Trade War with China

reservior dogs said:

I read a few pieces of his writing. I don't think he ever predicted the collapse of China. He pointed out that there was an imbalance for many years. No one has put out a convincing argument which refuted this point. If you disagree with him, maybe you can point to someone who did. He laid out a few scenarios of how the imbalance was going to be corrected. According to him, the least likely is an implosion. The most desirable (for China) is a period of low growth. The most likely, if the leadership take the path of least resistance, which is also not desirable, is a delay in correction followed by prolong period of adjustment like the Japanese lost decades.

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Now does it even come close to low growth of Japan? Japan development was stopped at it track because of Plaza accord She is semi colonized unlike China. China still grow at respectable 6.5% 3X the growth of western country or 6 X the growth of Japan. Does it sound like low growth?. He just use western metric to judge China He has no clue of Chinese economic culture or entrepreneurship and dynamism of Chinese people in general.
As to the proof his record speak for itself just like Gordon Chang Her is his article from 2013
Saying that Chines growth is unsustainable


Yeah the SOE borrow a lot of money and not very profitable But is has social function of building the foundation of prosperity like transport, port, airport, semiconductor, defense industry All of them few taker in private industry because it is not profitable and need large capital investment
Any country experience fast growth will load on debt That is true for America in 19th century

Here it is He predicted in 2011 that China is not rebalancing and that consumer growth is stalled Yet year after year since then the consumption part of GDP growing more and more to the tune of maybe 60% now So He is WRONG turn out all those debt is conducive to create wealth and drive consumption. He is confusing China with Latin America where they borrow for consumption or Japan where they built infrastructure where they don't need it



Heer is what he said

Contrary to some recent research reports cited in the press I do not think we have seen any substantial rebalancing of the economy towards consumption in 2011. This is largely an argument being made by economists who did not see why Chinese consumption repression was all along at the heart of the growth model. These economists are now too quick, I think, to hail evidence of a surge in consumption, but I find the evidence very weak and more importantly I am convinced that there cannot be a sustainable surge in consumption as long as the investment-driven growth model is maintained and as long as debt continues to rise unsustainably.

And as for debt, it is still rising quickly. As regular readers know I have always argued that the rise in Chinese debt, as bad as it is, was not going to lead to a banking collapse or any other sort of financial collapse because of the way local and specific debt problems would be “resolved”. Debt would simply be rolled onto the government balance sheet.

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Last Monday I was in Hong Kong visiting a few clients, and during my visit to Hong Kong the Financial Times gave me a nice gift – an opportunity to center my discussions – with this

canniBUS said:

It's pointless to discuss economics with a liberal. The purpose of mainstream liberal economics is to justify the status quo of capitalism. This taxation discussion is a good example. Everyone talks about who to tax and how much without questioning the history of taxation, why taxation exists or if it is even necessary for taxation to exist in its current form. Any state with a sovereign currency (pretty much every country except for the European Union states and certain small states that don't issue their own currency) can just print its own money to fund its expenditures. States do not need to ask for money from its citizens since the citizens don't produce money, the state does. Liberal economics presents taxation as a way to fund government expenses because it conceals the fact that states can print to finance and helps support the status quo of governments working with private banks to produce money even though this partnership is completely unnecessary and only benefits financial capital. Central banks should not be "independent", they should be organs of the state, and the state needs to ensure banks operate for the benefit of the working class, not the capitalist class.

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That's ridiculous. Do you even understand how currency works? The only thing printing money will cause is this:

reservior dogs said:

I read a few pieces of his writing. I don't think he ever predicted the collapse of China. He pointed out that there was an imbalance for many years. No one has put out a convincing argument which refuted this point. If you disagree with him, maybe you can point to someone who did. He laid out a few scenarios of how the imbalance was going to be corrected. According to him, the least likely is an implosion. The most desirable (for China) is a period of low growth. The most likely, if the leadership take the path of least resistance, which is also not desirable, is a delay in correction followed by prolong period of adjustment like the Japanese lost decades.

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Pettis is a China permabear who predicted in 2012 or 2013 that China's growth rate would average 3% in the 2010s. So China's growth rates have to be deeply negative in the next two years for his prediction to be even remotely true. He insists that China is similar to Japan, and seems oblivious to the facts that China is a fully independent country, has 10 times the population, 4 times the GDP in PPP terms, yet only a fraction of the per capita income of Japan, which indicates that China still has great potential for further development.

supercat said:

Pettis is a China permabear who predicted in 2012 or 2013 that China's growth rate would average 3% in the 2010s. So China's growth rates have to be deeply negative in the next two years for his prediction to be even remotely true. He insists that China is similar to Japan, and seems oblivious to the facts that China is a fully independent country, has 10 times the population, 4 times the GDP in PPP terms, yet only a fraction of the per capita income of Japan, which indicates that China still has great potential for further development.

