Chinese Economics Thread

[SampanViking]

I don't see any confusion. My point is that the US is the global trade/reserve currency precisely because most of world trade and capital flows are conducted in the dollar.

If you want to defend your home currency, what currency would you rather hold, the yen? the euro? You can do that, but the FDI and debt funding are mostly coming from America, and when people take their money out of your country, you better have some dollar if you don't want your currency to collapse.

Same thing with trade. Arabs want to sell oil? That's fine. But they better expect the US to pay them in the dollar and not the Yuan or the Yen.

The dollar as the global currency is a simple reflection on the structure of the world trade and capital system. Your banking regulator sitting in an office in the Fed got nothing to do with that.

OK, so lets assume that your answer covers the "what" aspect of the question. Now go back and revisit every part of your post and ask "why"!

 

[FugitiveVisions]

OK, so lets assume that your answer covers the "what" aspect of the question. Now go back and revisit every part of your post and ask "why"!

Every part of my answer addresses the "why".

It's the banking regulators, it's not the Fed, it's not Paulson, Bush or Lehman Brothers. It's the fact that the US GDP is four times the size of the next highest GDP, and thus, global demand and capital flows have been naturally been dictated in the dollar. That and the relative lack of political risk.

 

[pla101prc]

Every part of my answer addresses the "why".

It's the banking regulators, it's not the Fed, it's not Paulson, Bush or Lehman Brothers. It's the fact that the US GDP is four times the size of the next highest GDP, and thus, global demand and capital flows have been naturally been dictated in the dollar. That and the relative lack of political risk.

yeah but now the US is losing that virtue...to keep it they gotta go to war, but war is too costly, so they have to get money first...which can only be done by going to war...so you get into this regress argument which simply indicates that US dollar is bound to lose its status that you so forcefully attempt to legitimize

 

[SampanViking]

Every part of my answer addresses the "why".

It's the banking regulators, it's not the Fed, it's not Paulson, Bush or Lehman Brothers. It's the fact that the US GDP is four times the size of the next highest GDP, and thus, global demand and capital flows have been naturally been dictated in the dollar. That and the relative lack of political risk.

Well I am afraid I could not disagree more and funnily enough the subject of the size of the US economy is something I seem to be discusing all over the place these days. Here is something I wrote elsewhere on the subject

what exactly is the true size of the US economy? as that $14 Trillion has now to be highly suspect. If GDP is the sum of the value of the sale of goods and Services, what does it mean if a large number of the assets ands instruments used in those sales are found to be valueless? This is the big question that everybody seems to be trying to sidestep and the biggest single problem Obama will need to wrestle with.

Two Trillion may have already been committed, but as comentators have been pointing out today, it has failed to achieve its objectives and further vast sums are going to be required. Indeed 2 Trillion could be just the tip of the Iceberg.

The UK is in the same boat as our Gordon who boasted just before Christmas that he had saved the world with one massive bailout has just had to announce another, with back door briefings having to admit that many other tranches will be needed. At the same time the Govenor of the Bank of England has been preparing the way the for "exceptional" measures (printing money) So far where the UK has led in this respect, the US has soon followed and so is likely to do so again.

There is also the retaining of the "Crown Jewels"; those resplendent economic baubles, that adorn the reigning economy but are not owned by it, but which switch to the new centers of power as they arise. These are probably worth a sizable contribution to the US economy and would mark a major reduction if they relocated.

All of this just the latest layer of woe deposited onto the mountians of National and Personal Debt just at the time when the most prolific of TBill customers are very busily looking to limit their further exposure.

Sooner or later the Joe Public is going to have to wake up and smell the coffee. This crisis is no way over and things are not simply going back to the way they were.

This of course does not deal with the original point of the importance of the US Financial Institutions and regulators in maintaining the greenback as the Worlds Trade/Reserve Currency and how their failure will bring this to an end, but lets not cloud the issue with two many points at one time and instead take things slowly, point at a time.

 

[FugitiveVisions]

Well I am afraid I could not disagree more

Well before we go any further, please tell me what it is that you disagree? Do you disagree with the empirical, that American capital has been a major source of finance flow into the developing world, or that America's wealth has allowed it to purchase goods from the world, and is in fact the preferred customer of the world as judged by actions of Asian monetary authorities to prop up the purchasing power of the dollar? In that case you are not disagreeing with me, you are disagreeing with reality.

what does it mean if a large number of the assets ands instruments used in those sales are found to be valueless?

