Future uncertain right now
US doing everything it can apart from war to undermine China’s growth. They know they’ve wasted too much time in the mid east and is trying to wrap up.
Trade War with China
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Future uncertain right now
US doing everything it can apart from war to undermine China’s growth. They know they’ve wasted too much time in the mid east and is trying to wrap up.
China already is trying to move away from the USD as much as possible. One way they have done this was with bilateral currency swap agreements.
Another way they are working on it is with using CIPS as an alternative payment system to SWIFT.
Then there is the simple fact that as China becomes more embedded into the world's economy the allure to use the yuan as a trade currency will increase.
duncanidaho
Junior Member
I would say LesAdieux has a better understanding of interpretation and calculation of economic data than Bloomberg. There is a big flaw in Bloombergs calculation. They mixed up net growth with gross growth (net growth + inflation rate) by their interpretation of the chinese GDP growth.
For example: Chinas GDP in Trillion Yuan from 2016, 2017 and 2018.
2016: 74.413
2017: 82.71 (gross growth 11.11%)
2018: 90.03 (gross growth 9.2%)
As you see the absolute growth is always bigger than the net growth of 6.9% for 2017 and 6.6% for 2018
Since we're talking about opinions, everyone had got one. Here is mine: Likelihood of China NOT going past US in nominal GDP in 2020s is, in my personal opinion, under 5%.
And this is not an opinion that has just formed after reading your post. It's based on decades of observing, both directly and indirectly, China's economy and its growth trajectory, by that I don't just mean GDP growths curve.
You're obviously deeply influenced by the avalanche of negative Chinese economic news coverage of late that has filled the western media, which has been cyclic, as well as the Huawei containment mastered-minded by the US. I'm not accusing you of anti-China or anything like that, but I understand the MSM brainwashing can take its toll on innocent people. I agree with you that projecting far into the future is highly unreliable - in both direction. So it makes little sense to go into too many details, here are some of my points:
- China's GDP real growth rate will be 2-3 times of that of US in the next one or two decades, but will be definitely substantially higher than the US for even longer. As China's nominal GDP closes in on that of the US's, the incremental growth in absolute value increases significantly. The catching-up effect will become much evident. China's per capita GDP currently only around $10,000, slightly below global average. Growth at the said rates for decades is hardly unprecedented, not for East Asian economies.
- Export is not a key driver of China's growth anymore. In fact, export's contribution to economic growth had even become negative in several years of last decade. Over 70% of growth last year came from consumption. A lot of people in the West somehow still believe China is an export-oriented economy. As the world's largest exporting country, it's difficult to believe China can still rely on export to drive its economy growth.
- The trade dispute with the US has some impact on China's real economy, primarily psychological, but the real effect is rather small. Chinese economy is in a down cycle now, which has happened about every ten years. Even if all Trump tariffs take effect, China's economy may take some initial hit, but will adjust gradually both psychologically and in real economy. $500 billion export out of $2.5 trillion total export, for a $14 trillion economy growing at 6-7% a year is not a huge number. In any case, the US is not likely to suddenly cut off all imports from China.
- I think you're reading too much into the Huawei saga. That the US and its "allies" exerting pressure on China's economic growth is way exaggerated. Telecom and 5G is a more special and sensitive area; that's why the US government is playing the intelligence card. Just because some western countries expressing concerns in this area does not mean they're trying to contain China in broad economy. China is the world's second largest economy with a huge and increasingly affluent domestic market. It's not like these western countries are doing China a favor to have economic exchanges with China, to put it mildly.
- The current US trade war and tech war against China will have positive effects on China's economy in the longer term. It will accelerate China's transition towards a more consumption- and innovation-driven economy, which has been happening in the last five years regardless.