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Many with gloomy outlooks on the Chinese economy cited the abnormally slow growth in energy consumption and interviews of those that have factories in Southern China. While that was true, China also had a relatively inefficient economy in terms of energy used per dollar of GDP generated. This means that as China adopt more efficient technology, growth in energy consumption would go down dramatically even as the overall economy grows rapidly. As China moves up the value chain the growth in consumption of raw materials would go down also.

Factory output for many old manufacturing plants would shrink as they relocate or diminish in China. This is normal as China moves up the value chain and focuses on services growth. In fact China's growth in service economy had been faster than the overall GDP growth.

solarz said:

That's ridiculous. Do you even understand how currency works? The only thing printing money will cause is this:

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Nyet tovarisch. Inflation happens if there is more money than real output in the economy. If your money printing actually increases productivity then it's not a problem. Also, you forgot about taxation. The state can tax back the money it's printed to prevent the supply of money from growing too large. This is the correct usage of taxation that sovereign states should practice. Go read up on modern monetary theory.

SilentObserver said:

Many with gloomy outlooks on the Chinese economy cited the abnormally slow growth in energy consumption and interviews of those that have factories in Southern China. While that was true, China also had a relatively inefficient economy in terms of energy used per dollar of GDP generated. This means that as China adopt more efficient technology, growth in energy consumption would go down dramatically even as the overall economy grows rapidly. As China moves up the value chain the growth in consumption of raw materials would go down also.

Factory output for many old manufacturing plants would shrink as they relocate or diminish in China. This is normal as China moves up the value chain and focuses on services growth. In fact China's growth in service economy had been faster than the overall GDP growth.

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This means that as China adopt more efficient technology, growth in energy consumption would go down dramatically even as the overall economy grows rapidly. As China moves up the value chain the growth in consumption of raw materials would go down also.

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And a good example is U.S.A. whose growth in electrical energy production and consumption is way smaller than her reported GDP growth rate. In some years, the figure even went backwards.

@Hendrik_2000 ,

I have read Gordon Chang and agree that he is a quack. He existed because the Americans like the message, however flawed it was. On the other hand, just because Michael Pettis made the same prediction a while back does not mean that it won't come to pass. So far, what you have as an argument is that the Chinese GDP is still growing at 6+% and Chinese consumer demand growth is at 60%. Since I did not have access to FT, I was not able to read your article.

1. Yes, the Chinese are growing @ a higher rate, but at what cost? In 2008, the Chinese took on a lot of debt to stabilize their economy against a world wide slump. Many in China today, with the benefit of hindsight, have called that a mistake. However, for the many years after that, debt as a percentage of GDP kept climbing while GDP growth moderates. This indicates that debt as a means to boost economic growth is increasingly ineffective. Most of the roads in China are already built. Let alone the ghost cities (which most eventually are filled with people), there are a lot of empty apartments in China. A building cost X dollars to build, last a few decades, requires maintenance in the intervening years, and eventually must be torn down. The actual economic benefit is either for the owner to live there or for the rent generated by the tenants. If a guy bought three houses and left 2 empty for 30 years, he had wasted his investments. Even if someone lived there, if the rent does not cover the cost of the building during its life time, it is a net loss. A similar calculus must be made of roads and bridges. Even if you don't agree that there were a lot of wasted investments in the past, you surely agree that China does not need the same level of infrastructure investments in the future. I agree that there are still investments like Semi-conductors and military which make strategic sense and should be made, but there are a lot of investments in public constructions and state own companies that are wasted investments and at least should be stopped.

2. Chinese private demand growth at 59%. This is an improvement since the total share of private consumption was at 39% for the year. The fact that 59% of the growth is private spending is a good thing, but far too little to reverse the very low baseline. This indicates that the government is taking some action to correct but is too timid to do it in meaningful doses.

Investments must be appropriate for the level of productivity that population is in. I believe if you look at the similar GDP per capita for Japan, the Chinese have made far more investments in roads etc. There are also a lot of overcapacity, for example, in steel making and construction.

I think in the future, debt as a percentage of GDP must come down. Ever larger debt accumulation for ever smaller GDP growth is not sustainable.

Quickie said:

And a good example is U.S.A. whose growth in electrical energy production and consumption is far from her reported GDP growth rate.

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That's also because america reports completely unproductive activities as adding to GDP. I hope you don't mean to imply that interest payments on debts from working class americans actually makes the country wealthier. It reduces the purchasing power of americans and hurts the real economy for the benefit of wall street. Moving up the value chain is fine, but financialization is a road to ruin.

Jura said:

if you tried to provoke me

Today at 12:06 AM
Today at 3:26 AM


you should know you can't

awaiting moderation, both here and of
Who wrote the anti-Trump op-ed? https://www.sinodefenceforum.com/who-wrote-the-anti-trump-op-ed.t8328/

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Don't worry. I will report you again for this harassment on 2handswordsman.