Chinese Economics Thread

Equation

Lieutenant General
You made some great points, and I had been meaning to reply for a while but did not have time until now.

You showed unusual insight in seeing that in the past, American governments made grand bargains that traded wealth (in the form of access to the American market) for strategic advantage in the cold war. However, as the saying goes, the devil is in the details, and here, the details are of paramount importance.

You see, just because America got to write the rules of world trade does not necessarily mean the American government got to write all those rules, or wrote them in such a way as to be most advantageous to America. The detail everyone seems to miss is that the rules are actually written by powerful interest groups within American society, who have managed to thoroughly permeate and co-op the US government to do their bidding through the legalised corruption mechanism of campaign financing.

You can have the US government negociate the most amazing deal imaginable for American national interests with other countries, but if the special interest groups that owns both Houses of Congress don't get their dues, that deal isn't going to happen as its meaningless without Congressional ratification.

Even the most subservient American client country cannot offer a total blank cheque to America when negotiating a trade deal, so if Congress *cough* interest groups wants to get the parts of most import to them in, other things will have to come out. A key feature of TPP (and also the TTIP the US is separately negotiating with the EU), if not the most import (as in undroppable), is the power those deals with give to corporations over national courts and governments. That is not at all in the interests of the US as a country, since foreign corporations could just as easily sue the US government over egregious sins like harming their bottom line to protect a silly thing call the environment or workers rights etc, however, that is pretty much the only part of the deal that is beyond negotiation as far as the US is concerned.

And this is not a modern development either.

Similar clauses that not necessarily benefits the US government or country as a whole gets added to trade deals negotiated by the US all the time as a price to interest groups.

The 'trick' that China's leaders and strategists learnt was to spot this disconnect and ruthlessly exploit it to maximise the benefits for the Chinese nation and people. In that way, China managed to use enormous profits as the bait to get some of the most powerful and influential parts of America's corporate elite (and the interests groups they control) to turn against American national interest and advance Chinese national interest instead for huge profits.

People are not blind to this, however, it is a sign of the power that interests groups hold in the west, that rather than asking the obvious question of, "Hey, why aren't stopping those profiteers from harming American interest?", the masses have been brainwashed into thinking that Chinese level of government interest and activity in protecting and promoting the interests and rights of the country and its companies and citizens as somehow akin to 'cheating', hence the enormous sense of 'unfairness' and anger towards China. As any half decent spin-doctor *cough* propagandist knows, the best way to distract the people from your own failings is to point the finger of blame at foreigners.

The biggest difference between Chinese deals and American negotiated deals is the role both governments play. The Chinese government keeps an unapologetic iron fist on the steering wheel to make sure top level deals and initiatives like OBOR are uncompromising in serving Chinese national interests first and foremost. Paradoxically, sometimes that might mean companies taking a hit to their profits in order to maintain good strategic relationships with key governments for example. That is not to say Chinese companies are not allowed to make a profit, however, they must remember the Golden Rule, which is they are not to damage Chinese national interest in the pursuit of profits.

America, on the other hand, has been taught but interest groups to be almost instinctively hostile to pesky government meddling in the affairs, I mean Freedom!(TM), of companies.

On the face of it, no one could really argue with something as 'good' as Freedom!(TM), but unfortunately the very concept of Freedom!(TM) is based on a bare faced lie, which is that all men(and women) are born equally.

We are all born with the same rights, but not the same opportunities.

Sure, someone born dirt poor could still go on to change the world, but the odds of that happening are truly astronomical. OTOH, a Bush or Trump or any of the other 0.01% babies would have to be truly utterly and epically useless to not have the kind of wealth, influence and power that the other 99.99% of the population could only dream of.

In an environment where it is not only acceptable, but actively encouraged, for everyone to do any and everything they can get away with (including it seems, tax avoidance) who really benefits and who actually suffer from all these amazing Freedoms!(TM) we have all be repeatedly told governments should be handing out?

Western scholars are right that power corrupts, but they seem too preoccupied with government powers and corruption that it does not seem to have occurred to them that private individuals are just as susceptible, if not more so, since they are spared almost all the close scrutiny that would come with a powerful governmental position, yet often wields far more power.

The one thing that keeps the rich and powerful in check is the government, through laws and regulations. By relentlessly trimming back those laws and regulations designed to protect the powerless from the predations of the rich and powerful (which include trimming back legal aid, thereby massively tipping the scales of justice in favour of the rich who can afford to pay top lawyers out of their own pockets) in the name of Freedom!(TM) it is the people and country as a whole that suffers and are worse off, as the rich and powerful exploit their newly granted Freedoms!(TM) to squeeze ever more profits from their assets by, you guessed it, taking a bigger share of the economic pie for themselves at the expense of everyone else.

