China Economy Megathread

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whatever7: Jul 26, 2001; by LITERALLY AN ADMIN

I wouldn't count Turkey as part of ME because Turkey didn't want to be counted as part of ME. I probably will count Turkey as ME now because Turkey now wants to be part of ME, also Turkey is doing things to the minority blatantly only can be justified under ME value system.

Iran is till more democratic than Turkey. Iran's check and balance between the Supreme Leader, the President and Revolutionary Guard still works IMO.

# ? Oct 22, 2014 16:11

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# ? May 10, 2024 00:23

Ardennes: May 12, 2002

whatever7 posted:

I wouldn't count Turkey as part of ME because Turkey didn't want to be counted as part of ME. I probably will count Turkey as ME now because Turkey now wants to be part of ME, also Turkey is doing things to the minority blatantly only can be justified under ME value system.

Iran is till more democratic than Turkey. Iran's check and balance between the Supreme Leader, the President and Revolutionary Guard still works IMO.

What is a "ME value system"? No wait, I don't want to know.

Arglebargle III posted:

Also, someone mentioned the CPC cooking China's economic numbers. It's not that the CPC cooks the numbers, it's that everyone in the chain reports false numbers to each other for their own ulterior motives. The CPC doesn't know their own numbers because they can't trust their colleagues. Li Keqiang (Premier of the PRC State Council a.k.a. Xi's Number One) was caught on mic saying "China's numbers are all man-made" but he wasn't gloating that his government manages to fool the rest of the world but saying that he himself, China's #2 man, doesn't pay attention to the statistics because he knows they're rigged. In other words, China's #2 man doesn't have an exactly accurate number himself.

That is still cooking the books, and I am skeptical there isn't state complicity involved. They "trust" them because not trusting them is a hazard to their career but it doesn't mean they aren't complicit is passing false statistics. Obviously, great economic data is good for everyone politically but it is very hard at least to me to give them a pass for it just because of the chaotic way it is done. At the end of the day they know they are passing off bad numbers even though they aren't the ones that actually added the extra zero to numbers.

# ? Oct 22, 2014 17:53

namaste friends: Sep 18, 2004; by Smythe

http://www.newyorker.com/news/john-cassidy/chinese-economy-fall-off-cliff

quote:

The Conference Board, an international economic-research organization financed by donations from large corporations, is out with a new report claiming that the Chinese economic miracle is over, and that things are about to get sticky for what is now, by some measures, the world�s second-largest economy. During the next few years, China probably faces a period of turbulence and uncertainty, as well as the possibility of a serious financial crisis, the report says. And, over the long term, it will have to be content with annual G.D.P. growth of about four per cent�less than half the rate seen in recent decades.

It�s not surprising that the Wall Street Journal and other media outlets have picked up on the report. Its conclusions, if they hold up, have important implications for everything from the future of the Chinese Communist Party to the price of oil to the security situation in the Far East. But how plausible are they?

Some things we know for sure. The Chinese economy, after growing at an average annual rate of about ten per cent between 1993 and 2011, is already slowing down. This year, G.D.P. growth is expected to be about seven per cent. By Western standards, that�s a very rapid rate of expansion: recent estimates peg the long-term growth potential of the U.S. economy at about 2.5 per cent a year, or even less. The Chinese government, which helped engineer the recent slowdown by restricting the supply of credit (for reasons I�ll get to in a moment), would be delighted to see seven per cent growth continue indefinitely. If such a rate could be sustained for the next ten years, the Chinese economy would once again double in size, and it would overtake the U.S. economy as the world�s biggest. (In terms of domestic purchasing power, this may already have happened. Earlier this month, the Financial Times, citing data from the International Monetary Fund, reported that China�s G.D.P., when it is adjusted for the fact that the prices of many things are considerably lower there, is already slightly bigger than American G.D.P.)

But can Chinese policymakers pull it off? They face two separate challenges. Right now, the task is to slow things down without precipitating a property crash and a banking crisis. After a period in which the amount of credit being extended has grown much faster than G.D.P., and in which property bubbles have emerged in some cities, this won�t necessarily be easy. The second challenge is to make the transition from one growth model to another�from expansion fed by the country�s resources, and by heavy investment in industry and the recruitment of hundreds of millions of workers from rural areas, to growth that relies more on innovation, increased productivity, and consumer spending. The authors of the Conference Board report, David Hoffman and Andrew Polk, argue that the China optimists have underestimated both of these tasks. �In the short term (i.e., the next two or three years), we have difficulty seeing anything but a rocky and turbulent adjustment,� the report says. And it goes on: �The full transition of China�s economic growth model is likely to be a long slog as it presents many challenges: political, economic, social, and even cultural.�

I find it hard to argue with the first conclusion. The report shows just how reliant China has become on credit growth, particularly on bank loans to property developers and other businesses. �Private sector debt, now at almost 200 percent of GDP and up from 117 percent at the end of 2009, is still accruing at 15 percentage points per year,� the authors note. This pace of credit creation is unprecedented for China, and the result has been over-all debt levels that are now �well in excess of the thresholds that have historically triggered financial crises in other countries.�

If China were a fully capitalist economy, the outcome would be eminently predictable: a 2008-style �Minsky moment� in which something bad happens, creditors panic, new lending dries up, and a crash ensues. China would join the United States, the United Kingdom, South Korea, Argentina, Mexico, and a long list of other countries that have experienced credit binges that ended badly.

The complicating factor is that China, despite all its reforms, is still a country where the government controls large segments of the economy, including much of the financial sector. If there�s a crisis, optimists say, the government will step in and rescue lenders, writing off many of their bad loans. And the fact that people are aware of this will help prevent a crisis in the first place. (When depositors and investors know there�s a safety net in place, there�s less incentive for a bank run.) �Even if a huge swathe of loans go bad, the consequence is unlikely to be a Lehman-style financial collapse,� the editors of The Economist argue in this week�s issue. �For that, thank the Chinese regime�s vice-like grip on its financial system.�

The Conference Board analysts aren�t reassured. They argue that, as the rate of economic growth falls and bad debts pile up, there may well be too many stricken lenders for the state to rescue. And, even if the government does step in, the economic consequences will be severe. �While it is difficult to determine with precision when the breakpoint will be reached � a major deleveraging must occur at some point�it cannot be forestalled forever,� the report says. �Nor can China grow out of the problem. Anticipated nominal GDP growth comes nowhere close to being able to service the debt that has been accumulated since 2009. Something�s got to give.�

It shouldn�t be very long before we know which side in this debate is right. However, it could be decades before we know whether China has succeeded in adopting a new growth model. The pessimism that runs through the report is based on two questionable assertions: that China has already exhausted much of its potential for �catch-up� growth�the sort that comes from getting a late start in industrializing�and that its Communist government is incapable of introducing productivity-enhancing reforms.