America is poorer than it thought, but even on a purchasing power basis you can't possibility convince anyone that other nations are better off. Who's better off? Is the Japanese business man crammed into an internet cafe to sleep at night because he has no home better off? Is the average Chinese citizen working in factories and are consistently squeezed of their hard-earned income by corrupt administrators better off? Are the Arabs living in deserts better off? Are the aging Europeans dying by the hundreds in heat waves better off?

Financial assets are claims on future income, but the projections for these astronomic cash flows have not owned up to the reality that real growth averages around 2% annually. But still, when you peak into the kitchen of an average American household vs. an average Chinese household, the reality of the situation should speak pretty clear.

 

[crobato]

I can tell you this FV, poverty in the US---poverty as people who wonder where their next meal is coming---is greater, at least 12% and counting, over that of Europe and in Japan. You won't see the kind of homelessness and ghettoes I see in many American cities in places like in Japan, S. Korea, Taiwan and Singapore. I've been to less prosperous European states like the Czech Republic, and given the poverty and social conditions, i would certainly say Prague is well ahead of Los Angeles in the 'happiness' index. Do you want to see how Arabs in Qatar or Dhubai are better off? As for people in the PRC mainland, at least one thing I can about them is that they're ambitious and full of dreams and hope. They know at least, next year will be better for them and on on. Compare that to the depressive mood in the US right now, with only the change of administration, Obama, being the bright news and hope.

How much of the US GDP is based on consumption? 70%. How much is due to government spending. 30%?

Learn some accounting will you? In the end, what counts is whether you are in the red or black at the end of the balance sheet.

American capital has been a source of capital to the developing world but far the the dominant one. The Europeans have contributed a lot of their own, and in South East Asia, starting from the eighties, this role has been taken over by the Japanese, followed by Taiwan, Singapore, S. Korea and now China.

 

[FugitiveVisions]

China’s Economy Grows 6.8%, Slowest Pace in 7 Years (Update1)
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By Kevin Hamlin and Li Yanping

Jan. 22 (Bloomberg) -- China’s economy expanded at the slowest pace in seven years as the global recession dragged down exports, increasing pressure for more government spending and lower interest rates to buoy growth.

Gross domestic product grew 6.8 percent in the fourth quarter from a year earlier, after a 9 percent gain in the previous three months, the statistics bureau said in Beijing today. The figure matched the median estimate of 12 economists surveyed by Bloomberg News.

Plummeting Chinese demand for parts and materials for exports is reverberating across Asia and the Pacific, driving Taiwan, South Korea and Australia closer to recessions and worsening Japan’s slump. Premier Wen Jiabao said this week that the government must work urgently this quarter to reverse the slowdown and maintain social stability amid a “very grim” outlook for jobs.

“It’s an astonishingly steep slowdown,” said Paul Cavey, an economist with Macquarie Securities in Hong Kong. “We haven’t yet seen all of the pain.”

The yuan traded at 6.8362 against the dollar as of 10:51 a.m. in Shanghai from 6.8378 yesterday. The CSI 300 Index of stocks rose 0.4 percent, taking its gain this year to about 11 percent.

The central bank may cut the key one-year lending rate by as much as 81 basis points to 4.5 percent by the middle of the year, after 2.16 percentage points of reductions since September, Cavey said. Bank reserve requirements will also decline, he said.

Economic ‘Implosion’

The economy’s “implosion” poses a threat to the Communist Party’s rule and increases the likelihood that the government will devalue the yuan, prompting a trade war, according to Albert Edwards, a London-based global strategist for Societe Generale SA.

Industrial output grew 5.7 percent in December from a year earlier, close to the weakest pace in almost a decade, today’s data showed.

Aluminum Corp. of China, parent of the country’s biggest producer of the metal, will cut executives’ pay and workers’ wages after profit slumped last year. Baoshan Iron & Steel Co., China’s biggest steelmaker, may post its first quarterly loss, according to JPMorgan Chase & Co.

Inflation cooled to 1.2 percent in December, the slowest pace in more than two years, giving more room for interest-rate cuts. Producer prices fell 1.1 percent.

‘Deepening Crisis’

The 9 percent pace of growth for 2008 compares with the 13 percent expansion that pushed China past Germany in 2007 to become the world’s third-biggest economy.

“The international financial crisis is deepening and spreading with a continuing negative impact on the domestic economy,” said Ma Jiantang, head of the statistics bureau.