The story of American working and middle classes' decline is not one of China 'stealing' their jobs, its the rich and powerful owners of American companies exploiting all the new Freedoms!(TM) granted to them by the politicians they bought and paid for, and deciding they wanted a little bit more profits from their investments and so went to China (and other developing countries) to exploit the much lower wages and laxer environmental protection standards.

These corporate fat cats have zero love or loyalty towards China, and a lot of them are now busy relocating to places like Vietnam and Africa as wages and environment standards increase in China.

The big difference is that unlike America, the Chinese government had no illusions about the nature of these corporate titans, so kept its eyes on the ball and make contingency plans. One of the key ones is technology acquisition and development.

The reason American blue collar workers had it so good in the past was because of American technological superiority.

America was able to make stuff no one else could, so they could effectively name their price and see the rest of the world pay it. American companies were able to make fat margins, so more of it trickled down to the workers, who could make a very comfortable living doing very little work which required minimal skill (compared to today's American workers).

Western economists would swear blind that that was all down to their Most Holy God of Market Forces, but they forget their own history.

It is my belief that the lynchpin of American technological supremacy was in fact American government intervention in the markets in the form of the vast sums of money it was investing in R&D during the Cold War to beat the Soviets.

I think its little coincidence that with the fall of the Berlin Wall and the collapse of the USSR, and the corresponding drying up of the endless flood of government R&D money, America's previously untouchable technological lead started to erode.

With the erosion of American technological supremacy, American companies could no longer simply name their price and expect people to just pay up.

As China and others climb the technology ladder (value chain), they are increasingly able to offer products of similar if not superior performance and function to American offerings, yet charge far less.

That has forced western companies to seek cost savings, which in turn squeezed the comfortable living of US blue chip workers.

Yes but many of the US blue collar workers would still place blame on China or someone else instead of US companies for the "lost of American jobs." How's that so? The media is partly to blame but also the lack of education, understanding of culture, and the stubbornness to believe that they are still exceptional. As a result NO ONE is doing anything serious to combat the problem. That's why there is a such a deep division going on among Americans.
 

flyzies

Junior Member
You made some great points, and I had been meaning to reply for a while but did not have time until now.
.......

Great post!

The American middle and lower classes are slowing waking up to this fact IMO. Yes they still largely blame China, because that's more convenient than blaming other fellow Americans, but at least they now know that there's a deep underlying problem which caused all the factories they used to work in close over the years.

What I'm saying is that eventually the middle class Americans will see through the "it's all China's fault" lie as well.
 

DigoSSA

New Member
Registered Member
China GDP forecast to grow 6.5%-6.7% in 2017

China's economic growth will continue to advance steadily in 2017, and the country is expected to deepen reforms to tackle remaining challenges, experts said.

Given the sluggish global growth, China's economy is under pressure. Several economic indicators in the first three quarters of 2016 support the view that the country will be able to meet this year's GDP growth target of 6.7 percent, said Tian Yun, director of the China Society of Macroeconomics Research Center.

Tian told the Global Times that the growing Producer Price Index (PPI) in September was a promising sign that the country's industrial deflation has ended.

PPI, which measures the cost of goods at the factory gate, ended a 54-month decline in September, according to data released by the National Bureau of Statistics (NBS) on October 14.

Efforts to help domestic companies deleverage have also gained some ground, Tian said.

On the basis of the current economic trajectory, GDP growth will range from 6.5 percent to 6.7 percent in 2017, he said.

Liu Xuezhi, a senior analyst at Bank of Communications, agreed, saying that China's economy is approaching an inflection point, which means economic growth in 2017 will not slow as it did in previous years, though a rapid recovery is also unlikely. "[The economy] will advance steadily," he told the Global Times.

Liu forecast that "China's GDP will grow 6.6 percent or 6.7 percent in 2017."

Experts said rising infrastructure spending is expected to drive China's economic growth next year.

The country's investment in infrastructure projects rose 19.4 percent year-on-year to 9.5 trillion yuan ($1.37 trillion) over the first 10 months in 2016, the NBS said on November 14.

"Infrastructure investment can contribute to economic growth only if the investment can be transferred into supply and consumed by customers. If not, it just contributes to excess capacity," Tian cautioned.

The services sector will play a vital role in China's economy in the 2017, Liu said.