Even after all the progress China has made, it isn�t a rich country. According to World Bank data, its per-capita G.D.P. in 2013 was $6,807, which puts it on about the same level as Iraq and South Africa. By comparison, per-capita G.D.P. in the United States was $53,143; in South Korea, it was $25,977. Looking at the experience of South Korea and other �Asian tiger� economies, there is no obvious reason for the rate of economic growth to slow down dramatically at the income level China has reached. Unless, of course, the government puts a wrench in things.

That�s what the report says is likely to happen. The Communist regime is so tied up in the current system, it argues, that it won�t be able to introduce necessary changes. Rather than dealing with the debt problem, modernizing the tax system to encourage consumption, and promoting competition, the government will stall and stall, �because of the impact reforms would necessarily have on the business interests and financial fortunes of elites and their families across all levels of government in China.�

This is a powerful argument: if you run a state-owned bank in a provincial Chinese city and your brother is the biggest real-estate developer in town, you may well be reluctant to refuse him a loan. But the report may push the critique too far. In addition to corrupt local officials, the Chinese Communist Party contains plenty of highly educated technocrats who are devoted to expanding the country�s power and influence, and they aren�t just sitting on their hands. Credit has been tightened, the value of the currency has been allowed to rise modestly, and a vigorous anti-corruption campaign has been launched. The reforms haven�t gone far enough, but they can�t be wholly dismissed.

China shouldn�t be underestimated. Whatever one thinks of the authoritarian state-capitalism model, its success in building industries from scratch cannot be denied�and I�m not just talking about low-value-added activities, such as manufacturing clothing and assembling electronic devices. In inviting foreign companies to operate in China only if they did so in partnership with local companies, Beijing helped lay a basis for industries that now produce everything from automobiles to electric power to commercial aircraft to high-resolution liquid-crystal displays. These new industries provide plenty of avenues for raising productivity. China is already the world�s biggest purchaser of industrial robots, for example, outpacing both Germany and Japan.

Rather than focussing on China�s record of success, Hoffman and Polk emphasize over-investment, cronyism, and discrimination against foreign competitors. �Local champion firms now span all sectors, from industrials to consumer to services,� the report laments. �They enjoy opaque, non-market competitive advantages that serve to smother the real private sector and its dynamism. In many sectors, these firms have emerged as the chief competitors for MNCs.� (�MNCs� stands for �multinational companies,� such as General Electric, Monsanto, and Intel, all of which happen to be financial supporters of the Conference Board.)

If you speak to senior executives from some of the big firms that have set up operations in China, they will tell you, off the record, that China�s success was built in part on the theft of their intellectual property. If that�s true, it�s pretty similar to what American textiles manufacturers did to British market leaders during the early nineteenth century. The jackdaw strategy worked for the Americans then, and it has worked for the Chinese over the past twenty years; but it�s only part of the story. In addition to bringing in Western expertise, the Chinese invested heavily in infrastructure and education, particularly scientific education. This strategy provided a platform for rapid growth which, once China gets through its current problems, could well prove more durable than the Conference Board report acknowledges. But it�s an interesting and provocative study.

tl;dr : Maybe not.

# ? Oct 22, 2014 18:06

ocrumsprug: Sep 23, 2010; by LITERALLY AN ADMIN

Ardennes posted:

That is still cooking the books, and I am skeptical there isn't state complicity involved. They "trust" them because not trusting them is a hazard to their career but it doesn't mean they aren't complicit is passing false statistics. Obviously, great economic data is good for everyone politically but it is very hard at least to me to give them a pass for it just because of the chaotic way it is done. At the end of the day they know they are passing off bad numbers even though they aren't the ones that actually added the extra zero to numbers.

I know how much I am fudging my numbers, and can guess how much my vassals fudged the numbers they gave me, but I don't really know how much their underlings fudged their numbers. My lord probably fudged them a bit too when he passed them along.

# ? Oct 22, 2014 18:32

namaste friends: Sep 18, 2004; by Smythe

http://www.economist.com/news/finan...ng_the_darkness

quote:

IN THE town of Jingjiang, a few hours� drive from Shanghai, Yangzijiang Shipbuilding is making 21 huge container ships for Seaspan, a Canadian shipping firm. An enormous sign declares, �We want to be the best shipyard in China.� It is certainly among the most profitable, earning 3 billion yuan ($481m) last year. But only two-thirds or so of that came from building ships. The rest came from lending money to other companies using a local financial instrument called an entrusted loan. This puts Yangzijiang at the forefront of another industry: shadow banking.

A decade ago, conventional banks, which are almost all state-owned and tightly regulated, accounted for virtually all lending in China. Now, credit is available from a range of alternative financiers, such as trusts, leasing companies, credit-guarantee outfits and money-market funds, which are known collectively as shadow banks. Although many of these lenders are perfectly respectable, others constitute blatant attempts to get around the many rules about how much banks can lend to which companies at what rates.

Although bank lending remains far bigger than the shadowy sort and is still expanding at an astonishing pace, its rate of growth has recently stabilised. The growth of some of the more worrying forms of shadow lending, in contrast, is accelerating (see chart). Shadow banks accounted for almost a third of the rise in lending last year, swelling by over 50% in the process.