Hendrik_2000
Lieutenant General
I don't know why any one doubt China cannot once again be the biggest economy in the World when for the good part of up to 18th century China was the largest economy in the world
As to soft power Japanese still use Kanji until today and Korean Hangkul is derived based o Chinese script Both Japanese and Korean, Vietnamese language borrow extensively Chinese word
Chinese civilization bring enlightenment and humanity to so much of Orient
There is world out there beside Europe and North America As America effort to disrupt or retard Chinese growth It is exercise in futility The time has long passed . 20 years ago maybe but now ?The horse hs left the barn. China can maintain growth even if the western world boycott it It is not the first time they try it China was under full embargo until Nixon come in 1974 No it is not Western world that help China Overseas Chinese help China get out of isolation long before there is even diplomatic contact between China and the rest of the world Here is a timely article to rebut Totoro post And why China will continue to grow inspite of road block
Will China be the next Japan or South Korea?
Source: Global Times Published: 2019/2/10
Illustration: Xia Qing/GT
Economic development hardly has a universally successful model. An economic model that successfully catches up is not a model that maintains sustainable growth. The real difficulty is to distinguish whether it is necessary to alter the development model.
All high growth economies have experienced a high growth stage which then fell back to medium or low growth. Some countries or regions experience volatile change from shifting from fast gears to slow ones, while others are smoother.
Japan is an example of a rocky road. Its GDP growth deceleration is a sudden jolt. South Korea is better than Japan - its economic growth slides have been gradual since the 1990s.
So, people are wondering will China be like Japan or South Korea? Will its next stage of economic development be smooth or rocky?
Economies that experience high growth usually adopt a catch-up model - industrialization driven by exports. All economies in East Asia have adopted this model. China in the past 40 years did not fully utilize its huge market. It took the path of a piecemeal reforms and opening-up, which is fundamentally no different to the East Asia forerunners.
Next phase, development policies ought to focus on maximizing advantages from a giant marketplace.
A major characteristic of the next phase is convergence. The potential growth rate will slow down. The return on traditional investment has significantly decreased.
When there are exogenous shocks to the economy, loosening monetary policy to maintain demand is less effective. It is what is happening in China right now. This is a reminder to the government that the Chinese economy is making a transition to the next phase.
China is currently at the end of the catch-up model. Here are some indicators. First, the international market share of China's products has been at an unprecedented high. Second, real wages have continued to go up. Third, the return rate on capital is declining. Last, the total factor productivity decreases.
Entering into the convergence model, the technology advancement will only become slower. Without independent research and innovation the economy may quite easily slip.
China is currently at the end of the last phase, so how can it transition to the next phase? There will be risks involved during this transition and huge fluctuations on the macroeconomic level.
When the US started to create problems for Japan in the 1980s it began with a trade war. Japan didn't realize its economy was transitioning to the next phase.So, they still tried to fix problems with the old methods, which led to huge asset bubbles and long-lasting deflation. The biggest risk during the transition is macro-economic readjustment. China also faces an additional problem to fit its institutional system into the picture. The institutional system used to support the "catch-up model" including the governance method will need a rudimentary change.
As the development phase changes, the line of thinking has to change as well. Expanding domestic demand has been brought up for a while. Boosting domestic demand does not depend on credit and loans. Instead, opening the protected industries is the way to go.
To deal with the convergence phase, institutional reforms are also required. In the future with a medium to low growth rate, more innovation entities are necessary. The resource allocation is decentralized. The pattern of risk control needs to progress as well. As do the traditional top-to-bottom governance model and relations between government and businesses.
China has advantages in market scale. First of all, starting the new phase, one factor to consider is the size of the Chinese market. If top management disregards it, using policy combinations for small open economies, it will cause severe problems. China may be less dependent on the US market down the road and the importance of trade within the Asian region will be elevated.
Second, China eventually will have to trade with itself. The future growth with high-quality is inseparable from trade among its own regions where they can fully utilize their comparative advantages. Regional integration is crucial for future economic development.
Third, service and non-trade sectors need to maximize their advantages. Many small economies would rather not open their service and non-trade sectors because of low productivity, but a closed economy tends to make its labor productivity even lower.
