That explains how the "Gordon Changs" of the world continue to make a living.
Chinese Economics Thread
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That explains how the "Gordon Changs" of the world continue to make a living.
Hendrik_2000
Lieutenant General
As I said before China economy is now slowly restructuring from export led to consumption led Here is interview with David Dollar one of the more sane analyst from Brooking institute and long time negotiator of US and China trade Here is his twitter blog
Consumption means the goverment officials and company owners get smaller bit from the cake, and the workers get the bigger.
So, it require move part of the power to the population.
Additionaly only 40 % of the Chinese GDP is the household consumption, to move out from this hole require drastic changes .
Start with cutting back the investment, this consuption level require only fraction of the current investment activity.
Say that ,at the moment ech Chinese works 40% of hist time to make things that he use, 14.4% to make things for goverment, 5% to make tings for the US/UK, and 50% to make things that someone think would make sense in long term.
So, from a general worker perspective if the GDP is half as today, but only the esxport/investment decrease, then he lives as today.
Hendrik_2000
Lieutenant General
I don't know what are you trying to say here To begin with you use and outdated number Chinese consumption now is 52%
And retail consumption has been growing close to 10% every year for the last 5 or 8 years So do the wages It has been increasing at fast clip for the last 10 years sofar that now China's wages is higher than Mexico or Brazil and close to eastern and southern Europe
Consumption contribute to the largest section of GDP growth something like 60%
I don't think it is wise for Chinese to consume like drunkard as is in the west. It is more to do with culture of saving for the rainy day It is drilled in every Chinese since childhood. Coupled with less than generous social service It will always be lowered than in western country
China is still developing country and need infrastructure as fast as it can built. For comparison Chinese railway is only 125000km, US has 200000 km of railway . Using railway density Europe is still far ahead
The west is stil udeveloped and poor due to lack of connectivity and infrastructure
Yes it is burden but over the long they need to make that investment or you are going to have unbalanced development
China will always be a mixed economy with SOE and private company living side by side
And no you cannot abandoned SOE since they are the largest employer in China doing so will only create large unemployment
What they can do is giving private sector the same opportunity as far as lending and access to capital market and make the SOE more efficient by having it mixed ownership and subject to supervision of the share holder
solarz
Brigadier
Both the author of the article and the executives of Silicone Valley miss the point. Both are more interested in repeating their talking points than actually refleting on the issue.
China's work culture is what it is because it has an abundance of human resources.
First, let's correct the inaccuracies and false assumptions. China's workplaces are not all alike. Many SOE employees enjoy a relaxed schedule that would make any Silicone Valley employee jealous. Say what you will about SOEs, China's SOEs are a driving force of its economic engine. Even aside from SOEs, some technology firms in China treat their employees extremely well. It's all about supply and demand. If there are a dozen people who can do your job, and are just waiting for the chance, then yes, you'd better bust your ass and pull those 14-hour and weekend shifts. If, on the other hand, a dozen companies are competing for your skills, then they'd better offer some really nice perks.
The reason Americans think they can say controversial things in China is because Chinese people don't give a crap about what Americans think is controversial. Chinese have no concept or racism, no moral opposition to abortion, have their own sense of gender equality, and generally don't care about homosexuality. Just because they don't have the same concerns as Americans doesn't mean they're more oppressed or repressed.
Hendrik_2000
Lieutenant General
Via Emperor from CDF I though this is an excellent article contrary to western hysteria about China's debt
One positive factor that I think the article did not mention is that China may be beginning to realize the benefits from her huge housing and infrastructure investments made during the post-American financial tsunami years that was financed by cheap credit. During the build-out period and initial phase of completion, many housing and infrastructure remain idle, i.e. generating zero economic returns for society or the companies involved. Such investments thus led to a rising debt-to-GDP ratio. But once the "ghost cities" begin to fill up and the roads, bridges and rails increase in utilization, what used to be labeled as "white elephant" projects by the Western media helps to improve living standard, bolster consumption and generate economic returns for society.
China's Getting More Bang for Its Credit Buck
Bloomberg News
2017 a ‘turning point’ for credit efficiency: Morgan Stanley
Economic growth accelerated to 6.9% last year as trade boomed
China is squeezing more economic growth out of new credit, signaling that the nation is shedding some of the wasteful investment of the past.
The amount of new credit needed to generate each dollar of economic output fell to about 28 cents in 2017 from slightly more than 30 cents a year earlier, according to estimates by Bloomberg Economics updated following release of full-year 2017 gross domestic product data Thursday.
That backs calls made by JPMorgan Chase & Co. saying that inefficient capital allocation has started to "bottom" while Nomura Holdings Inc. says China’s "credit cycle has peaked."