Thus far, most of the concerns about shadow banking in China have centred on trusts. By offering returns as high as 10%, they raise money from businesses and individuals frustrated by the low cap the government imposes for interest rates on bank deposits. The interest they charge to borrowers, naturally, is even higher. They lend to firms that are unable to borrow from banks, often because they are in frothy industries, such as property or steel, where regulators see signs of overinvestment and so have instructed banks to curb lending. Over two-fifths of Yangzijiang�s loans go to property developers in smaller Chinese cities; land makes up nearly two-thirds of its collateral.

China�s economy is slowing. It has grown by 7.6% for the past two years, the slowest rate since 1990. Several trust products have defaulted, although investors in most of them have got their money back one way or another. Over $400 billion-worth of trust products are due to mature this year�and borrowers will want to roll over many of those loans. Many observers worry that investors will lose faith in trusts, prompting a run, which may, in turn, blight certain industries and other parts of the financial system. No country, pessimists point out, has seen credit in all its forms grow as quickly as China has of late without suffering a financial crisis.

One reason for optimism is that trusts are regulated by the same agency that supervises banks, the China Banking Regulatory Commission (CBRC). This, argues Jason Bedford, an independent expert who used to audit trust companies, means the CBRC can tell not only whether the trusts themselves are wobbly, but also how any wobbles would affect banks. As our special report this week explains, it and other regulators have recently strengthened oversight of trusts, requiring clearer accounting and limiting dealings with banks.

Now that regulators are tightening the screws on trusts, money is flowing to other, less closely watched intermediaries. �Shadow banking in China looks like a cat-and-mouse game,� declares Liu Yuhui, chief economist of GF Securities, a brokerage house.

For instance, the CBRC�s limits on the ways that banks and trusts could co-operate do not apply to securities houses. That has fuelled a boom in the assets these firms manage: they rose to 5.2 trillion yuan by the end of last year, up from 1.9 trillion yuan a year earlier. In some instances, the brokers are using loans originated by banks to back �wealth-management products� they sell to investors themselves; in others, they are acting as intermediaries to allow trusts to do the same, in spite of the new rules. These manoeuvres, in effect, allow banks to sidestep various restrictions on their lending.

Trust beneficiary rights products (TBRs) are another way around the restrictions on dealings between banks and trusts. A bank sets up a firm to buy loans from a trust; it then sells the rights to the income from those loans to the bank�a TBR is born. The bank can then sell the TBR to another bank. The intention, Mr Bedford says, is often to make risky corporate loans look like safer lending between banks, thereby evading capital requirements and minimum loan-to-deposit ratios, among other rules.

Entrusted loans are yet another fast-growing form of shadow banking. These involve cash-rich companies, often well-connected state-owned enterprises (SOEs), lending to less well-connected firms. There are so many SOEs now competing with Yangzijiang to offer loans, reports Liu Hua, the shipbuilder�s chief financial officer, that her firm has been forced to reduce the interest rates it charges from around 15% a year to closer to 10% a year.

Such loans, often made using banks as intermediaries to get around regulations forbidding such lending, expose the financial sector to yet more risk. The value of new entrusted loans in March was 239 billion yuan, up 64 billion from a year earlier. Companies borrowed 716 billion yuan via entrusted loans in the first three months of the year; corporate bond issuance over the same period amounted to only 385 billion yuan.

Entrusted loans are not the only way companies are lending to one another. Hangzhou, home to Alibaba and many other entrepreneurial outfits, is one of China�s richest cities, but it is now undergoing a quiet financial crisis. Its many small steel and textile entrepreneurs found it hard to get loans from official banks, so they banded together. Reports suggest that firms guaranteed one another�s debts, forming a web of entanglements that helped everyone get credit during good times. But now, with the economy slowing, the weaker firms are beginning to default, dragging healthy ones down too.

Steel traders in Guangdong, chemicals firms in Zhejiang and coal miners and energy firms in Shanxi appear to have developed similar networks. Xinhua, China�s official news agency, has reported that in some of these industries the guarantees invoked have spread from the �first circle� of firms vouching for the original defaulters to the �second� and �third� circles, meaning guarantors of the guarantors.

Just as a crisis in shadow banking could spread to the real economy, a sharp downturn in some sectors could cause trouble for shadow banks, leading to a broader financial mess. Many trust loans are secured with property, and many developers are reliant on shadow finance, but China�s raging property market is showing signs of cooling, especially in smaller cities. The fear is of a downward spiral in which the pricking of the property bubble leads to a panic in shadow finance, which reduces access to credit, pushing property prices and economic growth down further.

How bad could things get? IHS, a consultancy, recently predicted that such a property crash could reduce China�s GDP from a forecast 7.5% this year to 6.6%, and to 4.8% next year. That may not sound like the end of the world, but by China�s standards, it would be an alarming slowdown.

All this poses a genuine dilemma for China�s regulators. They have long desired to develop deep and versatile capital markets, and shadow banking is a natural part of that. Indeed, there is an argument that China would benefit from the expansion of certain forms of shadow banking, such as the securitisation of loans.

Although some kinds of lending are clearly getting out of hand, the losses should be manageable. For all the subterfuge Chinese shadow banks indulge in, their loans usually come with decent collateral. The biggest threat to the system is that by moving too forcefully to rein in shadow lending, regulators accidentally precipitate a run on shadow banks. Instead, they are moving warily, slowly ratcheting up regulation and allowing the occasional minor default.

Calibrating this curtailment, however, will be tricky. Standard & Poor�s, a ratings agency, argues that reforms could lead to �a turbulent period in which funding could dry up as the domestic market struggles to re-price risk�. That is a polite way of saying that there is no easy way out of China�s shadow-banking mess.

# ? Oct 22, 2014 21:15

Daduzi: Nov 22, 2005; You can't hide from the Grim Reaper. Especially when he's got a gun.

Cultural Imperial posted:

http://www.newyorker.com/news/john-cassidy/chinese-economy-fall-off-cliff

tl;dr : Maybe not.

Good article, matches up with what I've been hearing but add some details. Not too sure about the note of optimism at the end: "the Chinese invested heavily in infrastructure and education, particularly scientific education. This strategy provided a platform for rapid growth which, once China gets through its current problems, could well prove more durable than the Conference Board report acknowledges". I currently work with 13 Chinese universities and have taught professors from another 20 more and I have to say that if the hope is that scientific education and research will be the key to China's future growth then China's in deep poo poo.

