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icantfindaname posted:So how exactly did Japan make it so much further on this model before imploding? I mean China is still significantly poorer than Japan was in 1990, what happened? Population is one thing it is just that much harder to get a population of a billion people to the same level of development as a country of about one hundred and fifty million. The Chinese need to export that just that much more relatively to bring in the same about of capital, and Japanese exports were more profitable usually to boot. Another issue is that the West, especially the US, was a relatively untapped and rich market after the war compared to now. Austerity, and household debt has taken a hit on consumer spending and at the same time China now faces far more competition than Japan once did for the same market. Also, Chinese companies haven't been very successful at branding compared to Japanese ones. By 1990, Sony and Toyota were household names in the US, on the other hand China still mostly does the manufacturing for foreign brands. Most Americans or Europeans would struggle to think of a major mainland brand, Lenov is probably the closet bet and even then it doesn't have quite the same buzz that Sony did in 1984. Basically, China is too big and too late.
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Sep 29, 2014 21:33
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Ardennes posted:Population is one thing it is just that much harder to get a population of a billion people to the same level of development as a country of about one hundred and fifty million. The Chinese need to export that just that much more relatively to bring in the same about of capital, and Japanese exports were more profitable usually to boot. Partly this. Partly, its an issue of rates and accurate accounting. I don't trust that which I can't verify, and I can't verify Chinese data. With rates, what I'm looking for is an increase in Chinese consumption rates and a decrease in Chinese saving rates. China needs to transition over to a service economy and needed this transition a decade ago. Rather, PRC economic policy doubled down on providing liquidity to state-owned enterprises primarily in the construction and manutacturing sectors. Simply, while Japan had a democracy in place which could allow for turnover in patronage networks, China has no such process in place besides party-directed purges. And purges have a bad economic perception. Not only is China too big too late, China's size isn't know and can't be verified. It can only be guestimated.
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Sep 29, 2014 21:44
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My Imaginary GF posted:Partly this. Partly, its an issue of rates and accurate accounting. I don't trust that which I can't verify, and I can't verify Chinese data. Accounting is obviously another issue but purposefully difficult to cite because we can only guess how much they are off. I suspect the issue will come up soon when China "officially" passes the US in GDP PPP. Admittedly, Japan has had an issue with the transition to service industry as well. Japanese government also put a significant emphasis on liquidity not to state-owned enterprises but very large private corporations that worked closely with the government. Ultimately, the Japanese method was more transparent and flexible than China's current system but they can be compared. Japanese democracy was still dominated by a single party for most of its existence, the LDP didn't carry the same weight as the CCP but nevertheless ruled Japan mostly uncontested. Nevertheless, a liberal democracy dominated by one party is still more flexible than a literal one party state. In essence though China's system is even more rigid and opaque than Japan but there are obviously similarities in the development model. Granted, another big difference is that Japan mostly neglected its military during the post-war period. Japan does have an arms industry, but obviously China is putting far more of an emphasis on it in comparison. A massive arms build ups have worked economically before, the only problem is it makes war quite tempting. It will be interesting to see in the next few years how aggressive the PLN gets. Ardennes fucked around with this message at 22:15 on Sep 29, 2014 |
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Sep 29, 2014 22:06
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That, and it requires the development of certain skillsets for the workforce that may not be suitable for other industries, creates a lot of plant and equipment that can't easily be transitioned to other work or liquidated quickly or efficiently, and creates a brain drain from other, potentially more dynamic industries. Propping up certain sectors, or devoting huge amounts of money and capital to war production can be helpful counter-cyclical fiscal policies (to the extent that just pump-priming would be in general), but in the long-run I wouldn't be surprised to see some serious economic derangement. It's like if all your brilliant math students went into R&D for Boeing instead of Calpine, because the subsidies enabled Boeing to hire more people with higher wages at lower costs, and you ended up being able to build awesome rockets and planes and crap, but your clean energy sector stagnated.
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Sep 29, 2014 22:18
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Doesn't Japan also have a problem in that for a country known for producing high-tech goods its management style is still surprisingly low-tech? Like, "I have to fax poo poo to my boss because he doesn't have a PC or e-mail?" That's just based on an anecdote from a friend but if it's widespread I could also see it holding the economy back.
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Sep 29, 2014 22:35
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Fojar38 posted:Doesn't Japan also have a problem in that for a country known for producing high-tech goods its management style is still surprisingly low-tech? Like, "I have to fax poo poo to my boss because he doesn't have a PC or e-mail?" It depends upon the industry. They mastered supply chain logistics in heavy manufacturing.
