Chinese Economics Thread

[Hendrik_2000]

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When do we get to hear Jim Chanos lose his shirt...?

Gordon Chang, where Jim Chanos got all his ideas, has been so wrong on predicting China's collapse that now he's calling for the US to cut trade with China over North Korea in order to collapse the economy just so he can claim he was right.

Yeah the guy lost his shirt to the tune of 240 million US dollar!
Now he bullish on China
He won't be speculating on Chinese crash for along time
Chanos too look like he lost his shirt too

 

[Jura The idiot]

now I read
Yuan midpoint raised again in longest streak since 2010 2017-09-07 17:58 GMT+8

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The People’s Bank of China raised the yuan’s midpoint rate for a ninth consecutive day on Thursday, marking the currency’s longest consecutive run of strengthening since December 2010.

The impressive performance has caused some currency watchers to suggest the renminbi is becoming a “haven,” against a backdrop of US dollar weakness and other global concerns.

Thursday’s reference rate was set at 6.5269 per US dollar, its highest since May 18 last year. The currency has gained 6.5 percent so far this year, recouping all of its 2016 losses and surprising analysts with its strong performance.

CNBC cites Callum Henderson, managing director at Eurasia Group, as saying the Chinese government’s capacity for control “positions the yuan and China as a source of stability amid uncertain political and economic times.”

So what’s behind the yuan’s rally, and is it sustainable?

Capital controls

2017 has seen the central government introduce measures to tighten capital outflows and exchange in foreign currencies. After an average 28 billion US dollars exited the country every month in 2016 - a year that saw the yuan slump 7.5 percent - restrictions put in place on January 1 this year reduced outflows to six billion US dollars per month, according to the Financial Times.

Coupled with a buoyant stock market - the Shanghai Composite Index has increased by 11.09 percent in the last year - these policies have succeeded in not only stabilizing the yuan but strengthening it at an impressive rate.

The Trump effect

Since his inauguration in January, Donald Trump’s presidency has so far coincided with a US dollar slump of more than 10 percent. According to Bloomberg, “the yuan has found support from an unexpected source: President Donald Trump.”

Trump may point to record highs in the US stock markets as evidence of a strong economic performance, but the US dollar paints a different picture.

The currency hit a 14-year high shortly before his inauguration, and it has been all downhill since. Promises to boost business and manufacturing have fallen flat and turmoil over various scandals have caused investors to stay away from the US.

His failure to push through nearly all of his major pledges means that threats to sanction China and ignite a trade war are no longer convincing. If markets were confident that Trump would follow through with such threats, the yuan would probably not be hitting its current highs.

Strong economic data

China’s GDP growth for the first half of the year beat expectations by reaching 6.9 percent, while retail spending (10.4 percent) and industrial output (6.9 percent) have all dispelled fears of a downturn for the economy.

DPRK tensions and global uncertainty

With recent Korean Peninsula tensions showing little signs of easing, traditional safe havens like gold have all been boosted – especially after the recent nuclear test on September 3.

Instability in the region has shaken financial markets, and with Brexit and European uncertainty still ongoing, investors are seeing China as a stable bet for the time being.

Talking to Bloomberg, Mark Williams, chief Asia economist at Capital Economics in London, said “there’s talk of the yuan as a safe haven because investors have come around to the view that the People’s Bank won’t let it slide.”

Ahead of the upcoming 19th National Congress of the Communist Party of China and the need for economic stability, this rings especially true. Chinese monetary authorities are sure to maintain their current advantage and extend the yuan's gains for as long as they see fit.

 

[siegecrossbow]

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When do we get to hear Jim Chanos lose his shirt...?

Gordon Chang, where Jim Chanos got all his ideas, has been so wrong on predicting China's collapse that now he's calling for the US to cut trade with China over North Korea in order to collapse the economy just so he can claim he was right.

Both of them will probably lose their under wears.

 

[broadsword]

Both of them will probably lose their under wears.

Objection! Gordon will still continue to collect his easy bankroll.

 

[B.I.B.]

Both of them will probably lose their under wears.

I seriously doubt Gordan Chang will 'put his money where his mouth is'.

 

[Figaro]

Great work done by the PBOC to stem capital outflows ... the Chinese Yuan has recovered much of its losses. So much for the analysts predicting a 7.3 exchange rate by year's end ... this is why China has massive FOREX reserves ...