# ? Oct 23, 2014 02:17

namaste friends: Sep 18, 2004; by Smythe

Daduzi posted:

Good article, matches up with what I've been hearing but add some details. Not too sure about the note of optimism at the end: "the Chinese invested heavily in infrastructure and education, particularly scientific education. This strategy provided a platform for rapid growth which, once China gets through its current problems, could well prove more durable than the Conference Board report acknowledges". I currently work with 13 Chinese universities and have taught professors from another 20 more and I have to say that if the hope is that scientific education and research will be the key to China's future growth then China's in deep poo poo.

Hahah

Ok don't leave us hanging. Why do you think this?

# ? Oct 23, 2014 02:21

Pervis: Jan 12, 2001; YOSPOS

Cultural Imperial posted:

Many trust loans are secured with property

Isn't this similar to what happened in Japan? Using property as collateral for loans furthering a property bubble (in a business/corporate world), which then popped horribly? If the loans are secured with property that is highly speculative and in reality isn't worth anywhere near as much as the loan acts like they are, then the loans don't actually have much backing since the collateral will devalue in the event of a general downturn.

# ? Oct 23, 2014 03:35

ocrumsprug: Sep 23, 2010; by LITERALLY AN ADMIN

Pervis posted:

Isn't this similar to what happened in Japan? Using property as collateral for loans furthering a property bubble (in a business/corporate world), which then popped horribly? If the loans are secured with property that is highly speculative and in reality isn't worth anywhere near as much as the loan acts like they are, then the loans don't actually have much backing since the collateral will devalue in the event of a general downturn.

I believe Iceland's banking industry was using speculative acquisitions as collateral for loans for further speculative acquistitions, on their way to 2008 as well.

# ? Oct 23, 2014 03:38

namaste friends: Sep 18, 2004; by Smythe

Yes

# ? Oct 23, 2014 03:43

etalian: Mar 20, 2006

Daduzi posted:

Good article, matches up with what I've been hearing but add some details. Not too sure about the note of optimism at the end: "the Chinese invested heavily in infrastructure and education, particularly scientific education. This strategy provided a platform for rapid growth which, once China gets through its current problems, could well prove more durable than the Conference Board report acknowledges". I currently work with 13 Chinese universities and have taught professors from another 20 more and I have to say that if the hope is that scientific education and research will be the key to China's future growth then China's in deep poo poo.

China also used Keynesian spending on steroids as a way to avoid the 2009 recession and continue its rapid GNP growth. Of course bubbles never last forever.

# ? Oct 23, 2014 03:46

Daduzi: Nov 22, 2005; You can't hide from the Grim Reaper. Especially when he's got a gun.

Cultural Imperial posted:

Hahah

Ok don't leave us hanging. Why do you think this?

Well the main problems are:

1. Most university faculty don't actually give a poo poo about the subject they are studying. When I was teaching professors I was astonished how many confessed they actually weren't remotely interested in structural engineering/molecular biology/polymers/whatever they were researching. They'd basically been railroaded into the career path by their parents and had stuck it out strictly as a way to get the requisite signifiers of success in China (wife/husband, car, house, kid who will be educated anywhere except China). There were definitely some who were passionate, but they made up at most 50% and the ratio only gets worse the higher you move up the administrative ladder.

2. The quality of research being produced is pretty horrible. Most university faculty have never been properly trained in research methodology. PhD programs here are something of a joke, and masters programs a really unfunny joke. To make things worse, Hu Jintao's brainchild of funding universities purely on the basis of research output has created serious perverse incentives. Since universities are funded on how much research they produce, departments are funded on how much research they produce, so staff are promoted on how much research they produce. The result is that it's not uncommon for faculty to need to publish 6 papers a year to get/keep professorial positions. And anyone who's ever done research will tell you that at that rate the research isn't going to be much good.

Corners are cut left right and centre, topics are chosen on the basis of how easy they will be to churn out (rather than how important they might be), and blatant academic dishonesty is commonplace. Most of the research being made is either replicating results from elsewhere, putting existing research into a "China context", collating someone else's data, or doing reviews or summaries of research. Now all of these can be useful, but they're not likely to lead to a revolution in innovation in China

3. Because of 2) the teaching at universities is farcically bad. Many of the staff are really bad teachers to begin with (because of 1) and the poor teaching quality at schools when they graduated) but even those who are really good at and passionate about teaching simply don't have time to devote to it because of the pressure to produce borderline garbage research papers. As a result, even though the younger generation are much more promising than the current crop of academic staff, they're simply not getting adequate training and whatever passion they might have for the subject is killed by terrible lecturing.

4) Lack of academic freedom. Now this most obviously hurts social sciences the most, but even in the hard sciences I've heard stories of professors being forbidden from publishing their findings because the results could embarrass the CCP. Said professors either stop giving a poo poo about their work entirely, or else emigrate and publish overseas. This leads to a big problem where because of 1), 2) and 3) the government is relying increasingly on foreign universities to train their faculty, but most who are half-competent won't return from their foreign sojourns. So there's the whole brain-drain effect on top of everything else.

Now this is all based on my own personal experience, mind, but I've heard similar complaints from many of my Chinese friends, in particular those who work in R&D-intensive industries. By and large they don't even bother working with professors from Chinese universities and instead work solely with academics whose experience lies chiefly overseas.

The only hope China has of switching to an innovation-based economy is to seriously overhaul higher education. Scrapping the system of evaluating universities solely by research output would be a big start. However this government is showing no signs of doing so, and to be honest even if they did it would probably be too late: the reform needed to begin 10 years ago, not today.

# ? Oct 23, 2014 04:06

namaste friends: Sep 18, 2004; by Smythe

That's awesome, thanks daduzi

# ? Oct 23, 2014 04:09

Fall Sick and Die: Nov 22, 2003

X number of papers per year is a measurable metric, while quality of papers produced is subjective, so you get stuff like wow China is producing the second largest number of patents per year, or the most scientific papers per year, but the people in charge are worried about the face of the matter, not the substance. From people I know in academia, there is absolutely no benefit to publishing even in partnership with Chinese universities or colleagues, it just casts aspersions on the topic you're writing about. If you see joint ventures it's purely a money for legitimacy transfer, but I think western universities are finding out that the problems that come along with that are not what they imagined.

