Chinese Economics Thread

[iewgnem]

Agreed

But on a practical level, if China can produce everything better and cheaper, what does China actually need to buy from overseas?
And in order to make overseas products cheaper than Chinese products, you have to make the RMB overvalued.
That would imply the RMB has to double in value against the USD, which would take a decade if managed gradually.

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The other solution is for Chinese companies to open factories abroad and produce locally, so China does export less.
Given how automated factories are these days, it shouldn't make much difference in job numbers.
But then you have political risk with factories located elsewhere, so you want to locate these factories in friendly locations.

Western economic thinking believes in comparative advantage, but they never imagined they would be on the side of being only good for primiary resources with nothing else to offer.

Its ultimately an identity problem, comparative advantage doesnt actually say all parties will be equally wealthy, and the west is struggling to come to term with the fact that they have no more to offer the world comparatively than Africa, and as such will, through trade, converge to their natural living standard thats equal to Africa, from both directions.

Whats actually unsustainable is for a western country who sells rocks to be more wealthy than an African country selling rocks.

 

[dingyibvs]

Not as long as they are local brands. If they're Western brands, then there should be a reason they are used, such as either being superior tools to do a better job while local alternatives are developed, or to take apart and study to improve domestic brands.

Yeah, it powers an enemy government and military. What do Chinese people get out of it? 10 seconds of culinary enjoyment to afford the Japanese another round of ammo they want to fire at us in Taiwan.

Unfortunately, in the real world, very few Chinese people are so political. They'd learn if they went to the West to witness the fear and hatred of their kind or if they were able to read online what American politician and MAGA want to do to China.

You can't think of countries like households. Trading manufactured products for Gucci bags and wagyu encourages the development of factories and engineers in China while encouraging designers and agriculture elsewhere. No amount of money can buy you ammo when all you have at home are crazy fat cattles. Just look at the US right now, many times the spending on military yet both quantity and quality is progressing at a far slower pace than China.

 

[pbd456]

it is a good trade for essential goods to luxury goods to help out trade balance. they would.have to.think twice to apply sanction to china in.the future.

 

[AndrewS]

You can't think of countries like households. Trading manufactured products for Gucci bags and wagyu encourages the development of factories and engineers in China while encouraging designers and agriculture elsewhere. No amount of money can buy you ammo when all you have at home are crazy fat cattles. Just look at the US right now, many times the spending on military yet both quantity and quality is progressing at a far slower pace than China.

What makes a product luxury?

If you ignore the branding, China can produce comparable luxury goods in terms of the actual design and quality.

It just seems wasteful to pay for overpriced "branding", especially if the profits go to companies based in hostile countries. In terms of handbags, remember the actual production cost is usually in the region of $200-$500, yet they are sold for thousands.

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So shouldn't China develop its own domestic luxury brands, which then go global?
Imagine a world where Chinese luxury brands have replaced European luxury brands...

EDIT. Actually, in the past, the luxury goods of the time were Silk, Porcelain and Tea from China.
And sailing ships to Asia were the spaceships of their time.

 

[AndrewS]

it is a good trade for essential goods to luxury goods to help out trade balance. they would.have to.think twice to apply sanction to china in.the future.

But what sanctions can work against China?

The US already tried that recently in the trade war, but the US backed down after Ford's automobile factories started to shut down, and Raytheon was 3 weeks away from stopping production of missiles.

 

[tphuang]

What is your attitude? Sell them our toys, sneakers, cars, appliances/electronics, etc... and buy from them cheese, wine, beef, Gucci, etc...? We sell at the most competitive prices in the world and they sell to us at premium prices for their "Made in EU/USA" tags? What is the point? What does "nobody" mean? Know your enemies and know your friends.

There are many nations that are friends of China. Those nations should be traded with; we should help them improve their lives with our products and they can supply us with what we need from them to grow and develop further. That is the purpose of trade. Both China and these countries should prosper.

Then there are countries that are enemies of China. They have antagonized China for decades sitting by America's side. Their technologies should be made obsolete, their products copied and improved, and thier prices undercut so that they can no longer find a niche for themselves on the international market. These countries should languish and find themselves in the same situation as the countries in the global south that they oppressed.