China's yuan rallies past 6.45/dlr to the highest in nearly 21 months
Reuters Staff
1 MIN READ
SHANGHAI, Sept 8 (Reuters) - China’s yuan strengthened further against the U.S. dollar on Friday morning to its highest level in nearly 21 months.

The spot market opened at 6.4800 per dollar and rose to a high of 6.4478 at one point, bringing the daily gains to 0.58 percent. It last reached these intraday highs in December 2015.

As of 0311 GMT, the onshore spot yuan slipped back and traded at 6.4518 per dollar.

 

[Lethe]

Yep. There's a reason why China is in a rush towards automation, so not only can it prevent a middle income trap from its current unsustainable model but also its to avoid being stuck in the wrong side of Elysium once the automation because cheap and efficient enough to completely replace low skill labor.

Big multinational corporations and World powers will no longer have an interest in throwing its FDI in poor countries for cheap labor. They invested in China and the developing world places so they can exploit cheap labor but its a two way street. The FDI recipient may have provided cheap labor but in return received something greater than just money from foreign investment, access to the global market, skills training, infrastructure and new technology.

Like you said, it will be truly an economic iron curtain and aside from charity or PR campaigns which will act as equivalents of pity money given to homeless no real money will come in. The developing world will not be able to jump start their own manufacturing industry and consumer market though outside capital as they could in the past and be permanently stuck in purgatory. At most they can hope for is negotiating market access for a few robot factories that only employ a few dozen people, leaving the rest of the poor to become a demographic time bomb.

I have read a number of posts and articles along these lines and what has been lacking in each is any suggestion of how developing nations such as those of South Asia, South-East Asia, and Africa should proceed in light of the above trends.

For if the answer is simply that there is no answer, that the impoverished peoples of this world are doomed to remain impoverished and the gap between rich and poor destined to grow ever wider, both within nations as well as between them, then such trends seem entirely undeserving of the congratulatory note that seems to attend them.

Of course it is a wonderful thing that China's civilisation has re-emerged to deliver pride and prosperity to its people that better reflects its rich civilizational heritage and the place of its people amongst humanity, but ultimately China's prosperity and the power it brings is not something I regard as laudable per se. Rather, the prosperity that matters is the prosperity of humanity, and in that respect the transformation of China over these past has been the story of a vast alleviation of human poverty. If the story of China going forward is to join the west in suppressing the prospects of other nations and thereby of humanity -- while simultaneously worsening inequality within China I might add -- then I do not see that as something to be proud of.

 

[Blitzo]

I have read a number of posts and articles along these lines and what has been lacking in each is any suggestion of how developing nations such as those of South Asia, South-East Asia, and Africa should proceed in light of the above trends.

For if the answer is simply that there is no answer, that the impoverished peoples of this world are doomed to remain impoverished and the gap between rich and poor destined to grow ever wider, both within nations as well as between them, then such trends seem entirely undeserving of the congratulatory note that seems to attend them.

Of course it is a wonderful thing that China's civilisation has re-emerged to deliver pride and prosperity to its people that better reflects its rich civilizational heritage and the place of its people amongst humanity, but ultimately China's prosperity and the power it brings is not something I regard as laudable per se. Rather, the prosperity that matters is the prosperity of humanity, and in that respect the transformation of China over these past has been the story of a vast alleviation of human poverty. If the story of China going forward is to join the west in suppressing the prospects of other nations and thereby of humanity -- while simultaneously worsening inequality within China I might add -- then I do not see that as something to be proud of.

I agree, I've written about this on CDF a few times over the last year as automation became a bigger topic, and I also think it is concerning that developing countries in south asia, southeast asia, and africa may not be able to use the same model that China did to reach prosperity and development due to technological trends. I do feel some relief that China has managed to put itself on a track and trajectory of development before the technology reached a point where China is unable to... but I also feel terrified at the notion of many populations in those other less economically developed countries potentially unable to reap the same benefits from the same trajectory.


I'm not sure if China will be "joining" the west and "suppressing" the prospects of other nations by emphasizing automation and future manufacturing and technological trends, but rather competing with the current developed nations who are already further along that path and trying to do China's own best to remain competitive with them. I wouldn't even necessarily say the west are deliberately "suppressing" the prospects of developing nations by moving to automation and the like, because that is just the advancement of technology itself. Even in the west, there are expected to be significant job losses due to automation that will likely cause significant social ripples.