# ? Oct 23, 2014 05:03

namaste friends: Sep 18, 2004; by Smythe

http://www.ft.com/intl/cms/s/0/3a23...l#axzz3HVbtPYAc

quote:

Inflated Chinese export data are back.
The ruse of puffed-up export invoices to convert extra foreign currency into renminbi is on the rise again, casting doubt on recent strong export data.

Chinese exports hit a high of $214bn in September, well ahead of forecasts. Growth of 15.3 per cent from a year earlier was also the swiftest pace in 20 months.
That looked like good news for an economy where fixed-asset investment, traditionally the biggest growth driver, is slowing on the back of a weak property market.

But economists warn that true export demand may be weaker than meets the eye.

The gap between Chinese exports to Hong Kong and Hong Kong imports from China � theoretically two sides of the same coin and based on customs data from the two jurisdictions � rose sharply in September.

For analysts, that suggests Chinese exporters are again using phantom exports to Hong Kong as a means to skirt the country�s strict capital controls and bring in foreign money.

�The apparent re-emergence of over-invoicing strengthens our view that China�s September export data do not herald strong sustained actual export growth,� wrote Louis Kujis, chief China economist at Royal Bank of Scotland.

Inflated export invoices have long been an issue in China. The Chinese currency is freely convertible for trade purposes, but investment flows remain tightly controlled. The lure of higher interest rates, as well as a steadily rising currency, creates an incentive to circumvent these controls. Disguising hot money inflows as trade has long been the most common technique.
Such activity died down earlier this year, as the central bank engineered a weakening of the Chinese currency and the foreign exchange regulator launched a crackdown on illicit flows.

But the renminbi has come storming back in recent months, hitting an eight-month high on Wednesday. The world-beating performance of the Shanghai equity market in recent months has provided an additional enticement.

quote:

Economists say that this time companies seem to be using new methods to skirt capital controls. Julian Evans-Pritchard of Capital Economics notes that Chinese imports also appeared inflated in September, judging by the gap between Chinese and South Korean data on Chinese imports from South Korea.

�That both imports and exports surged in tandem suggests firms are �round-tripping� � importing a good and then re-exporting it to a related party at a mark-up to bring money into the country,� Mr Evans-Pritchard wrote this week.

�We . . . don�t have a strong explanation for why firms are going to the trouble of importing from Korea rather than Hong Kong. Our best guess is that, as authorities have cracked down on fake invoicing, firms have had to become more creative in how they game the system.�

Wang Tao of UBS estimates that after correcting for over-invoicing, trade growth in the third quarter was only 11 per cent, compared with 13 per cent growth shown in official Chinese data.

That suggests that much like consumption, Chinese exports are in decent shape but will not be enough to arrest China�s investment-led slowdown.

# ? Oct 30, 2014 04:33

My Imaginary GF: Jul 17, 2005; by R. Guyovich

Any recent good reads from the end of last month, or accurate sites providing un-bias analysis of China's economy and RMB liquidity markets?

# ? Nov 2, 2014 04:42

namaste friends: Sep 18, 2004; by Smythe

My Imaginary GF posted:

Any recent good reads from the end of last month, or accurate sites providing un-bias analysis of China's economy and RMB liquidity markets?

FT alphaville. It's free if you register with ft.com.

# ? Nov 2, 2014 05:46

namaste friends: Sep 18, 2004; by Smythe

http://www.ft.com/intl/cms/s/0/ccb7...l#axzz3HssszqEN

quote:

China�s cooling economy has already roiled global commodity markets and prompted slowdowns in places such as Latin America, Australia and Germany that had been big beneficiaries of the Chinese boom.

The Chinese economy grew at its slowest pace since the depths of global financial crisis last quarter and is almost certain this year to register its weakest annual growth rate since 1990.

But continued rapid and unsustainable growth in a range of important indicators suggests strongly that China�s slowdown has a long way to go before it levels off.

The current deceleration has happened even as credit is still expanding faster than gross domestic product, local governments continue to borrow far more than they can afford and investment in everything from steel production to real estate is rising fast, even as sales slump.

Given falling demand, the rise in all these indicators is unsustainable and at some point soon they will have to come down, inevitably causing China�s growth to slow more sharply.

�I�m confident we won�t see a collapse or a financial crisis in China but as credit conditions tighten in the next year or so things are going to get ugly and we will have much less growth,� says Jonathan Anderson, president of Emerging Advisors Group, an independent macroeconomic research firm. �What we will inevitably have is a big shakeout on the supply side because that�s where all the credit has gone and we may see companies start going bankrupt in droves.�

With a 7.3 per cent expansion in the third quarter from a year earlier, China still has the fastest-growing big economy in the world but as recently as 2011 it was growing by nearly 10 per cent.

As Chinese exports collapsed in the wake of the global financial crisis five years ago, the government launched a credit-fuelled investment boom that reignited growth.

In what was intended to be a temporary measure, Beijing lifted controls on credit and flooded the economy with cash, much of which was funnelled into an expanding property bubble.

The result was a construction boom and an unprecedented increase in total debt to GDP from 147 per cent at the end of 2008 to 251 per cent by the end of June this year, according to estimates from Standard Chartered.

Credit expansion has slowed in recent months but is still growing a lot faster than GDP while providing less and less growth for each renminbi borrowed.

The World Bank alluded to this problem last week when it advised China�s rulers to abandon their obsession with trying to hit annual GDP targets (set at �around� 7.5 per cent for 2014).

�The current emphasis on meeting short-term growth targets will make it more challenging to implement the policies necessary to shift growth to a more sustainable medium-term path,� Karlis Smits, senior economist, wrote in the World Bank China Economic Update, published last week. �Without policy action, the slowdown in China�s potential growth in the medium term could be more severe.�
Some analysts believe a severe downturn could come sooner.

A slump in property sales and prices that began at the start of this year has been blamed for much of the slowdown in headline growth.
But the correction has so far been fairly mild and has not yet seriously impacted investment and construction, the most important drivers of the Chinese economy.