China has accumulated a mountain of debt to fuel growth since the global financial crisis, fostering zombie companies and excess industrial capacity, and prompting the International Monetary Fund to warn of the risk of a “sharp adjustment.” Wringing more value from credit coincides with President Xi Jinping’s intensification of a campaign to crack down on financial risks and polluting companies.
“It is an important turning point,” said Robin Xing, chief China economist at Morgan Stanley Asia Ltd. in Hong Kong. "The global recovery since last year and a booming services industry is providing the room to control debt without triggering a major economic correction."
Drivers of better credit efficiency include rising producer prices -- they boost corporate profits, enabling enterprises to pay down debt. At the same time, new investment by many heavily-indebted industrial companies has slowed, says Zhu Haibin, chief China economist at JPMorgan in Hong Kong.
White Elephants
"In sectors from steel to coal mining, we’ve seen industry profits rebound but very little new investment," says Zhu. "That’s probably the most important thing to explain the stabilization of credit allocation efficiency."
Another factor is a rising contribution to growth from consumption, services and the new economy, which are less credit intensive than the "old economy," says Xing. Consumption, which includes some government spending, contributed 58.8 percent of GDP growth last year.
"Growth in fixed-asset investment has declined steadily every year, which could suggest that there’s less wasteful spending on white elephant projects," said Andrew Collier, an independent analyst in Hong Kong and former president of Bank of China International USA. "As credit becomes tighter, there will be a scramble for capital, and it is possible that the better businesses that can generate growth and employment may actually benefit."
Might policy makers still resort to old investment habits to prop up slowing growth? Xing thinks it’s unlikely this time round, all the more so because a tailwind from exports is giving ample room to follow through on their regulatory clampdown and pollution curbs without spurring a slowdown.
“It’s too early to tell if regulators will have the spine to stick with the program," said Andrew Polk, co-founder of Beijing-based research firm Trivium China. "But my sense is that they will try, and if they are successful then when we look back, it will be obvious that 2017 was the critical inflection point.”
— With assistance by Kevin Hamlin
One positive factor that I think the article did not mention is that China may be beginning to realize the benefits from her huge housing and infrastructure investments made during the post-American financial tsunami years that was financed by cheap credit. During the build-out period and initial phase of completion, many housing and infrastructure remain idle, i.e. generating zero economic returns for society or the companies involved. Such investments thus led to a rising debt-to-GDP ratio. But once the "ghost cities" begin to fill up and the roads, bridges and rails increase in utilization, what used to be labeled as "white elephant" projects by the Western media helps to improve living standard, bolster consumption and generate economic returns for society.
China's Getting More Bang for Its Credit Buck
Bloomberg News
2017 a ‘turning point’ for credit efficiency: Morgan Stanley
Economic growth accelerated to 6.9% last year as trade boomed
China is squeezing more economic growth out of new credit, signaling that the nation is shedding some of the wasteful investment of the past.
The amount of new credit needed to generate each dollar of economic output fell to about 28 cents in 2017 from slightly more than 30 cents a year earlier, according to estimates by Bloomberg Economics updated following release of full-year 2017 gross domestic product data Thursday.
That backs calls made by JPMorgan Chase & Co. saying that inefficient capital allocation has started to "bottom" while Nomura Holdings Inc. says China’s "credit cycle has peaked."
China has accumulated a mountain of debt to fuel growth since the global financial crisis, fostering zombie companies and excess industrial capacity, and prompting the International Monetary Fund to warn of the risk of a “sharp adjustment.” Wringing more value from credit coincides with President Xi Jinping’s intensification of a campaign to crack down on financial risks and polluting companies.
“It is an important turning point,” said Robin Xing, chief China economist at Morgan Stanley Asia Ltd. in Hong Kong. "The global recovery since last year and a booming services industry is providing the room to control debt without triggering a major economic correction."
Drivers of better credit efficiency include rising producer prices -- they boost corporate profits, enabling enterprises to pay down debt. At the same time, new investment by many heavily-indebted industrial companies has slowed, says Zhu Haibin, chief China economist at JPMorgan in Hong Kong.
White Elephants
"In sectors from steel to coal mining, we’ve seen industry profits rebound but very little new investment," says Zhu. "That’s probably the most important thing to explain the stabilization of credit allocation efficiency."
Another factor is a rising contribution to growth from consumption, services and the new economy, which are less credit intensive than the "old economy," says Xing. Consumption, which includes some government spending, contributed 58.8 percent of GDP growth last year.
