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What & Why From wikipedia: The socialist market economy[17] of China is the world's second largest economy by nominal GDP and by purchasing power parity after theUnited States.[2] It is the world's fastest-growing major economy, with growth rates averaging 10% over the past 30 years.[18] China is also the largest exporter and second largest importer of goods in the world. China is the largest manufacturing economy in the world,[19] outpacing its world rival in this category, the service-driven economy of the United States of America. ASEAN–China Free Trade Area came into effect on 1 January 2010. China-Switzerland FTA [20] is China's first FTA with a major European economy. The economy of China is the fastest growing consumer market in the world. From <http://en.wikipedia.org/wiki/Economy_of_China> How Debt: Chinese banks added 89 trillion yuan of assets, mostly through loans, in the past five years, equivalent to the entire U.S. banking industry’s, CBRC data show. By comparison, U.S. commercial banks held $14.6 trillion of assets at the end of September, according to the Federal Deposit Insurance Corp. From <http://www.bloomberg.com/news/2014-02-14/china-banks-bad-loans-rise-to-highest-since-financial-crisis.html> Economic Growth: Gross domestic product (GDP) grew at an annual rate of 7.7% in the October-to-December period, down from 7.8% in the previous quarter. But it was still higher than the government's target rate of 7.5%. China is trying to maintain strong growth while rebalancing its economy. China has said it wants to move away from an investment-led growth model to one driven by domestic consumption. From <http://www.bbc.com/news/business-25805227> Shadow Banking: http://www.bbc.com/news/business-26335304 quote:The shadowy threat from China’s lenders Talk of a Chinese shadow banking crisis is on the rise, leaving many investors in the U.S. and elsewhere wondering: What exactly does that mean? Shadow banking is unregulated, high-yield lending that largely takes place off banks' balance sheets. China's central bank wants to restrain risks related shadow banking in that country, but has shown little interest in shutting it down entirely. Fears about China's banking system have flared recently because of a financial product known as a wealth management product, or WMP, that was widely expected to default this week until an 11th-hour agreement resolved the situation. This particular WMP has a three-year maturity and was supposed to bring a return of between 9.5 percent and 11 percent—far above the 3 percent deposit rate banks are paying. The initial principal investment was roughly $500 million. WMPs are pervasive in China, and many are seen as being at risk of going bust. They are often invested in risky assets such as pawn shops, or in infrastructure projects that have no revenue. And sometimes they aren't invested but are just rollovers of WMPs that have matured. It's feared that investors will abandon WMPs, which despite their risk provide credit to small and midsize businesses. That would lead to tighter credit and an economic slowdown. It could also lead to a run on the banks if investors fear they're too exposed. Some China experts are less concerned, for two reasons. First, the nation has a lot of money to recapitalize any bank it wants to. Second, it has a "closed capital account." That means money does not flow freely across its borders but moves only if the Chinese government says it can move. The implication is that the government can shut down, or almost wall off, the banking system. It's debatable whether that's a good thing, but in the short term, it means that China can control or stop money from leaving the country or even leaving the banks. WMPs are widely believed in China to be guaranteed by the government, but it's not clear if that's true. That leads to a different fear of many market watchers: If the Chinese government bails out investors in a WMP, it could make the risks associated with them much higher and avoid short-term problems in exchange for much bigger ones down the road. From <http://www.cnbc.com/id/101370538> But: With small and medium-sized enterprises - by far the economy's most important growth engine - unable to acquire sufficient funding from the formal financial sector, they have been forced to turn to informal channels. As shadow banking has become the primary source of finance for SMEs - which tend to be higher-risk borrowers - the financial risks in China's economy have grown exponentially. Exacerbating matters, the central bank's repeated efforts to tighten the money supply raises the cost of capital. Last June, the annualised interbank lending rate surged to more than 10 per cent - a level that it almost matched in December. SMEs ultimately shoulder these costs, diminishing their ability to contribute to overall economic growth. From <http://www.scmp.com/comment/insight-opinion/article/1444591/shadow-banking-biggest-threat-chinas-economy> The question is, when? China’s premier has warned that future defaults on bonds and other financial products are “unavoidable” underlining