The volume of floor space sold in the first nine months of the year was down 8.6 per cent from the same period a year earlier.
Meanwhile, the amount of floor space under construction increased by 8.1 per cent in the same period, while newly completed floor space was up 5.1 per cent from a year earlier by the end of September.

This fundamental mismatch in supply and demand is adding to an already huge overhang in the housing market.
In a recent report, Goldman Sachs economists estimate around one-fifth of urban housing in China is empty.
A range of auxiliary industries, such as steel, face similar fates.

Despite many years of extreme overcapacity and falling profits � the price of steel is now less than the price of cabbage in China � steel production in China was up 5.4 per cent in the first nine months of this year.

Bankruptcies are another area where the pain has not yet really begun.

Han Chuanhua, a bankruptcy lawyer at Zhongzi Law Office in Beijing, says the number of bankruptcies has increased in recent months but many companies that should be going bust are not.

In many cases this is because local governments simply order courts not to accept bankruptcy cases because they do not want job losses or loss of tax revenue recorded in their jurisdictions.

Many companies have resorted to borrowing at high rates to roll over old loans and keep their gates open for a few months longer.
But as growth inevitably grinds lower in the coming months, most analysts expect to see a lot more failures, particularly in the property sector and upstream industries.

�Real estate developers and steel producers will continue to survive on credit and build up inventories as long as they can because the government can�t afford to hurt employment and consumption too much,� says Michael Pettis, a professor of finance at Peking University.
�But eventually the government has to allow growth to slow more. The longer growth stays above 5 or 6 per cent the worse the debt problem gets and the greater the risk of a really ugly adjustment.�

# ? Nov 2, 2014 17:23

Soy Division: Aug 12, 2004

Fall Sick and Die posted:

X number of papers per year is a measurable metric, while quality of papers produced is subjective, so you get stuff like wow China is producing the second largest number of patents per year, or the most scientific papers per year, but the people in charge are worried about the face of the matter, not the substance. From people I know in academia, there is absolutely no benefit to publishing even in partnership with Chinese universities or colleagues, it just casts aspersions on the topic you're writing about.

Depends, in hard sciences it can still be beneficial, higher end Chinese labs have some nice equipment and they can also do things like animal research much more easily/cheaply than American labs can.

# ? Nov 3, 2014 05:21

My Imaginary GF: Jul 17, 2005; by R. Guyovich

Cultural Imperial posted:

http://www.ft.com/intl/cms/s/0/ccb7...l#axzz3HssszqEN

So, one of the contributing factors to the continued decline in energy prices has been China's over-production of supertankers. The international energy shipping market cannot afford to ship more than refinement capacity is able to handle, while excess capacity in shipment capabilities is forcing energy-producing nations to deeply discount their energy exports. This is driving up inflation in those nations and driving down consumption. This driving down of consumption has a knock-on effect of freezing liquidity markets in other market sectors, which further strengthens global reserve currencies and drives down manufacturing equipment exports. In turn, demand for lower-chain manufactured goods and products, such as steel or cargo ships, is driven down even further, increasing inventories in China despite attempts to subsidize the use of these resources for production of goods up the value chain, such as cargo ships, railroad engines and rails, wind turbines, and mass construction projects.
However, the rate at which these projects and export-orientated goods are being produced and utilized is vastly below the rate at which stockpiles are gathering and at which further systemic pressure is exerted that results in an acceleration of inventory accumulation secured with state and subprime loans.

Is that understanding of current dynamics correct or a bit too simplified?

# ? Nov 3, 2014 07:34

namaste friends: Sep 18, 2004; by Smythe

I'm not an expert but I would add the shale oil boom, OPEC overproduction to the list of causes driving down the price of oil.

# ? Nov 3, 2014 15:02

Obdicut: May 15, 2012; "What election?"

Daduzi posted:

The only hope China has of switching to an innovation-based economy is to seriously overhaul higher education. Scrapping the system of evaluating universities solely by research output would be a big start. However this government is showing no signs of doing so, and to be honest even if they did it would probably be too late: the reform needed to begin 10 years ago, not today.

I'd like to echo this, but worse, for the social sciences. Obviously, hard sciences are centrally important for an industrialized society, but social sciences contributed a lot to Western economic growth, too. Stuff like Frank and Lillian Gilbreth's studies on efficiency, studies on consumer behavior, on urban living, had a lot of effect in the US. Studies like this in China are nearly impossible, partially because of problems with academia already stated by you, but also because of the intense political pressures around such studies and the firm idea that Chinese people/culture is fundamentally different from all other cultures, and so social learning from other contexts can't be applied.

I seriously think that China could fill an amazing and needed slot in research just by reproducing work done otherwise, and knocking down all those P=.05 studies that just hit the random chance lottery. This would be a great way for them to actually mature into a real scientific power.

# ? Nov 3, 2014 15:03

FrozenVent: May 1, 2009; The Boeing 737-200QC is the undisputed workhorse of the skies.

Increased shipping capacity doesn't mean you have to ship more, it just means that you can ship more and it's cheaper to do so.

But otherwise yeah that sounds right to me.

# ? Nov 3, 2014 23:09

My Imaginary GF: Jul 17, 2005; by R. Guyovich

FrozenVent posted:

Increased shipping capacity doesn't mean you have to ship more, it just means that you can ship more and it's cheaper to do so.

But otherwise yeah that sounds right to me.

Ship more for less, which means petro economies that depend on energy exports as their sole reliable source of government revenue have to produce more energy to maintain current revenue levels, which in turn means they have to ship more energy, and to do so need more discounts financed by energy exports....

Global logistics chains are so tight that a 1% change in production will cause a 10% change in price; eventually, it'll become too expensive to subsidize energy exports and shipments will freeze and you've got a global liquidity crisis for any state which relies upon tarriffs to fuel economic growth.

So yeah, I'm pretty certain China is in a downward economic spiral that is intensifying global conflicts and threatening the stability of the entire world.