Urban fixed-asset investment rose 26.1 percent last year, the data showed, compared with a 26.8 percent increase in the first 11 months.

China’s leaders “will do anything” to maintain an economic expansion of about 8 percent, the government’s target for creating jobs, said Huang Yiping, chief Asia economist at Citigroup Inc. in Hong Kong.

China has pressured state-owned banks to increase lending, unveiled a 4 trillion yuan ($585 billion) stimulus package, reduced export taxes and is adding support for 10 key industries, including tax cuts and subsidies for steel and autos.

Export Decline

China’s growth will weaken to 3 percent to 4 percent this quarter, the slowest since quarterly figures began in 1994, before stimulus measures kick in and export demand starts to revive, said Wang Qing, Hong Kong-based chief China economist at Morgan Stanley.

Exports will decline 6 percent this year, down from a 17.2 percent gain in 2008, according to Fitch Ratings. China has already stalled gains by the yuan against the dollar to aid exporters.

Timothy Geithner, President Barack Obama’s nominee for Treasury secretary, said yesterday that China’s currency manipulation was a “significant issue.”

“It’s important for the United States and for the global economy that our major trading partners operate with a flexible exchange rate system and that market forces determine the level of those exchange rates,” Geithner said.

Taiwan, Korea, Japan

Besides trimming China’s contribution to global growth, which was estimated by the International Monetary Fund at 19.5 percent in 2007, the slowdown is hurting Asia, where South Korea reported today a bigger-than-forecast economic contraction.

Taiwan’s exports to China plunged 44 percent in December, Korea’s dropped 30 percent, and those from Australia declined 25 percent, Chinese figures show. Japan reported today that its shipments to China plummeted a record 35.5 percent.

China’s own exports declined by the most since 1999, triggering factory closures and job cuts.

“Localized unrest” may rise sharply this year, said Wang Tao, China economist at UBS AG in Beijing, adding that as many as 10 million people may lose their jobs in export industries, along with another 5 million in construction.

The government has signaled that the official urban jobless rate, which doesn’t include migrant workers, may jump to as high as 4.6 percent in 2009, which would be the worst in almost 30 years.

A sagging property market makes a quick economic rebound less likely. House prices across 70 cities dropped for the first time on record in December and construction will contract 30 percent this year, according to Hong Kong-based Macquarie Securities property analyst Eva Lee.

Economic growth may weaken to 2 percent in 2009, the slowest pace in at least 30 years, according to Ryan Atkinson, chief market analyst at New York-based hedge-fund manager Balestra Capital Ltd.

“There’s an extraordinary amount of excess capacity and there’s no way the world can absorb the amount of goods they are set up to produce,” said Atkinson.

To contact the reporter on this story: Kevin Hamlin in Beijing on [email protected]; Li Yanping in Beijing at [email protected]
Last Updated: January 21, 2009 22:11 EST

Bow to the chairman and hail to the de-coupling theory. Time to increase the salaries of bureaucrats so they can provide better service for all of us and death to the hostile monopolistic dollar that we are trying to prop up with hundreds of billions of Treasury purchases.

It's all going bright and sunny in China, Europe, South America and the Middle East. Nothing to see here.

 

[Hendrik_2000]

Even whenexport is down Chinese economy managed to grow 9% With capital investment grow by 22.5% and Inflation down to 5.9% And
Retail sale by 21.5% Look like China is in good position to weather the slow down in export

Those doom and gloom crowd just counting their egg before the chicken hatch:china:
But as always there is sceptic based on nothing but anecdotal and prejudice
Together with upcoming reform in health care and injection of $120 billion in subsidy China has ample ammunition to combat slow down in export

Not a day gone by without the mandarin in Beijing pump more stimulus into the economy This coming after the gargantuan 500 billion and subsidy to car and steel manufacturer

China's economy grew 9.0 pct in 2008: govt

BEIJING, Jan 22 (AFP) Jan 22, 2009
China's economy grew 9.0 percent in 2008, slipping back into single digits for the first time in six years as the global crisis took its toll, the government said on Thursday.
Growth slowed to 6.8 percent in the final quarter, the National Bureau of Statistics reported, confirming the world's third-largest economy was severely hit towards the end of last year by the global crisis.

"The international financial crisis is deepening and spreading with a continuing negative impact on the domestic economy," Ma Jiantang, the head of the National Bureau of Statistics, told reporters in Beijing.

The 2008 growth rate was down from 13.0 percent in 2007, due mainly to an abrupt slowdown in the second half of the year.