concerns that a wave of bad debts threatens to derail growth in the world’s second-largest economy. Li Keqiang said on Thursday that China was likely to see a series of defaults as the government accelerates financial deregulation, although he added the government would take steps to ensure they do not pose a threat to the wider financial system. In the past, the government has always stepped in to bail out companies but Mr Li has decided to allow several small, mostly privately owned, companies to default on their debts in order to address the problem of “moral hazard” in the economy, according to people familiar with the government’s thinking. Some analysts have warned that by doing so, Beijing could trigger investor panic and prompt a “Lehman moment” in China’s increasingly debt-dependent economy. Beijing’s challenge is laid bare by the failure of Haixin Steel, a privately owned mill in the heart of China’s coal country, to repay loans that came due last week. The default, disclosed to the Financial Times by steel traders, could send shockwaves through the local banking and shadow banking sectors. From <http://www.ft.com/intl/cms/s/0/27f9f4aa-aa82-11e3-9fd6-00144feab7de.html> Contrarian Views: It looks like a colossal accident waiting to happen: China’s first true bond default has laid bare the country’s financial risks just as $400bn in debt comes due this year for cash-strapped local governments. But a curious thing has happened in recent days. Far from triggering a wave of defaults, the concerns about the Chinese bond market have instead nudged local governments closer to financial safety. Bonds issued by local government financing companies – long seen as one of the big problems hanging over the Chinese economy – have found favour among domestic investors and brokerages. Credit costs for provinces and cities have declined as a result, making it easier for them to obtain the cash to pay off their maturing debts. When Chaori, a struggling solar cell maker, missed an interest payment this month – the first real domestic default in the modern era of China’s bond market – it was seen as a sign that the government would finally allow companies to fail. Analysts predicted that investors would start to pick between borrowers in the bond market, flocking to safe, lower-yielding paper and demanding higher rates from riskier companies. Yet such predictions failed to grasp the political realities of China’s financial system. And those are that Beijing will draw a line between weak private companies and weak government-backed companies; it will let the former default but not the latter. From <http://www.ft.com/intl/cms/s/0/bf2e2834-add2-11e3-9ddc-00144feab7de.html> A Texas sharpshooter and a China analyst walk into a bar… Last week’s default of little Chaori 11, China’s first onshore corporate default, brought with it some analyst hyperbole which has been rightly called out. Leaving aside for a moment this was BofAML’s second Bear Stearns call this year, their point was that Chaori 11 would be the moment that the market started to seriously re-assess financial risk in China. So far, not so much. From the FT: Some have expressed fears that the Chaori default could create a domino effect where investors quit the bond market altogether, sparking a liquidity squeeze or a credit crunch. However, the domestic bond markets have so far treated the default as a non-event. Average yields on investment grade debt have fallen this year, while the spread between highly-rated and low-rated credit has been widening steadily for the past six months – an indication that investors had already begun re-pricing risk. Everybody knew the bond was in trouble, Choari has just 1,500 employees, is privately owned, and falls under the supervision of the Shanghai government, which is seen as one of the more progressive local authorities. A perfect trial balloon then, but whether its default can really “result in a revelation of risk exposure and correction across the board” is almost as debatable as whether it will start a chain reaction that leads to Lehman. It obviously does pay to keep in mind how panic can spread when information is suppressed but calling this one in advance is… difficult. From <http://ftalphaville.ft.com/2014/03/10/1793302/barely-stearns-in-china/> China Megathread: http://forums.somethingawful.com/showthread.php?threadid=3466532 BBC Documentary - How China Fooled the World https://www.youtube.com/watch?v=HUSjMnmS5lI namaste friends fucked around with this message at 03:48 on Mar 18, 2014 |
# ? Mar 18, 2014 03:39 |
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# ? May 16, 2024 18:07 |
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From the Canada Housing Bubble Megathread: http://forums.somethingawful.com/showthread.php?threadid=3533827&userid=0&perpage=40&pagenumber=83#post427000564 EoRaptor posted:Don't ignore that this has happened in other countries. GM started offering financing for their cars, and eventually they became a financing company that happened to make cars. They grew into other types of lending, got huge, and then imploded (and got bailed out).