The only other time the world experienced such a boon in shipping capacity was coupled with uncontrolled population growth in all nations. Pretty sure, economically speaking, China is entering uncharted territory and will have to raise net effective tax rates or wind up in a situation where foreign policy forces Chinese troop deployments or national reform in the face of systemic collapse as a nation. I'm going to bet that the central committee will be more willing to deploy troops than it will be to enact effective tax reform, especially since effective tax reform has only been known to work when coupled with systemic social reform and empowerment of lower-class citizens.

Unless there is a time in Chinese history when an emperor or warring prince expanded citizenship to all Chinese and charged them accordingly? Would certainly be interesting if China made every Han a party member to charge them party dues.

E:

Cultural Imperial posted:

I'm not an expert but I would add the shale oil boom, OPEC overproduction to the list of causes driving down the price of oil.

If OPEC lowers production, OPEC states can either institute democratic reforms with austerity measures or commit genocide against the disenfranchised portions of their population. Bit of a rock and a hard place they find themselves between: Fight internal ISIS groups, or hope to god that things improve.

My Imaginary GF fucked around with this message at 04:12 on Nov 4, 2014

# ? Nov 4, 2014 04:08

caberham: Mar 18, 2009; by Smythe; Grimey Drawer

http://www.apec-china.org.cn/

It's down

# ? Nov 6, 2014 01:41

namaste friends: Sep 18, 2004; by Smythe

http://www.reuters.com/article/2014/11/15/us-g20-summit-china-banks-idUSKCN0IZ06S20141115

quote:

(Reuters) - China's economy is going through a "period of pain" as authorities try to shift it toward slower, more sustainable growth, with the rapid expansion of its shadow banking sector a major problem, the vice finance minister said on Saturday.

"We do have problems that have been accumulating over time," Vice Finance Minister Zhu Guangyao told reporters at the G20 Leaders Summit in Australia.

Zhu reiterated President Xi Jinping's catchphrase of a "new normal" for the Chinese economy, saying it would be "running at relatively high speed instead of super high speed."

"We are changing gear and our economic structure is undergoing a period of pain and a period where we are absorbing the large-scale stimulus packages we rolled out earlier," he said.

The IMF expects global growth of 3.3 percent this year, with China growing 7.4 percent and the United States 2.2 percent. That would still be China's slowest growth in 24 years.

SHADOW BANKING

Zhu said shadow banking, a term that broadly refers to a variety of lending that does not appear on bank balance sheets, and overcapacity in the parts of the economy were some of the major problems facing China.

"The main problem of shadow banking is the offshoot business of the banks, and it's mainly about the trust funds that they run," Zhu said.

The Financial Stability Board said in a recent report that China's shadow banking sector grew rapidly in 2013 and was now the third largest in the world.

Zhu said the size of the shadow banking sector compared with the total financial volume of the world's second-largest economy "is not that great, but the biggest risk here is that growth is very rapid."

Beijing has been trying to rein in the riskier elements of shadow banking without shutting down the flow of money to smaller businesses that need funding.

Figures on Friday showed bank lending tumbled in October and money supply growth cooled, raising fears of a sharper economic slowdown and prompting calls for more stimulus measures, including cutting interest rates.

Zhu said the global economy recovery was too slow and unbalanced, and also called on the United States to ratify a much-delayed IMF quota and governance reform package.

"We also really hope to see that our partners in Europe, in Japan... will restore a relatively high growth rate," he said.

# ? Nov 15, 2014 17:40

namaste friends: Sep 18, 2004; by Smythe

http://online.wsj.com/articles/in-china-coal-hub-city-struggles-to-survive-amid-economic-slowdown-1416778046

quote:

In China Coal Hub, City Struggles to Survive Amid Economic Slowdown
Workers Go Unpaid, Factories Collect Dust in One of China�s Slowest-Growing Cities

JIXI, China�In this city of 1.8 million people near the Russian border, hulking factories are collecting dust and restaurants sit empty in a landscape of half-completed building projects, idled cranes and closed businesses.

�I haven�t been paid in three months,� said Hao Xumei, a coal washer who has worked for 30 of her 47 years at Jixi�s Dongshan mine, as a rooster crowed and the smell of sulphur hung in the air. �I don�t want my children to grow up and do this kind of work here.�

The struggle of this city, a coal-mining and industrial hub, illustrates the challenge that China faces in trying to buoy its sprawling economy and squeeze growth from lagging areas.

Jixi is among the slowest-growing cities in China�s slowest-growing province. In 2013, its economy grew 0.9%, the lowest rate among China�s 288 larger cities. In the first three quarters of 2014, it contracted 3.7% year-on-year, according to government data. The province, Heilongjiang, grew 5.2% in the first three quarters of 2014.

The sluggishness has dragged on despite 300 billion yuan ($50 billion) being funneled into 65 stimulus projects in Heilongjiang, many of them in Jixi.

Jittery investors are looking to the world�s second-largest economy for growth at a time when the Chinese government is attempting a difficult pivot: steering the economy from an old model driven by investment to one geared toward services and consumption. It is trying to boost employment, narrow the wealth gap and extend prosperity to western, central and northeast areas like this one.

On Friday, China�s central bank cut interest rates for the first time in more than two years�a response to signs of sputtering growth, including flat factory activity.

quote:

Coal-mining centers such as Jixi and other resource-dependent cities�from steel-dependent Tangshan near Beijing to iron-ore-rich Linfen in central China and across the northeast�have been hit particularly hard by the slowdown.

�The issue for Jixi and a lot of similar places is a very unbalanced, undiversified economy� often tied to natural resources, said China research director Andrew Batson with Gavekal Dragonomics. Wide swathes of the country are in similar straits, he said: �If resources are in recession, you�re in recession and there�s no easy way out.�

Jixi was mostly known for ginseng and edible fungus until the centrally planned economy made it a center of industry. Now, Jixi�s foundation is coal. At the local museum, displays include crystal dishes filled with briquettes and an animal fossil with a red bow through its eye socket.

But the companies that were the city�s strength are now weighed down by excess capacity and dated technology.

The state-owned Heilongjiang LongMay Mining Holding Group Co., which employs 266,000 workers across the province, is one of the city�s biggest employers, with 13 of its 44 mines in the Jixi area. LongMay reported a first-half 3.3 billion yuan loss, nearly double its 1.8 billion yuan loss the previous year.