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Sep 29, 2014 22:36
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That's a side effect of state subsidization. All of the growth was in high tech manufacturing, and because of the subsidies there was no reason to invest in anything else, so 30 years later you're still using typewriters and fax machines even though you're producing cell phones and computers
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Sep 29, 2014 22:36
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Grand Theft Autobot posted:That, and it requires the development of certain skillsets for the workforce that may not be suitable for other industries, creates a lot of plant and equipment that can't easily be transitioned to other work or liquidated quickly or efficiently, and creates a brain drain from other, potentially more dynamic industries. Propping up certain sectors, or devoting huge amounts of money and capital to war production can be helpful counter-cyclical fiscal policies (to the extent that just pump-priming would be in general), but in the long-run I wouldn't be surprised to see some serious economic derangement. Certainly, but I have a feeling Beijing might be looking for a "easy fix" soon to the issue of growth beyond just lying about it. Military build-up certainly isn't much of a solution especially not a long term one but nationalism, expansionism and an investment with dual returns (you can also shoot people with arms) may very well be compelling to China. Chinese military spending is already expanding rapidly as it is. Anyway, in order to improve the savings rate of Chinese consumers, wages would have to go much higher and even then China really can't control demand for exports overseas or the expense of imports. In addition, like Japan, they have so much bad debt that is built up that stimulus can only go so far, although it is complicated by the fact so much of the economy is controlled by the state. Putting money into arms, probably isn't going to fix that, but it may provide a useful distraction. Ardennes fucked around with this message at 22:43 on Sep 29, 2014 |
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Sep 29, 2014 22:40
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Ardennes posted:Certainly, but I have a feeling Beijing might be looking for a "easy fix" soon to the issue of growth beyond just lying about it. Military build-up certainly isn't much of a solution especially not a long term one but nationalism, expansionism and an investment with dual returns (you can also shoot people with arms) may very well be compelling to China. Chinese military spending is already expanding rapidly as it is. I continue to maintain that "easy fix" involves direct colonization of Africa.
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Sep 29, 2014 22:44
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You guys do realise that less than 10% of the Chinese economy is State Owned Enterprises, right?
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Sep 30, 2014 14:54
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Ceciltron posted:You guys do realise that less than 10% of the Chinese economy is State Owned Enterprises, right? Pretty much all of the banking industry is state owned, which is going to ultimately make a pretty massive difference. Also local-governments play a large role in the economy, especially regarding the large amount of debt they have accrued.
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Sep 30, 2014 14:56
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Ardennes posted:Pretty much all of the banking industry is state owned, which is going to ultimately make a pretty massive difference. Also local-governments play a large role in the economy, especially regarding the large amount of debt they have accrued. Some friends of mine collaborated on a piece addressing this specifically. If you'll allow me to dump some text: concerning the banks posted:
Sorry for the text dump, (and odd formatting), but I really do think that even though, on the surface, China has state-owned banks, the shadow banking system has completely overpowered it. China's financial regulations are toothless, and since we don't really reflect the shadow banking system in our calculations of ownership, we can easily consider that SOEs in the banking sector are not the majority of actors.
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Sep 30, 2014 15:06
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Ceciltron posted:Some friends of mine collaborated on a piece addressing this specifically. If you'll allow me to dump some text: Obviously, a very large shadow banking exists and is difficult to regulate, but at the same time I think it is far too much to assume the formal banking system is therefore now almost irrelevant. State owned banking still account for a large amount of lending, 98% of formal banking assets are in state owned banks. Also according to the New York Times at least: quote:As of 2011, 35% of business activity and 43% of profits in the People's Republic of China resulted from companies in which the state owned a majority interest. Critics, such as The New York Times, have alleged that China's state-owned companies are a vehicle for corruption by the families of ruling party leaders who have sometimes amassed fortunes while managing them.[24] http://www.nytimes.com/2012/11/10/world/asia/state-enterprises-pose-test-for-chinas-new-leaders.html Ultimately that is probably their percentage of the formal, not the shadow economy but I don't really think you can dismiss how expansive SOEs still are. Then there are is the issue of local governments, which obviously can be considered part of the state, who themselves are considerably in debt and if anything there has been shown connections between them and shadow banking. Obviously, there are two economies in China, but the "shadow" economy still has considerable connections to the state.