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# ? Mar 18, 2014 03:46 |
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Sources: The Economist - http://economist.com Financial Times - http://ft.com FT Alphaville - http://ftalphaville.ft.com South China Morning Post - http://scmp.com Not really focused on the economy but: http://danwei.com zerohedge has a lot of lovely disaster porn. Good for a laugh but i refuse to link those loving idiots.
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# ? Mar 18, 2014 03:51 |
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So I started this megathread because of my interest in Canada's housing bubble. I used to live in Vancouver which is arguably the most expensive place to live in North America. The funny thing is, there's really no reason for it to be so other than the appearance of a lot of mainland chinese immigration and investment, almost all of which is in real estate. The other reason is that I find it really hard to find good information on what's going on with China's economy. At least at a level I can easily understand. I can't read chinese and I find technical articles like those found on the FT and FTalphaville sites difficult to understand. Hopefully other find this topic interesting and will be able to share greater insight into wtf is happening.
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# ? Mar 18, 2014 03:58 |
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Cultural Imperial posted:I used to live in Vancouver which is arguably the most expensive place to live in North America. Hahaha, what? I take it you have never lived in San Francisco or Manhattan. Maybe you meant "the most expensive place to live in Canada"?
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# ? Mar 18, 2014 04:16 |
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http://www.4-traders.com/INDUSTRIAL...-Loan-18111947/quote:Du Ronghai received an urgent phone call from his private banker at Industrial & Commercial Bank of China Ltd. about an investment opportunity promising a 10 percent annual return. Only for the privileged few, he was told.
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# ? Mar 18, 2014 04:19 |
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enraged_camel posted:Hahaha, what? I take it you have never lived in San Francisco or Manhattan. Sorry I wasn't very clear. http://www.cbc.ca/news/canada/british-columbia/vancouver-s-housing-2nd-least-affordable-in-world-1.2505524 Median house price/median income.
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# ? Mar 18, 2014 04:22 |
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Cultural Imperial posted:Sorry I wasn't very clear. Median house price/median income comparison does not take into account the fact that Canada's welfare system is superior to that of the USA. Heck, your schools are cheaper and your healthcare is free. This means people in Canada can save up much easier than people in the USA. I know Vancouver is expensive, but it's definitely not the "2nd least affordable in the world."
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# ? Mar 18, 2014 04:28 |
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Another good post:FrozenVent posted:An important thing to remember when discussing china is that the government will go to great length to keep people employed - people with jobs don't have as much time to revolt.
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# ? Mar 18, 2014 04:28 |
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Cultural Imperial posted:Another good post: People have been predicting China's crash for well over a decade. Predictions like that are made by economic incumbents (USA and allies, i.e. the West) to sow doubt in people's minds about China's upcoming rockstar status. It's the way a veteran boxer looks at a young trainee, shakes his head and goes, "tsk tsk... he's training too hard." And then gets beaten a few years down the line by said trainee, who is now the champion.
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# ? Mar 18, 2014 04:40 |
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Cultural Imperial posted:Another good post: Is there some kind of "short the hell out of China" mutual fund you can buy
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# ? Mar 18, 2014 04:50 |
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Dr.Zeppelin posted:Is there some kind of "short the hell out of China" mutual fund you can buy http://finance.yahoo.com/q?s=FXP It look like a recession might be priced in already , the ETF is up 23% over the last 3 months.
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# ? Mar 18, 2014 04:56 |
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karthun posted:http://finance.yahoo.com/q?s=FXP Not necessarily, it was a lot higher in 2012 and a LOT higher in 2009 looks like.
