicians celebrating about getting China's former job of producing textiles and cheap toys? Lol.

New industries are emerging all the time (humanoid robotics being a recent example).

Yes, and name me one European company that is relevant in the humanoid robotics supply chain....

Create demand where none existed before - like Elon Musk did with EVs & Star Link

..or in EVs (excluding the ones with Chinese JVs because that's functionally Chinese technology). European Star Link equivalent? Lol.

Under cutting the West, Japan, South Korea, etc. is inevitable as they historically dominated high end industries. But it’s not a zero sum game.

You literally say "we are going to undercut them and its inevitable" but then you follow up with a don't-worry-bro "its not a zero sum game".

(not that China should care too much about it, but it’s not a given that you have to shift towards services).

...and then you say "but we don't really care about it even if we did".


Put yourself in any western European politician's shoes and think about whether what you said is politically acceptable. (I am being *very* precise when I say politically acceptable, and not whether what they do is morally correct)

My overall point is, the other side gets a vote/choice on what happens next. What's the strategy? Hope Western leaders (That's right, the same generation of Western leaders that literally grew up being taught they were the pinnacle of civilization) understand that they are antiquated/backwards/old/irrelevant and take it?

It is much easier to do this deindustrialization/going onto path of irrelevance slower with the next generation of leaders (millennials/GenZ/GenAlpha are much less precious about their prior global status especially considering they are now being bombarded by Chinese techno-dominance on TikTok/XHS all day long).

 

[HighGround]

Industry is not a static pie. New industries are emerging all the time (humanoid robotics being a recent example). It is neither necessary nor possible for China to monopolize every industry and indeed China has been and will continue to give ground on low technology manufacturing like textiles and cheap toys. While gaining in high technology industries.

Under cutting the West, Japan, South Korea, etc. is inevitable as they historically dominated high end industries. But it’s not a zero sum game. China can and should be more innovative in pioneering new industries instead of simply seeking to fast follow & monopolize existing ones. Create demand where none existed before - like Elon Musk did with EVs & Star Link. From these new industries will emerge new opportunities that lift global productivity as a whole.

That’s the key to dominating the 4th Industrial Revolution without de-industrializing everyone else (not that China should care too much about it, but it’s not a given that you have to shift towards services). Humanity is capable of so much more than they are currently doing - where are the flying cars & when do we start mining space?

"There are no sunset industries, only sunset technologies."

 

[HighGround]

Put yourself in any western European politician's shoes and think about whether what you said is politically acceptable. (I am being *very* precise when I say politically acceptable, and not whether what they do is morally correct)

I'd only point out one caveat.

The Nexperia debacle, EU's tariffs against Chinese cars demonstrate a competence and execution issue in Europe's ability to retaliate and protect its industry.

IMO, I haven't gamed this out in my head, but there is a very reasonable scenario where Europe's unaffordability crisis lasts for the next 30 years, and European capitals keep a lot Chinese imports coming simply to politically survive as their industry slowly withers away. Yes, from a "big picture" view it makes sense to craft industrial/trade policy to directly keep Chinese goods out as much as possible, and revitalize European industries.

But if you're Spain or Hungary, it may not make much sense to vote for such EU initiatives because your main concern is getting Chinese factories built in Europe, cheap Chinese goods flowing in, and the general qualit of life up. Because the alternative is higher unemployment, higher prices, and political pressure from all political polities to avoid the unaffordability spiral from getting worse.

 

[abenomics12345]

IMO, I haven't gamed this out in my head, but there is a very reasonable scenario where Europe's unaffordability crisis lasts for the next 30 years, and European capitals keep a lot Chinese imports coming simply to politically survive as their industry slowly withers away. Yes, from a "big picture" view it makes sense to craft industrial/trade policy to directly keep Chinese goods out as much as possible, and revitalize European industries.

This is a possible way forward yes but its much easier to 'thread that needle' with a far more 'conciliatory tone' + some domestic Chinese actions on some of the concerns raised by the more hawkish Eurocrats. In other words, buy more time and slow down the process. My point is to do it while minimizing costs - easier to accept for Europeans as it happens slowly and better for Chinese economic growth sustainably (longer term time horizon).

But if you're Spain or Hungary, it may not make much sense to vote for such EU initiatives because your main concern is getting Chinese factories built in Europe, cheap Chinese goods flowing in, and the general qualit of life up.

Yes Spain/Hungary have very different calculus in terms of China - frankly this is the best way forward - Chinese companies build factories in Hungary/Spain and then export into core EU that way. Win/win.