Right now, world trade is extremely unfair. There are first world Western countries that use their control of technology and finance to keep other countries poor, producing things that are sold at cheap prices to keep the Western countries rich and their lives easy. China is the only country that can out innovate them and make everything they produce globally uncompetitive. Then, who needs their currency (Euro, dollar, yen) if no one needs anything from them? If no one needs their currencies, then how can they control finance? Once that is broken, they will be the new poor nations struggling to produce what they need for their lifestyles. Of course, the finishing touch on this is that China is also the only country that can build a military that can prevent them from using force against smaller nations that economically pivot away from them.

This should be the end goal and meaning of trade from a Chinese perspective, to create a world where our enemies are weak and sidelined while China and our allies become powerful and dominant.

you seem to have no clue what has made Chinese industry where it is right now. This level of ignorance is just embarrassing.

https://twitter.com/i/web/status/2011275063325004287

Trade surplus (goods) of 1.189 trillion USD.

this is exactly the kind of stuff that is going to have to push up RMB.

We are now at USD/CNY = 6.97

 

[Eventine]

What makes a product luxury?

If you ignore the branding, China can produce comparable luxury goods in terms of the actual design and quality.

It just seems wasteful to pay for overpriced "branding", especially if the profits go to companies based in hostile countries. In terms of handbags, remember the actual production cost is usually in the region of $200-$500, yet they are sold for thousands.

---

So shouldn't China develop its own domestic luxury brands, which then go global?
Imagine a world where Chinese luxury brands have replaced European luxury brands...

EDIT. Actually, in the past, the luxury goods of the time were Silk, Porcelain and Tea from China.
And sailing ships to Asia were the spaceships of their time.

Selling industrial products and technology and buying raw materials and luxury items is actually a great deal. It means you accumulate hard power, while the rest of the world is de-industrialized, eventually making you the hegemon by default.

But of course, real trade never works that way. Any country with an ounce of competence will not accept such an arrangement and will demand factories and tech. transfers. The game is then what can you afford to give up, and what can you get in return. The calculus is never that simple.

China's national strategy presently is to catch up and then dominate high technology industries - from AI to robotics to semiconductors to precision manufacturing to biotechnology to next generation energy to hyper propulsion. This kind of strategy requires tremendous investment in R&D and the building of technology/IP moats - creating companies like ASML, TSMC, Boeing, Lockheed Martin, and SpaceX that other countries will have a very hard time replicating.

From a policy perspective, it means transitioning investments and subsidies. No country has infinite money, not even the US, and so inevitably some industries will have to be "given up" in the sense of being left on their own.

So for example, if you're a manufacturer of textiles or toys, you're going to have to compete vs. the likes of India and Indonesia with their 1/3rd - 1/5th labor costs. Maybe you manage to thrive any way, by transitioning to higher tech. production lines (and here, the government can help subsidize the transition because it is synergistic with the national strategy), but if you insist on using manual labor, well too bad, your business is going to have to leave China and go to India or Indonesia because China can't afford to subsidize you.

Similarly on the financial front, transitioning to a R&D strategy will require smarter capital management. Bureaucratic central banks that don't know how to invest in tech. start ups and research projects, won't be nimble enough to succeed in R&D. Hence China has to develop a professional investor class, even if they ultimately end up working for the Ministry of Science and Technology, as opposed to private money like in the US. Here, a stronger currency will also help, so as to attract global investments and talent.

Finally on the trade front, because R&D is capital intensive, to truly build a world class high technology sector, you need foreign adoption of your technology, so that you can channel global profits into more R&D to stay ahead of competitors. To do this, you must have trade deals, where they buy your high technology products, and you buy anything from them that supports or at minimum doesn't negatively affect your high technology sector. This is the phase of the transition that China is currently in - it needs buyers for its rising high technology sector, and that means giving up certain things to gain other things.

 

[tphuang]

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Since the closure of Hainan Free Trade Port's entire island, as of early this month, the number of duty-free shoppers in Hainan reached 585,000, and the amount spent reached 3.89 billion yuan, representing year-on-year increases of 32.4% and 49.6% respectively.