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# ? Mar 18, 2014 05:01 |
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Dr.Zeppelin posted:Not necessarily, it was a lot higher in 2012 and a LOT higher in 2009 looks like. The Shanghai Composite is again hovering around 2000. A recession could be priced in, it has reached that level before. Ultimately, it is a lot of opaqueness in the Chinese bond market especially and it is unclear exactly how many bad loans are being effectively backed by the big public banks.
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# ? Mar 18, 2014 05:59 |
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Before you guys go all Bill Ackman and poo poo, like China is some Herbalife whale, I strongly urge you to read Kalenn Istarion's post on shorting here: http://forums.somethingawful.com/showthread.php?threadid=3569987&userid=0&perpage=40&pagenumber=22#post424850697 Do not gently caress around with short selling unless you know what you're doing. John Paulson lost hundreds of millions before he struck it rich shorting the US housing collapse. In fact, read everything on this page: http://forums.somethingawful.com/showthread.php?threadid=3569987&userid=0&perpage=40&pagenumber=22
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# ? Mar 18, 2014 06:00 |
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Cultural Imperial posted:Before you guys go all Bill Ackman and poo poo, like China is some Herbalife whale, I strongly urge you to read Kalenn Istarion's post on shorting here: I don't know if anyone was recommending actually shorting Chinese stocks. This is more of a macro-economic thread, also at this point, the timing is completely up in the air because Chinese still has enough capital to keep the economy rolling along admittedly at a slowing pace. In macro-economic terms, it is more complex because we (the real public at least) don't have a firm idea of much of the inner-mechanics of what is happening in China, and the extent Chinese figures are actually accurate. As for the geopolitics, China is obviously a rising great power, beyond that is more cloudy especially future economic dominance.
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# ? Mar 18, 2014 06:04 |
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Note that FXP is a 2x short ETF. So you don't want to short the short if you think that FTSE China 25 is going down.
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# ? Mar 18, 2014 06:41 |
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enraged_camel posted:People have been predicting China's crash for well over a decade. Predictions like that are made by economic incumbents (USA and allies, i.e. the West) to sow doubt in people's minds about China's upcoming rockstar status. It's the way a veteran boxer looks at a young trainee, shakes his head and goes, "tsk tsk... he's training too hard." And then gets beaten a few years down the line by said trainee, who is now the champion. That's not the narrative I've been seeing pushed over the past decade, which is that China is destined to dominate the world with a super-powerful economy that will leave the West in shame. This narrative has been so prevalent that shitloads of people already believe that China is the most powerful country in the world. Widespread worry about the stability of the Chinese economy wasn't really a thing until the past few months. This looks a lot more like Japan in the 80's, where everyone thought it was going to surpass the West and become the most powerful country in the world for the same reasons they think that China will now (that reason being Asian Magic apparently.)
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# ? Mar 18, 2014 12:51 |
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Important thing to remember is that there's a lot of ruin in a nation, and when the inevitable financial crisis finally occurs, it is not likely to reverse all of that growth.
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# ? Mar 18, 2014 12:55 |
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ronya posted:Important thing to remember is that there's a lot of ruin in a nation, and when the inevitable financial crisis finally occurs, it is not likely to reverse all of that growth. Right, but even now after decades of lightning-fast growth the Chinese economy is only half as big as the American economy and it's starting to cool. Narratives of China surpassing the US are exaggerated in basically every way but China will definitely be a great power for the foreseeable future.
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# ? Mar 18, 2014 12:58 |
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enraged_camel posted:People have been predicting China's crash for well over a decade. Predictions like that are made by economic incumbents (USA and allies, i.e. the West) to sow doubt in people's minds about China's upcoming rockstar status. It's the way a veteran boxer looks at a young trainee, shakes his head and goes, "tsk tsk... he's training too hard." And then gets beaten a few years down the line by said trainee, who is now the champion.
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# ? Mar 18, 2014 14:26 |
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ronya posted:Important thing to remember is that there's a lot of ruin in a nation, and when the inevitable financial crisis finally occurs, it is not likely to reverse all of that growth. China's social and political situation would explode though. The only thing keeping the very big problems at bay (massive divide between coastal urban/rural life, no political rights, oppression of non-Han) is the constant insane growth. If that were to even just slow down, much less reverse, China would be in for some very rocky times. And unlike the Soviet collapse, the entire world economy is heavily connected to China.