"Growth in fixed-asset investment has declined steadily every year, which could suggest that there’s less wasteful spending on white elephant projects," said Andrew Collier, an independent analyst in Hong Kong and former president of Bank of China International USA. "As credit becomes tighter, there will be a scramble for capital, and it is possible that the better businesses that can generate growth and employment may actually benefit."
Might policy makers still resort to old investment habits to prop up slowing growth? Xing thinks it’s unlikely this time round, all the more so because a tailwind from exports is giving ample room to follow through on their regulatory clampdown and pollution curbs without spurring a slowdown.
“It’s too early to tell if regulators will have the spine to stick with the program," said Andrew Polk, co-founder of Beijing-based research firm Trivium China. "But my sense is that they will try, and if they are successful then when we look back, it will be obvious that 2017 was the critical inflection point.”
— With assistance by Kevin Hamlin
Start at the begining.
-The FINAL consumptiont data that you quote it is the sum of the and consumption. The goverment is roughtly the same like in the US, but the household represent only 39% versus the US 68.8%.
Just for reference, the Japan stagnation was trigered by the low , and it took for them two decades to increase it by 6%..
So, if you say that the consumption growing represent 60% from the GDP then the rebalanincg hasn't started yet, considering that the 60% should be the target ratio to reach to be an advanced economy, but with this growth it will took a century to reach.
The, and there is healthacare provided by the goverment.
If you start to consider the healthcare , then te picture is even worst, because it is comming off from the household consumption, and in the UK (or russia, poland, spain) it is in the goverment consumption part.
Get it? If there is no general healthcare in China then the household consumption number has to be higher than if the goverment provide the services.
-Why you think that the Chinese transportation system has to be like in Europe or US? the railway system over there was creatd 200 years ago, and now best part of them won't make money. You could quote the british channel network lenght as well to show the desired level of waterways that the country needs.
Generaly, this kind of logic is a You consider that the item itself bring the wealth, not the capability of the population (or the need of the population) to use them.
-The SOEs in China the least efficient part of the economy. The micro/small companies, run by street smart chineses the ones that can generate real growth and increase in the level of living.
The SOEs needs foreign help to growth ,but the street smart chinese can create an economy that realy an be on the top - but of course it means that the director of the SOE can't send his daughter to Swiss private schools.
-The changes has to be done gradualy. The goverment has to start to support the private economy, and slowly suffocating the SOEs using the unemployment as gauge. But of course it require non corrupt goverment officials, because the way to do it is like the goverment place orders to the lowest biders for state projects, without corruption. That was the american way to grow private businesses.
-Just for reference, China manufacture more Heavy duty truck as Japan++Europe together . Actualy, the production of the per person heavy truck is as high as in the US.
And No, China doesn't export heavy duty trucks : ) Why? they carry coal with them ?
Typical poison prescribed by western economists for China. No one had consumed their way to prosperity. By their logic, India would have become a super power long time ago
Japan and Korea overcame the middle-income trap thanks to their governments' generous support for quasi-SOE's and investment in education.
Anyone who attended business school would know it is nearly impossible for new players to break into a mature market because the incumbents will use various tactics such as price cuts and withholding supplies from firms that source materials from new entrants to kill off the new players. Many thirdworld companies able to compete and win against Western firms by being price competitive, but that are generally in the low-tech industries like garment or toys. High value-added products like DRAM, flash memory, high-end capacitors, carbon fibre, etc require huge amount of investment in R & D and capital expenditure. Private companies generally can't afford that cost, that's why most countries grew to middle-income level and stuck there. Government support is vital to move up the value chain and SOE's are in a good position to do that.
Maybe you can enlighten us mortals on the reason why?
manqiangrexue
Brigadier
What's your point? And I do mean answer it in one sentence, not 500 words.
If you used Japan as reference for China, then China's GDP should still be 3 trillion. Japan 52%, China 52%, UK, 66%, USA 69%... looks like household gluttony isn't the key to having a prosperous economy, is it?
You don't understand why you need upgraded railways and transport systems to make business smoother and to cultivate economic growth in remote areas? Nobody's talking about making 200 year old derelict rails that nobody uses; they're talking about making a modern and efficient transport system to access and invigorate underdeveloped areas such as western China.
Japan: zaibatsu (財閥)
South Korea: chaebol (財閥)
Taiwan: Guanxi qiye (关系企业)
They were all crucial to escaping the middle-income trap for their respective nations, and all have had significant government intervention and financial/political backing. I don't see why China's SOEs can't emulate their successes and help provide the R&D required for moving the overall economy up the value chain. Made in China 2025 and the so-called "supply-side" SOE reforms are aiming to do just that, actually.