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Sep 30, 2014 15:20
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icantfindaname posted:So how exactly did Japan make it so much further on this model before imploding? I mean China is still significantly poorer than Japan was in 1990, what happened? Japan benefited from the US Cold War era policy of providing its allies easy access to its market. Japan maintained extremely high tariffs by modern standards while the US maintained low barriers to Japanese imports; this was US policy. Until the 1980s the trade imbalance with Japan was seen as an acceptable consequence of US foreign policy towards its allies. The Japanese boosted industry domestically and others have posted about that, but they had the US giving them a free ride on trade policy, intentionally, for 30 years after WWII.
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Sep 30, 2014 16:31
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Ceciltron posted:Some friends of mine collaborated on a piece addressing this specifically. If you'll allow me to dump some text: Whether or not the state controls all investment is irrelevant, what's relevant is that it is directing enough investment, and allowing enough easy credit to the bubble sectors that it is impacting the economy as a whole
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Sep 30, 2014 21:00
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Fojar38 posted:Doesn't Japan also have a problem in that for a country known for producing high-tech goods its management style is still surprisingly low-tech? Like, "I have to fax poo poo to my boss because he doesn't have a PC or e-mail?" This is a derail, but this isn't necessarily a bad thing and the opposite, an obsession with instant feedback and accelerated decision cycles, may actually have a lot of downsides in cases where speed isn't critical since it doesn't really add anything and often results in information overload, poor decision-making, weird oscillations, etc. Also there's still plenty of industries in the US where faxes and printed paperwork are the order of the day.
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Sep 30, 2014 22:38
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No, it is a sign of inflexibility, and can readily be observed by the one party system. It is a you problem if you can't manage what others can, you should be fired. You can't be fired through, so you essentially hold everyone back, and the youth have lost faith, according to polls. So no, things were not better in the good old days, get out*. Stagflation since the freaken 80s.. *not you, old people
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Sep 30, 2014 23:34
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Continued government propping of the shipbuilding industry: Reuter posted:SHANGHAI, Sept 30 (Reuters) – China has given four shipping lines including China Cosco 1.8 billion yuan ($293.3 million) in subsidies to encourage them to retire and upgrade their vessels, the four companies said. The thing with shipbuilding is that demand fluctuates naturally depending on demand for ocean transportation at any given time, with some amount of lag (because shipbuilding is a somewhat long term investment). Ships themselves are a commodity, and to an extent so is shipbuilding capacity. China had cheap steel and cheap labor, so for a while they were building cheap ships... And business was good so everyone was building new ships to increase capacity. Then 2009 happened and the market contracted, so people kept using the new boats and scrapped the old poo poo... But they also stopped ordering new ships. So the shipyards ran out of work, and when there's nothing on the slips, you lay off the shipwrights and welders and whatnot. China does not like unemployment, so the government decided that part of their energy policy was to have domestic crude oil shipping capability. They ordered a poo poo ton of oil tankers; this sudden capacity increase decreased the worldwide charter rates, which lowered the value of tankers themselves, which makes them less attractive to build... tl;dr, China's trying to prop up its shipbuilding industry at the expense of the global shipping industry. It won't work eternally.
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Oct 1, 2014 04:26
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Ceciltron posted:You guys do realise that less than 10% of the Chinese economy is State Owned Enterprises, right? I'd be interested to see where you got that figure from (not challenging it, I'd actually be interested in reading it) but regardless it's worth noting that there's a different between "state owned" and "state controlled". A large section of the market is built around companies which are either offshoots of state owned organisations (SOEs, universities, local governments) or depend upon government or state-owned contracts. All of these the government is able to exercise significant control over.
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Oct 1, 2014 11:35
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Daduzi posted:I'd be interested to see where you got that figure from (not challenging it, I'd actually be interested in reading it) but regardless it's worth noting that there's a different between "state owned" and "state controlled". A large section of the market is built around companies which are either offshoots of state owned organisations (SOEs, universities, local governments) or depend upon government or state-owned contracts. All of these the government is able to exercise significant control over. As our source, we used the China Labour bulletin for 14 December, 2007, as well as others in that series from different dates. I would argue, however, that at this point it's not the state that controls the industries, but the industries that control the state. The market may be built around significant SOEs, but the market is not designed to benefit the state in any way -it's designed to benefit specific members of the state. Membership of the communist party is increasingly tycoon/industrialist. I'm of the opinion that the Chinese government couldn't change any of this if it even tried, not to mention without ripping itself to shreds.
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Oct 1, 2014 14:21
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Ceciltron posted:As our source, we used the China Labour bulletin for 14 December, 2007, as well as others in that series from different dates. That is fair, but certainly it is going to be a bit different than Japan where conglomerates were private and autonomous, if anything I think it is going to be even harder for China to change direction specifically because the state and the economy has become an amorphous blob of a patronage network. However, it is also an issue simply because it is more opaque and harder to predict, a balance-sheet recession may already be happening but at this point many in the West are simply trying to figure out what variables would warn us of it happening.