In a telling sign of the precipitous decline of activity, the consumer price index, the main gauge of inflation, slowed to 1.2 percent in the December, the bureau said.

China started out 2008 concerned that rising prices would be a major challenge -- inflation was at a near-12-year high of 8.7 percent in February -- but ended the year fearing it would instead have to fight deflation

China's retail sales rise 21.6 pct in 2008: government

BEIJING, Jan 22 (AFP) Jan 22, 2009
China's retail sales, a main measure of consumer spending in the world's third-largest economy, increased 21.6 percent in 2008, the National Bureau of Statistics said Thursday.
The figure, compared with 16.8 percent growth in 2007, has been disputed by some economists, who believe the nation's shops and malls are actually far less busy than the official data suggest.

A survey in December of more than 3,000 people in 10 major cities showed that consumer confidence was at the lowest level in six years.

China's fixed asset investment up 25.5 pct in 2008: government

BEIJING, Jan 22 (AFP) Jan 22, 2009
China's fixed asset investments, the main measure of public spending on infrastructure and productive capacity, rose 25.5 percent in 2008, the National Bureau of Statistics said Thursday.
This compared with 2007 growth in investments in fixed assets of 24.8 percent, suggesting that China's government had deep enough pockets to keep this part of the economy going at a brisk pace.

BEIJING — China announced Wednesday that it intended to spend $123 billion by 2011 to establish universal health care for the country’s 1.3 billion people.

Xinhua, the state news agency, said the authorities would “take measures within three years to provide basic medical security to all Chinese in urban and rural areas, improve the quality of medical services and make medical services more accessible and affordable for ordinary people.”

Providing universal health care is seen by some economists as a way to stimulate domestic spending during the current economic downturn. The Chinese have a high savings rate, and one of the reasons usually cited is their worry about possible medical expenses because China lacks a social safety net, including affordable health care.

Bai Zhongen, chairman of the economics department at Tsinghua University’s School of Economics and Management in Beijing, said that establishing universal health care with government-financed insurance would increase general consumer spending. He said the school did a survey in 2007 about the effect of rural health insurance on consumer behavior and “found that in government-sponsored health insurance areas, people are spending more.”

The government already gives many people a small subsidy to help pay for health care, but more government financing for individual health care would strengthen the economy, Mr. Bai said.

Xinhua reported that the plan approved Wednesday would aim to provide some form of medical insurance for 90 percent of the population by 2011. Each person covered by the system would receive an annual subsidy of more than $17 starting in 2010. Medicine would also be covered by the insurance, and the government would begin a system of producing and distributing necessary drugs this year.

The plan also aims to improve health centers in rural and remote areas as well as equalize health services between urban and rural areas, Xinhua reported. Furthermore, the government would begin this year to reform the operations of public hospitals.

“Growing public criticism of soaring medical fees, a lack of access to affordable medical services, poor doctor-patient relationship and low medical insurance coverage compelled the government to launch the new round of reforms,” Xinhua reported.

 

[FugitiveVisions]

I guess I didn't make the digit 2 for next year's economic forecast big enough.

 

[Hendrik_2000]

I guess I didn't make the digit 2 for next year's economic forecast big enough.

I don't who is the 2 bit economist who predict 2% growth. The most prestigious think tank in China CASS predict 8.3%

20 January 2009

The Chinese Academy of Social Sciences (CASS) has revised its forecast for China's economic growth in 2009 downward to 8.3%, state media reported. The think tank had orginally predicted that China's GDP had a "70% chance" of growing at 9% or higher in 2009. The new figure is lower than the United Nations Development Program's prediction of 8.4% growth for this year. CASS also predicted that the recent economic stimulus package will position China's economy for an early recovery in the third quarter and that primary, secondary, and tertiary industries will grow at 5%, 9.8%, and 9.5%, respectively. The central government set a goal of 8% economic growth for 2009 at the Central Economic Work Conference on December 8 last year.


So how big is Chinese economy now
This remind me of discussion with Taiwanese sceptic about the possibilty ttha one day Chinese economy will exceed Japanese He believe it is impossibily because as Chinese grow so do the Japanese Well Anthony Hu wherever you are now I'm right I believe next year China will be trounched Japan not counting the normal upside revision

the GDP figure is 30067 billion Yuan, by today's exchange rate of 1 Chinese yuan = 0.146216 U.S. dollars, the GDP figure in USD is,

30067 * 0.146216 = 4.396 trillion usd