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# ? Mar 18, 2014 14:46 |
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Can anyone think of any economy in the last thirty years that has grown rapidly without relying in part on asset bubbles or the presence of a valuable commodity like oil?
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# ? Mar 18, 2014 15:56 |
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I think we need a "Has China crashed yet?" site.
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# ? Mar 18, 2014 16:11 |
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Helsing posted:Can anyone think of any economy in the last thirty years that has grown rapidly without relying in part on asset bubbles or the presence of a valuable commodity like oil? That's why I find this topic fascinating. China's gone from an agrarian medieval society to 21st century economic titan in the span of 60 years. How long did it take America?
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# ? Mar 18, 2014 16:54 |
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Cultural Imperial posted:That's why I find this topic fascinating. China's gone from an agrarian medieval society to 21st century economic titan in the span of 60 years. Not that difficult when a decent chunk of the world has already advanced to a post-industrial society and is pouring money and investment into China. The paradigm of industrialization had already been well established by the time China industrialized, whereas it was completely uncharted when England and the US industrialized.
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# ? Mar 18, 2014 17:01 |
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Cultural Imperial posted:That's why I find this topic fascinating. China's gone from an agrarian medieval society to 21st century economic titan in the span of 60 years. It only took the USSR about 30 years, command economies are good for short term economic growth.
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# ? Mar 18, 2014 17:07 |
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Fojar38 posted:The paradigm of industrialization had already been well established by the time China industrialized, whereas it was completely uncharted when England and the US industrialized. There have been detailed maps of most of China since like 4000 BCE...
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# ? Mar 18, 2014 17:25 |
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Slaan posted:There have been detailed maps of most of China since like 4000 BCE... He's talking about the path of industrialization.
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# ? Mar 18, 2014 17:27 |
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Oh, yeah, I see that now. But red text plus the standard 'only white people can explore places' beliefs made me go down the other path. But yeah, the way to quickly modernize is to heavily finance the growth of a few heavy industries to bring in foreign money and train workers on modern techniques. You also do basic land reform to make peasants move from their land to the cities more quickly so that there is a greater workforce. Its the path that the USSR, South Korea and China went down. Most of the Asian Tigers, Brazil, etc as well. The US and UK basically did it as well, just over a longer period of time.
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# ? Mar 18, 2014 17:37 |
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Slaan posted:Oh, yeah, I see that now. But red text plus the standard 'only white people can explore places' beliefs made me go down the other path. I don't see how you could have possibly made that error.
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# ? Mar 18, 2014 17:46 |
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Slaan posted:Oh, yeah, I see that now. But red text plus the standard 'only white people can explore places' beliefs made me go down the other path. The US sort of followed that model but Britain, perhaps because it industrialized first, doesn't really fit that description.
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# ? Mar 18, 2014 17:49 |
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In the case of the UK, the textile industry was a heavy driver of their industrialization. To feed the mills for that industry, the British took over places like Egypt and India which were good for both cotton farming and food; this could be considered land reform in that the incoming cash crops lowered agricultural prices at the same time new jobs were opening up in industries like textiles and ship building. It was a much more organic process than we have seen recently, to be sure, though.tbp posted:I don't see how you could have possibly made that error. I live in the US South. "Columbus found the new world and showed the naked locals 'magical boomsticks'," and "The Spanish explored South America and found cannibal Aztecs," and "The British went into deepest darkest Africa to explore the savage wilderness" are literally taught in our schools. It is, unfortunately, the basic idea here that only White Europeans are able to really map out anything. So when he said 'China, which was uncharted unlike the US/UK' I read it as this.