 

[AndrewS]

Selling industrial products and technology and buying raw materials and luxury items is actually a great deal. It means you accumulate hard power, while the rest of the world is de-industrialized, eventually making you the hegemon by default.

But of course, real trade never works that way. Any country with an ounce of competence will not accept such an arrangement and will demand factories and tech. transfers. The game is then what can you afford to give up, and what can you get in return. The calculus is never that simple.

China's national strategy presently is to catch up and then dominate high technology industries - from AI to robotics to semiconductors to precision manufacturing to biotechnology to next generation energy to hyper propulsion. This kind of strategy requires tremendous investment in R&D and the building of technology/IP moats - creating companies like ASML, TSMC, Boeing, Lockheed Martin, and SpaceX that other countries will have a very hard time replicating.

From a policy perspective, it means transitioning investments and subsidies. No country has infinite money, not even the US, and so inevitably some industries will have to be "given up" in the sense of being left on their own.

So for example, if you're a manufacturer of textiles or toys, you're going to have to compete vs. the likes of India and Indonesia with their 1/3rd - 1/5th labor costs. Maybe you manage to thrive any way, by transitioning to higher tech. production lines (and here, the government can help subsidize the transition because it is synergistic with the national strategy), but if you insist on using manual labor, well too bad, your business is going to have to leave China and go to India or Indonesia because China can't afford to subsidize you.

Similarly on the financial front, transitioning to a R&D strategy will require smarter capital management. Bureaucratic central banks that don't know how to invest in tech. start ups and research projects, won't be nimble enough to succeed in R&D. Hence China has to develop a professional investor class, even if they ultimately end up working for the Ministry of Science and Technology, as opposed to private money like in the US. Here, a stronger currency will also help, so as to attract global investments and talent.

Finally on the trade front, because R&D is capital intensive, to truly build a world class high technology sector, you need foreign adoption of your technology, so that you can channel global profits into more R&D to stay ahead of competitors. To do this, you must have trade deals, where they buy your high technology products, and you buy anything from them that supports or at minimum doesn't negatively affect your high technology sector. This is the phase of the transition that China is currently in - it needs buyers for its rising high technology sector, and that means giving up certain things to gain other things.

Generally agree.

I think China could start appreciating the currency gradually, as industrial leadership in all sectors won't be affected.

I think it would be a huge mistake for the Chinese currency to sharply double in value, like we saw with the Plaza Accord with Japan.

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However, China keeping its currency weak actually will attract more global investment, rather than less.

As for attracting global talent, yes, a stronger currency will help with higher headline wages. But the Chinese strategy is to be selective, so I expect they'll just pay global rates anyway

 

[manqiangrexue]

You can't think of countries like households. Trading manufactured products for Gucci bags and wagyu encourages the development of factories and engineers in China while encouraging designers and agriculture elsewhere.

Totally unnecessary. Copy and improve what you like and sell them domestically.

No amount of money can buy you ammo when all you have at home are crazy fat cattles.

You can use that money to invest in weapons plants or import weapons.

Just look at the US right now, many times the spending on military yet both quantity and quality is progressing at a far slower pace than China.

That's due to incredibly inefficient labor and capitalist corruption. If Trump wants to spend $1.5 trillion on the military, it's going to result in barely any true materialisation for the military but a glutton of corrupt money-siphoning.

it is a good trade for essential goods to luxury goods to help out trade balance.

No, it's not. You sustain their lives with the things you make and they trade you 1 thing for 20 things, creating the image that items made in their countries are worth more. Essential goods rule the economy; luxury goods are generally just plain useless. They need us; we don't need them.

they would.have to.think twice to apply sanction to china in.the future.

This kind of logic is like buying friends. If I pay this guy $100 to be my friend everyday, he'll have to think twice before before being unfriendly to me in the future.

you seem to have no clue what has made Chinese industry where it is right now.

Do a point-to-point rebuttal if you have so many clues.

This level of ignorance is just embarrassing.

Speak for yourself.