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Oct 1, 2014 14:34
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Ardennes posted:That is fair, but certainly it is going to be a bit different than Japan where conglomerates were private and autonomous, if anything I think it is going to be even harder for China to change direction specifically because the state and the economy has become an amorphous blob of a patronage network. Yeah the Japanese-style conglomerates also usually have deep links to government with a lot of informal control being exercised, but there's only a handful of them to deal with which offers fairly centralized control versus a more complex network. A lot of their behavior, especially in the early years, was also due to shared nationalism and cultural values as well as the usual common interests/background, which is easy for Americans to forget since American business culture (and China, and modern business cultur ein general) is much more FYGM.
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Oct 1, 2014 15:30
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Ceciltron posted:Sorry for the text dump, (and odd formatting), but I really do think that even though, on the surface, China has state-owned banks, the shadow banking system has completely overpowered it. China's financial regulations are toothless, and since we don't really reflect the shadow banking system in our calculations of ownership, we can easily consider that SOEs in the banking sector are not the majority of actors. By most credible estimates, the shadow banking system is smaller than the formal financial system and the state-owned banks still dominate. The Chinese shadow banking system is estimated at $5.8 trillion USD whereas financial assets in the banking system is around $23 trillion USD. The big 4 state-owned banks (ICBC, CCB, BoC, and ABC) by themselves hold $10 trillion USD in assets. For comparison, the US banking system at the height of the housing boom in 2007 was around $13.5 trillion. icantfindaname posted:So how exactly did Japan make it so much further on this model before imploding? I mean China is still significantly poorer than Japan was in 1990, what happened? To put it succinctly, each country experienced exogenous shocks to their financial system at different points in their economic development. Japan's credit bubble was arguably a result of the 1985 Plaza accord, where the then-G6 nations collectively appreciated the Yen. This led to lower interest rates, which then led to credit expansion and thus a bubble. For China, the 2008 financial crisis threaten to plunge their economy into negative GDP growth. With western-style financial reforms discredited, they turned to credit expansions to infrastructure and politically important projects to boost GDP, hence the 2009 stimulus in the form of credit. These bubbles and crashes weren't inevitable results of their development models but rather reactions to an outside shock.
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Oct 2, 2014 04:31
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CIGNX posted:To put it succinctly, each country experienced exogenous shocks to their financial system at different points in their economic development. Japan's credit bubble was arguably a result of the 1985 Plaza accord, where the then-G6 nations collectively appreciated the Yen. This led to lower interest rates, which then led to credit expansion and thus a bubble. For China, the 2008 financial crisis threaten to plunge their economy into negative GDP growth. With western-style financial reforms discredited, they turned to credit expansions to infrastructure and politically important projects to boost GDP, hence the 2009 stimulus in the form of credit. These bubbles and crashes weren't inevitable results of their development models but rather reactions to an outside shock. The bubble itself in Japan may have been caused by low interest rates, but in general the developmental model was reaching its limits, first by importer nations reacting to Japan and then competition by other exports. A big part of the 2008 crash was the loss of manufacturing jobs in the West, and the rise of a bad credit across the 2000s. You really can't separate the two, since China's model ultimately meant that it would have more limited horizons for exports. Also, their developmental model would reach its own limits even if a financial crisis didn't happen. Beyond that it is was also up to China to try to flood credit so broadly and the problems associated with it because they needed to maintain artificially high growth for political reasons.
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Oct 2, 2014 05:02
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http://blogs.wsj.com/economics/2014/10/11/china-central-bank-official-no-major-stimulus-needed-in-foreseeable-future/quote:
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Oct 12, 2014 16:28
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Cultural Imperial posted:http://blogs.wsj.com/economics/2014/10/11/china-central-bank-official-no-major-stimulus-needed-in-foreseeable-future/ I wonder if signs of any sort of "landing" will show up in actual state statistics. I like the positioning of the rhetoric though, I mean it wasn't like ever aspect of Chinese society wasn't geared for maximized growth for the last two decades.