The added value created by services sector grew by 7.6 percent in the third quarter in 2016. The services sector contributed around 58.5 percent to China's GDP growth in the first three quarters, according a report released on Friday by CMB International, a wholly owned subsidiary of China Merchants Bank.

Other industries such as high-end equipment manufacturing and high technology will help drive economic growth in 2017, Liu said, noting that consumption created by online shopping will also contribute.

However, experts also showed concern about China's economic prospect due to the country's sluggish exports and the uncertainties in the real estate market.

In the first 10 months of 2016, China's exports declined 7.7 percent year-on-year, while imports fell 7.5 percent, according to data from the General Administration of Customs on November 8.

"We'll know that the economy has hit bottom only when China's exports start to see zero growth and then move toward a slight increase," Tian said, noting that "the growth must last one to two quarters, not just one month."

Indeed, recently released home-buying restrictions have reined in the overheated property market, said Yan Yuejin, research director at the E-house China R&D Institute. The goal of the restrictions is to let some air out of a real estate bubble.

That will allow some capital to flow into sectors such as infrastructure, which will boost economic development to some extent, Yan told the Global Times on Sunday.

The domestic property market will possibly cool slightly, but will not experience a sharp fall in the coming year, he said, noting that "housing inventory will be further reduced across the country."

With the goal of achieving medium-to-high speed growth, China is expected to further deepen supply-side reforms and step up efforts to cut industrial overcapacity, experts said.

The Chinese government is expected to adopt prudent monetary policy to counter potential risks in the domestic and international markets, such as currency fluctuations and capital outflows, Liu noted.

The yuan will continue to face downward pressure in 2017, but it is controllable and the currency will not suffer from depreciation in the long term, experts said.

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DigoSSA

New Member
Registered Member
India’s trade deficit with China rises to $53 billion in FY16

“Increasing trade deficit with China can be attributed primarily to the fact that Chinese exports to India rely strongly on manufactured items,” said Commerce Minister Nirmala Sitharaman.

India’s trade deficit with China increased to $52.69 billion in 2015-16 from $48.48 billion in the previous financial year, Parliament was informed on Monday.

During the April-September period of 2016-17, the deficit is at $25.22 billion, Commerce and Industry Minister Nirmala Sitharaman said in a written reply to the Lok Sabha.

“Increasing trade deficit with China can be attributed primarily to the fact that Chinese exports to India rely strongly on manufactured items to meet the demand of fast expanding sectors like telecom and power,” she said.

India is negotiating the Regional Comprehensive Economic Partnership (RCEP) trade agreement keeping in view “its offensive export interests” as well as sensitivities with respect to all participating countries including China, she said.

She added that efforts are being made to increase overall exports by diversifying the trade basket with emphasis on manufactured goods, services, resolution of market access issues and other non-tariff barriers.

Further, the Minister said that as India and China are WTO members, any restrictions imposed on trade needs to be WTO compliant.

No blanket ban can be imposed on China or any other member country under the WTO framework, she added.

Replying to a separate question, she said India’s import of bulk drugs from China stood at $1.63 billion in 2015-16, which constitutes 64 per cent of India’s total bulk drug imports. Overall, India had imported such drugs worth $2.5 billion last fiscal.

“Efforts are being made for revival of (Active Pharmaceutical Ingredient) API industry to lessen dependency on import of key starting materials, intermediates and bulk drugs including from China,” the Minister said.

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taxiya

Brigadier
Registered Member
India’s trade deficit with China rises to $53 billion in FY16

......

Replying to a separate question, she said India’s import of bulk drugs from China stood at $1.63 billion in 2015-16, which constitutes 64 per cent of India’s total bulk drug imports. Overall, India had imported such drugs worth $2.5 billion last fiscal.

“Efforts are being made for revival of (Active Pharmaceutical Ingredient) API industry to lessen dependency on import of key starting materials, intermediates and bulk drugs including from China,” the Minister said.

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That is a first time for me to know as pharmacy products are reported as a strong India export.
 

vesicles

Colonel
That is a first time for me to know as pharmacy products are reported as a strong India export.

I don't think she was talking about the drugs for direct consumption by patients. It sounds like she meant the starting materials, like benzene or toluene etc, which they can use to further synthesize actual drugs. My guess...
 

taxiya

Brigadier
Registered Member
I don't think she was talking about the drugs for direct consumption by patients. It sounds like she meant the starting materials, like benzene or toluene etc, which they can use to further synthesize actual drugs. My guess...
Thanks. I realized that from the article (such as bulk drugs?). But that was still my first time to know, so the question.
 
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