China's market is big enough to accommodate global competition - an open economy will not bring down productivity.
Fourth, China needs to make the most of its complete supply chain and city conglomerates. Our current policies are following the old models. That has to change in the future.
The article was compiled based on a speech made by Zhang Jun, dean of the School of Economics of Fudan University, at a forum on January 9. [email protected]
As to soft power Japanese still use Kanji until today and Korean Hangkul is derived based o Chinese script Both Japanese and Korean, Vietnamese language borrow extensively Chinese word
Chinese civilization bring enlightenment and humanity to so much of Orient
There is world out there beside Europe and North America As America effort to disrupt or retard Chinese growth It is exercise in futility The time has long passed . 20 years ago maybe but now ?The horse hs left the barn. China can maintain growth even if the western world boycott it It is not the first time they try it China was under full embargo until Nixon come in 1974 No it is not Western world that help China Overseas Chinese help China get out of isolation long before there is even diplomatic contact between China and the rest of the world Here is a timely article to rebut Totoro post And why China will continue to grow inspite of road block
Will China be the next Japan or South Korea?
Source: Global Times Published: 2019/2/10
Illustration: Xia Qing/GT
Economic development hardly has a universally successful model. An economic model that successfully catches up is not a model that maintains sustainable growth. The real difficulty is to distinguish whether it is necessary to alter the development model.
All high growth economies have experienced a high growth stage which then fell back to medium or low growth. Some countries or regions experience volatile change from shifting from fast gears to slow ones, while others are smoother.
Japan is an example of a rocky road. Its GDP growth deceleration is a sudden jolt. South Korea is better than Japan - its economic growth slides have been gradual since the 1990s.
So, people are wondering will China be like Japan or South Korea? Will its next stage of economic development be smooth or rocky?
Economies that experience high growth usually adopt a catch-up model - industrialization driven by exports. All economies in East Asia have adopted this model. China in the past 40 years did not fully utilize its huge market. It took the path of a piecemeal reforms and opening-up, which is fundamentally no different to the East Asia forerunners.
Next phase, development policies ought to focus on maximizing advantages from a giant marketplace.
A major characteristic of the next phase is convergence. The potential growth rate will slow down. The return on traditional investment has significantly decreased.
When there are exogenous shocks to the economy, loosening monetary policy to maintain demand is less effective. It is what is happening in China right now. This is a reminder to the government that the Chinese economy is making a transition to the next phase.
China is currently at the end of the catch-up model. Here are some indicators. First, the international market share of China's products has been at an unprecedented high. Second, real wages have continued to go up. Third, the return rate on capital is declining. Last, the total factor productivity decreases.
Entering into the convergence model, the technology advancement will only become slower. Without independent research and innovation the economy may quite easily slip.
China is currently at the end of the last phase, so how can it transition to the next phase? There will be risks involved during this transition and huge fluctuations on the macroeconomic level.
When the US started to create problems for Japan in the 1980s it began with a trade war. Japan didn't realize its economy was transitioning to the next phase.So, they still tried to fix problems with the old methods, which led to huge asset bubbles and long-lasting deflation. The biggest risk during the transition is macro-economic readjustment. China also faces an additional problem to fit its institutional system into the picture. The institutional system used to support the "catch-up model" including the governance method will need a rudimentary change.
As the development phase changes, the line of thinking has to change as well. Expanding domestic demand has been brought up for a while. Boosting domestic demand does not depend on credit and loans. Instead, opening the protected industries is the way to go.
To deal with the convergence phase, institutional reforms are also required. In the future with a medium to low growth rate, more innovation entities are necessary. The resource allocation is decentralized. The pattern of risk control needs to progress as well. As do the traditional top-to-bottom governance model and relations between government and businesses.
China has advantages in market scale. First of all, starting the new phase, one factor to consider is the size of the Chinese market. If top management disregards it, using policy combinations for small open economies, it will cause severe problems. China may be less dependent on the US market down the road and the importance of trade within the Asian region will be elevated.