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Oct 12, 2014 16:36
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I have been reading some economic books recently. One interesting point about I got from Michael Pettis's "The Great Rebalancing" is that China is not really a "export economy", China is a "Investment Economy". China used about 50% of its GDP for reinvestment, which is a crazy rear end high number. It only happened twice before, Germany in the 30s and Soviet Union in the 50s. I think Beijing will try harding and harding to negociate infrastructure projects to digest the internal over supply labor force and keep the machine running. Things like the 8 billion railway lines for Uganda is kind of thing Beijing bascially build the raidroad for Uganda for free (lets face it, the money BJ lead to Uganda will never get it back), but as a mean to use Chinese labor force and make Uganda slowly pay it back with export miniral and oil resource. Beijing has been eyeing the railroad and canal projects in Thailand for a while. whatever7 fucked around with this message at 18:30 on Oct 12, 2014 |
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Oct 12, 2014 18:12
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whatever7 posted:I think Beijing will try harding and harding to negociate infrastructure projects to digest the internal over supply labor force and keep the machine running. Things like the 8 billion railway lines for Uganda is kind of thing Beijing bascially build the raidroad for Uganda for free (lets face it, the money BJ lead to Uganda will never get it back), but as a mean to use Chinese labor force and make Uganda slowly pay it back with export miniral and oil resource. There's no slow about it. The line you're referring to was designed with up-value food production in mind.
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Oct 12, 2014 18:19
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whatever7 posted:I have been reading some economic books recently. One interesting point about I got from Michael Pettis's "The Great Rebalancing" is that China is not really a "export economy", China is a "Investment Economy". China used about 50% of its GDP for reinvestment, which is a crazy rear end high number. It only happened twice before, Germany in the 30s and Soviet Union in the 50s. Ultimately though the capital China has gotten for that investment in the first place primarily have come from manufactured exports, which in turn have over time been reinvested, during the 2000s. Basically, they work hand in hand.
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Oct 12, 2014 20:26
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Chinese economics question: Say you're a provincial official with a good unreported revenue stream. What are the investment and banking options open to you?
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Oct 12, 2014 20:31
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My Imaginary GF posted:Chinese economics question: Say you're a provincial official with a good unreported revenue stream. What are the investment and banking options open to you? American bank account obviously
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Oct 12, 2014 20:33
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My Imaginary GF posted:Chinese economics question: Say you're a provincial official with a good unreported revenue stream. What are the investment and banking options open to you? Stacks of cash you hide in your apartment and/or land investment. Not even joking.
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Oct 12, 2014 20:36
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My Imaginary GF posted:Chinese economics question: Say you're a provincial official with a good unreported revenue stream. What are the investment and banking options open to you? At one time, a nice trip to Macao.
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Oct 12, 2014 20:41
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Typo posted:American bank account obviously Ardennes posted:At one time, a nice trip to Macao. computer parts posted:Stacks of cash you hide in your apartment and/or land investment. All of these, and: -Buying men's fashion accessories (Does a second-hand/resale market exist on these that isn't just knockoffs?) -Sending your kids to America What else?
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Oct 12, 2014 20:51
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You can read the list of stuff confiscated from Zhou Yongkang/family. I don't know how accurate the list is.
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Oct 12, 2014 21:51
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computer parts posted:Stacks of cash you hide in your apartment and/or land investment. Gold is pretty handy for this and seems to be common. I imagine it's why every bank is advertising the tacky gold commemorative objects they're selling.
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Oct 12, 2014 23:31
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whatever7 posted:You can read the list of stuff confiscated from Zhou Yongkang/family. I don't know how accurate the list is. Have a link? What I'm really wondering is, what the exposure is for the world to China's sub-prime credit market. I'm pretty certain of the sociological impact when growth slows due to the housing burst: increased civil unrest, increased inflation, decreased imports, viscious cycle which causes a rapid rise in unemployment rates and threatens global markets.
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Oct 13, 2014 01:24
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My Imaginary GF posted:Have a link? I don't know what Epoch Times is but thats what I found on my phone. China has tons of foreign asset/bonds oversea, more than its foreign debt. The Chinese market is not going to be affected by the oversea market that much. quote:I'm pretty certain of the sociological impact when growth slows due to the housing burst: increased civil unrest, increased inflation, decreased imports, viscious cycle which causes a rapid rise in unemployment rates and threatens global markets. Look, the housing market is not going to burst. Reason 1 the government has too much economic controlling levers in the domestic market. Reason 2 the housing market went up precisely because housing is one of the very few ways the chinese can do investment. If you put your money in the banks, which are all owned by the government btw, you get very meager interest return. Chinese civilians have almost no way to invest in oversea financial market either. ( More on this later)
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Oct 13, 2014 03:55
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whatever7 posted:I don't know what Epoch Times is but thats what I found on my phone. It's a Falun Gong associated newspaper so I'd take what you read with a grain of salt.
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Oct 13, 2014 05:19
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My Imaginary GF posted:All of these, and: bitcoins
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Oct 13, 2014 05:22
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