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# ? Mar 18, 2014 18:11 |
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Slaan posted:In the case of the UK, the textile industry was a heavy driver of their industrialization. To feed the mills for that industry, the British took over places like Egypt and India which were good for both cotton farming and food; this could be considered land reform in that the incoming cash crops lowered agricultural prices at the same time new jobs were opening up in industries like textiles and ship building. It was a much more organic process than we have seen recently, to be sure, though. Well the British also had much more direct land reform in form of the Inclosure Acts. British industrialization was certainly more organic, but that's doesn't preclude a certain amount of government driving some of the process.
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# ? Mar 18, 2014 18:16 |
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Slaan posted:So when he said 'China, which was uncharted unlike the US/UK' I read it as this. Except that is literally not the combination of words I used to form my sentence.
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# ? Mar 18, 2014 18:17 |
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Helsing posted:The US sort of followed that model but Britain, perhaps because it industrialized first, doesn't really fit that description. quote:Well the British also had much more direct land reform in form of the Inclosure Acts. British industrialization was certainly more organic, but that's doesn't preclude a certain amount of government driving some of the process. Every single industrializing country followed a state driven model, it's just that some of them was done better (Britain, Germany, South Korea, Japan, the US, China post-1979) than others (Much of the Arab world, ARGUABLY China pre-1979).
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# ? Mar 18, 2014 19:22 |
enraged_camel posted:People have been predicting China's crash for well over a decade. Predictions like that are made by economic incumbents (USA and allies, i.e. the West) to sow doubt in people's minds about China's upcoming rockstar status. It's the way a veteran boxer looks at a young trainee, shakes his head and goes, "tsk tsk... he's training too hard." And then gets beaten a few years down the line by said trainee, who is now the champion. There might be some truth to this but alone it is not proof that a Chinese crash is not coming. Also, I've heard about "internal problems in China" from people at the opposite political end of Western neo-liberal pundits (Chomsky, for example). I'd rather the thread be about Chinese economy instead of some lovely holier-than-thou witch hunt against some guy you don't like. And yeah, you did read that sentence all wrong. At least wait until Fojar actually says something objectionable before jumping on the guy (or rather, don't do it at all in this thread).
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# ? Mar 18, 2014 19:24 |
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enraged_camel posted:People have been predicting China's crash for well over a decade. Predictions like that are made by economic incumbents (USA and allies, i.e. the West) to sow doubt in people's minds about China's upcoming rockstar status. It's the way a veteran boxer looks at a young trainee, shakes his head and goes, "tsk tsk... he's training too hard." And then gets beaten a few years down the line by said trainee, who is now the champion. I mean, "Chinese collapse" is an overplayed meme and I don't think its particularly likely, but the reverse (the Chinese Juggernaut becoming the new #1) is another overplayed meme that seems just as unlikely. Typo fucked around with this message at 19:35 on Mar 18, 2014 |
# ? Mar 18, 2014 19:28 |
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Cultural Imperial posted:That's why I find this topic fascinating. China's gone from an agrarian medieval society to 21st century economic titan in the span of 60 years. If this was 1865 America then you are stuck with either developing those on your own or waiting for someone else to developing it for you. Either way it would be take a lot longer. And it's not just China either, countries with lower GDP per capita tend to have much faster GDP/capita growth rate across the board: http://en.wikipedia.org/wiki/Convergence_(economics) Typo fucked around with this message at 19:38 on Mar 18, 2014 |
# ? Mar 18, 2014 19:31 |
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# ? May 16, 2024 18:07 |
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Britain did use protectionism to shield the growth of its industry and it practiced "land reform" of a sort via enclosures of common land, but I don't think the British government consciously stimulated industry in the 18th century in the same way that the USA, Japan, South Korea, or China did in the 19th and 20th centuries. I'd have to check some historical sources before saying anything more than that. The British did subsidize and protect their industry under the Henry VII and Henry VIII in the 16th century and I know that in the 18th century guys like Daniel Defoe called for that sort of plan to be repeated but my general impression is that the British industrial revolution mostly happened without any direct stimulation from the government (other than protectionism and the opening up of colonial markets of course), which is not the case in the other countries we're discussing. I admit I might be off here if anyone has evidence to the contrary.
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# ? Mar 18, 2014 19:34 |