Second, China eventually will have to trade with itself. The future growth with high-quality is inseparable from trade among its own regions where they can fully utilize their comparative advantages. Regional integration is crucial for future economic development.
Third, service and non-trade sectors need to maximize their advantages. Many small economies would rather not open their service and non-trade sectors because of low productivity, but a closed economy tends to make its labor productivity even lower.
China's market is big enough to accommodate global competition - an open economy will not bring down productivity.
Fourth, China needs to make the most of its complete supply chain and city conglomerates. Our current policies are following the old models. That has to change in the future.
The article was compiled based on a speech made by Zhang Jun, dean of the School of Economics of Fudan University, at a forum on January 9. [email protected]
Video from Davos given a few weeks ago. Skip to around the 11:50 mark for a projection of the US and China GDP's with and without decoupling. The Lowy Institute claims it won't have much of an impact on China's ascent to overtake the U.S. nominal GDP by the early 2030s. The panel includes the German defense minister so the research here is likely sound.
notwithstanding the financial motto: past performance is no guarantee for the future performance. when it comes to prediction, the only real thing you can count on is what has happened.
see the graph below, China's GDP only amounted to 6.7% of that of the US back in 1990, and it's 65.6% in 2018.
it seems you've done extensive work on this topic, you can do your "back testing" by applying your model to the real data rather than make a whole array of assumptions and predict all the way into the oblivion.
the exchange rate will play a big part, the RMB has been significantly undervalued. the world bank and the IMF put the ppp exchange rate at 3.5-3.8, that's no reason to believe the RMB will remain permanently undervalued.
...
Will China be the next Japan or South Korea?
Source: Global Times Published: 2019/2/10
Illustration: Xia Qing/GT
Economic development hardly has a universally successful model. An economic model that successfully catches up is not a model that maintains sustainable growth. The real difficulty is to distinguish whether it is necessary to alter the development model.
All high growth economies have experienced a high growth stage which then fell back to medium or low growth. Some countries or regions experience volatile change from shifting from fast gears to slow ones, while others are smoother.
Japan is an example of a rocky road. Its GDP growth deceleration is a sudden jolt. South Korea is better than Japan - its economic growth slides have been gradual since the 1990s.
So, people are wondering will China be like Japan or South Korea? Will its next stage of economic development be smooth or rocky?
Economies that experience high growth usually adopt a catch-up model - industrialization driven by exports. All economies in East Asia have adopted this model. China in the past 40 years did not fully utilize its huge market. It took the path of a piecemeal reforms and opening-up, which is fundamentally no different to the East Asia forerunners.
Next phase, development policies ought to focus on maximizing advantages from a giant marketplace.
A major characteristic of the next phase is convergence. The potential growth rate will slow down. The return on traditional investment has significantly decreased.
When there are exogenous shocks to the economy, loosening monetary policy to maintain demand is less effective. It is what is happening in China right now. This is a reminder to the government that the Chinese economy is making a transition to the next phase.
China is currently at the end of the catch-up model. Here are some indicators. First, the international market share of China's products has been at an unprecedented high. Second, real wages have continued to go up. Third, the return rate on capital is declining. Last, the total factor productivity decreases.
Entering into the convergence model, the technology advancement will only become slower. Without independent research and innovation the economy may quite easily slip.
China is currently at the end of the last phase, so how can it transition to the next phase? There will be risks involved during this transition and huge fluctuations on the macroeconomic level.
When the US started to create problems for Japan in the 1980s it began with a trade war. Japan didn't realize its economy was transitioning to the next phase.So, they still tried to fix problems with the old methods, which led to huge asset bubbles and long-lasting deflation. The biggest risk during the transition is macro-economic readjustment. China also faces an additional problem to fit its institutional system into the picture. The institutional system used to support the "catch-up model" including the governance method will need a rudimentary change.
As the development phase changes, the line of thinking has to change as well. Expanding domestic demand has been brought up for a while. Boosting domestic demand does not depend on credit and loans. Instead, opening the protected industries is the way to go.