Unfortunately, the consequence of this sort of global technological advancement and march for greater competitiveness is that it may screw over the prospect of the developing nations of the world, but at the same time, realistically speaking China cannot afford to hamstring its own future competitiveness with the developed nations to try and give some opportunities to the developing nations, especially seeing as it is impossible to calculate how the knock on effects of the future economy even without an automated China may or may not help assist developing nations. It might end up that developed nations end up taking up the slice of the pie that China had "given" for the developing nations by not automating.


Unless there is some kind of global agreement to limit technological advancement and automation (entirely unrealistic and illogical of course) so as to provide an opportunity for developing nations to leverage their strong points like large labour forces to develop and modernize, I don't see how the developing nations can be provided the similar opportunities that China itself had over the last two to three decades.



At best I think those nations can try to improve and build their infrastructure, and for their own govts to try and navigate the brave new world the best way they can.

 

[Lethe]

Unfortunately, the consequence of this sort of global technological advancement and march for greater competitiveness is that it may screw over the prospect of the developing nations of the world, but at the same time, realistically speaking China cannot afford to hamstring its own future competitiveness with the developed nations to try and give some opportunities to the developing nation

Thanks for your reply. The parts of your post I have omitted are because I agree with them and have nothing to add, and just to keep things as brief and readable as possible.

I agree that the consequences of automation will be felt everywhere and that China cannot and should not "hamstring" itself in order to assist other developing nations. The increasing wealth inequality that automation promises seems to me, certainly in the west and perhaps in China as well, an acceleration of processes that have already long been underway. These circumstances will in future require greater levels of state intervention in the economy to distribute economic gains, and to prevent the immediate beneficiaries of those gains from capturing the political process. China's CCP could well be better prepared to meet these challenges in coming decades and generations than the liberal democracies of the west.

Unless there is some kind of global agreement to limit technological advancement and automation (entirely unrealistic and illogical of course) so as to provide an opportunity for developing nations to leverage their strong points like large labour forces to develop and modernize, I don't see how the developing nations can be provided the similar opportunities that China itself had over the last two to three decades.

At best I think those nations can try to improve and build their infrastructure, and for their own govts to try and navigate the brave new world the best way they can.

The problem I see is that one of the obvious responses for developing nations is going to be the response that was adopted by many currently developed nations in the past: restriction of trade to protect and encourage nascent domestic industry. And this will run contrary to China's interests and therefore China will oppose it using all the tools of influence and coercion available to the world's largest economy, much as western nations have done in the past (and will continue to do so). At some point such measures become the active suppression of humanity in service of the narrow interests of (a narrow segment of...) one's ownnation.

 

[Blitzo]

Thanks for your reply. The parts of your post I have omitted are because I agree with them to the point I have nothing to add.

I agree that the consequences of automation will be felt everywhere and that China cannot and should not "hamstring" itself in order to assist other developing nations. The increasing wealth inequality that automation promises seems to me, certainly in the west and perhaps in China as well, an acceleration of processes that have already long been underway. These circumstances will in future require greater levels of state intervention in the economy to distribute economic gains, and to prevent the immediate beneficiaries of those gains from capturing the political process. China's CCP could well be better prepared to meet these challenges in coming decades and generations than the liberal democracies of the west.

Yes, I do believe a transition to universal basic income or something like that will be inevitable sometime within my lifetime, and I think the CCP might actually be positioned well to implement one given the nature of the system of govt itself.

The problem I see is that one of the obvious responses for developing nations is going to be the response that was adopted by many currently developed nations in the past: restriction of trade to protect and encourage nascent domestic industry. And this will run contrary to China's interests and therefore China will oppose it using all the tools of influence and coercion that it has available, much as western nations have done in the past (and will continue to do so). At some point such measures become the active suppression of humanity in service of the narrow interests of (a narrow segment of...) one's own the nation.

Ah I see what you mean now.

One reason I am a little doubtful about current/future developing nations using the protect-and-develop strategy that China and other developing nations have used in the past, is about whether the sheer scale of technological imbalance international inequality of technology ownership between nations may make the prospect of developing nations developing their own industry to be able to compete with the other established technological giants... very difficult if not impossible.


I imagine certain nations might be able to get there if they have the right policies of incentive and punishment aimed not only at foreign firms but also at attracting talent for their own companies, and also sheer political will and a long term vision spanning multiple decades... but I somehow feel like those nations would be more the exception than the norm.


That said, I also agree that western nations, and likely China in future, may move to oppose the protect-and-develop strategy of current developing nations in the foreseeable future. However, I see that as a secondary factor to the bigger issue of technological change/automation/and even AI making even the strategy of protect-and-develop a potentially obsolete one.