To deal with the convergence phase, institutional reforms are also required. In the future with a medium to low growth rate, more innovation entities are necessary. The resource allocation is decentralized. The pattern of risk control needs to progress as well. As do the traditional top-to-bottom governance model and relations between government and businesses.
China has advantages in market scale. First of all, starting the new phase, one factor to consider is the size of the Chinese market. If top management disregards it, using policy combinations for small open economies, it will cause severe problems. China may be less dependent on the US market down the road and the importance of trade within the Asian region will be elevated.
Second, China eventually will have to trade with itself. The future growth with high-quality is inseparable from trade among its own regions where they can fully utilize their comparative advantages. Regional integration is crucial for future economic development.
Third, service and non-trade sectors need to maximize their advantages. Many small economies would rather not open their service and non-trade sectors because of low productivity, but a closed economy tends to make its labor productivity even lower.
China's market is big enough to accommodate global competition - an open economy will not bring down productivity.
Fourth, China needs to make the most of its complete supply chain and city conglomerates. Our current policies are following the old models. That has to change in the future.
The article was compiled based on a speech made by Zhang Jun, dean of the School of Economics of Fudan University, at a forum on January 9. [email protected]
I do not 100% agree with that Global Times analysis. China still only has roughly the average world GDP per capita. In an economy as focused as China's this will not stand still for ever. I think the GDP per capita in China will at least double before we see a significant major slowdown.
Also a lot of people misdiagnose the causes for the Japanese economic slowdown. One of the reasons was they simply hit the ceiling. Once Japanese GDP/capita reached the level of advanced countries then growth diminished significantly. Yes many economic mistakes were made and they had some down cycles. Which if you examine more closely are nearly all related to major earthquakes in Japan.
For example the Japanese economy was recovering under Abe. Then the last major earthquake happened and they turned off all nuclear reactors post-Fukushima. Surprise, surprise, they had to import loads of fuel and that cost their economy dearly. Then there are the reconstruction costs. The Asian Financial Crisis in the late 1990s? Another earthquake which stopped a lot of factories.
A lot of financial analysts basically ignore that while Japan has 1/2 the population of the USA, the USA has like 1/4th the population of China. So yes the current perspective that China will somehow magically stop growing once it attains US GDP levels is risible in my opinion. Even simply assuming that China will have twice the GDP of the USA over the next decade, which is conservative, like I did, means that China will only have half the GDP/capita of the USA. Japan has gone way above that!
China is much larger than Japan. While it has earthquake prone areas like Sichuan the economy is large enough it can absorb regional disaster events like that more easily. Only a national disaster would prevent China's rise and if that happened it would probably be a global disaster.
I also disagree that Chinese brands have reached their peak in the market. It was only in the last 5 years that we have seen companies like Huawei, ZTE, Oppo, Xiaomi, DJI, become important in the market. However there are still loads of consumer goods products where China still hasn't had the same degree of global impact. China still does not have enough quality cars or enough capacity in civilian airliner manufacture for example. South Korean cars were the butt of jokes even a decade ago. Now? They are not. US cars are worse than South Korean cars on average. Before that the same thing happened with Japanese cars. It will still take China some time to reach those kinds of standards. Which is not to say China has not had some successful wins here and there in the car sector but they are still way, way, less than I would expect given their potential. So I can see China still growing over the next two decades at least.
If there is someone in Asia who might hit the ceiling next unless some event happens, like reunification, is South Korea. I also think a lot of people severely underestimate the potential of the Vietnamese economy going forward. Fact is low skilled labor businesses have been moving from places like China to Vietnam for over a decade already. China is moving up the value chain as a result.
What China must not allow is the same thing that Europe did. Ever so often we got European technology business champions. But these get bought out and destroyed by US corporations with more access to capital. That is one of the main dangers of allowing the Western corporate capital model into China in my opinion.
Jura The idiot
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