Investment has slowed to a trickle, and businesses from luxury-goods sellers to noodle dives feel the pinch. In Jixi, investments in factories, buildings and other fixed assets declined 30.5% over the 12 months ending in August compared with the year before.

The slide in Jixi and in Heilongjiang province overall has frustrated Beijing. In June, Premier Li Keqiang told Heilongjiang Governor Lu Hao and seven other mayors and governors from around the country that they needed to target growth, the official Xinhua News Agency said.In July, Beijing sent inspection teams to laggard regions to root out inefficiency and complacency.

Wang Shi , head of the provincial propaganda office declined to comment on growth prospects, while a Jixi official said the city hopes to attract more investors.

One of the proposals to turn things around in Jixi involves expanding tourism and organic food production. But the area, gripped by Siberian cold much of the year, is a long way from major markets.Further, some analysts say, the area lacks a robust entrepreneurial culture.

Heilongjiang has rolled out subsidized loans for large state companies and low-income housing projects. Many are recycled from recent provincial industrial-reform initiatives, raising questions about how effective they�ll be in jumpstarting near-term growth.

Heilongjiang LongMay, the mining company, is in line to receive 3 billion yuan to help it restructure.

Like many state-owned resource companies, LongMay has old technology, overcapacity and high costs, and seems more driven by job preservation than profitability, said Thomas Deng, an analyst with consultancy ICIS C1.

�Heilongjiang was the first to start the planned economy and is the last to give it up,� said Jiao Fangyi, economics and business dean at Heilongjiang University. �We have great ample natural resources, but the good times are over. It�s like we�re begging for food from a golden bowl.�

Former workers of the quietly rusting Jixi Beifang Zhigang Co. Ltd. steel plant said they would like government support. Beifang produced reinforcement bars for the building industry until it closed last year, laying off 3,000 people.

Now they farm beans on the lawn between company dormitories, which are pasted with dozens of notices for apartments for sale.In a lonely property showroom along a road of unfinished building projects, sales agent Han Xueru with Jixi Huachen Development Co. said sometimes a month goes by without a sale. Ms. Han said that over 40 Jixi developers are trying to sell houses in the declining market and that her relative lost 900,000 yuan when one developer fled.�Few projects are selling and more developers are close to running away,� she said.

Dozens of banks and appliance and machine makers are suing Beifang for millions of yuan in claims. Officials at Beifang, its parent company and at LongMay couldn�t be reached to comment. The telephone numbers listed on their websites were out of operation.

# ? Nov 24, 2014 06:31

GlassEye-Boy: Jul 12, 2001

Good, China can do with less loving coal burning everywhere!

# ? Nov 24, 2014 13:38

icantfindaname: Jul 1, 2008

Also GDP growth

# ? Nov 24, 2014 13:42

I would blow Dane Cook: Dec 26, 2008; Can't post for 17 hours!

quote:

The End of China�s Economic Miracle?
Debt and corruption are hobbling the Asian giant.

On a trip to China in 2009, I climbed to the top of a 13-story pagoda in the industrial hub of Changzhou, not far from Shanghai, and scanned the surroundings. Construction cranes stretched across the smoggy horizon, which looked yellow in the sun. My son Daniel, who was teaching English at a local university, told me, �Yellow is the color of development.�

During my time in Beijing as a Journal reporter covering China�s economy, starting in 2011, China became the world�s No. 1 trader, surpassing the U.S., and the world�s No. 2 economy, topping Japan. Economists say it is just a matter of time until China�s GDP becomes the world�s largest.

This period also has seen China�s Communist Party name a powerful new general secretary, Xi Jinping , who pronounced himself a reformer, issued a 60-point plan to remake China�s economy and launched a campaign to cleanse the party of corruption. The purge, his admirers told me, would frighten bureaucrats, local politicians and executives of state-owned mega companies�the Holy Trinity of vested interests�into supporting Mr. Xi�s changes.

So why, on leaving China at the end of a nearly four-year assignment, am I pessimistic about the country�s economic future? When I arrived, China�s GDP was growing at nearly 10% a year, as it had been for almost 30 years�a feat unmatched in modern economic history. But growth is now decelerating toward 7%. Western business people and international economists in China warn that the government�s GDP statistics are accurate only as an indication of direction, and the direction of the Chinese economy is plainly downward. The big questions are how far and how fast.

My own reporting suggests that we are witnessing the end of the Chinese economic miracle. We are seeing just how much of China�s success depended on a debt-powered housing bubble and corruption-laced spending. The construction crane isn�t necessarily a symbol of economic vitality; it can also be a symbol of an economy run amok.

Most of the Chinese cities I visited are ringed by vast, empty apartment complexes whose outlines are visible at night only by the blinking lights on their top floors. I was particularly aware of this on trips to the so-called third- and fourth-tier cities�the 200 or so cities with populations ranging from 500,000 to several million, which Westerners rarely visit but which account for 70% of China�s residential property sales.

From my hotel window in the northeastern Chinese city of Yingkou, for example, I could see empty apartment buildings stretching for miles, with just a handful of cars driving by. It made me think of the aftermath of a neutron-bomb detonation�the structures left standing but no people in sight.

The situation has become so bad in Handan, a steel center about 300 miles south of Beijing, that a middle-aged investor, fearing that a local developer wouldn�t be able to make his promised interest payments, threatened to commit suicide in dramatic fashion last summer. After hearing similar stories of desperation, city officials reminded residents that it is illegal to jump off the tops of buildings, local investors said. Handan officials didn�t respond to requests for comment.

For the past 20 years, real estate has been a major driver of Chinese economic growth. In the late 1990s, the party finally allowed urban Chinese to own their own homes, and the economy soared. People poured their life savings into real estate. Related industries like steel, glass and home electronics grew until real estate accounted for one-fourth of China�s GDP, maybe more.

Debt paid for the boom, including borrowing by governments, developers and all manner of industries. This summer, the International Monetary Fund noted that over the past 50 years, only four countries have experienced as rapid a buildup of debt as China during the past five years. All four�Brazil, Ireland, Spain and Sweden�faced banking crises within three years of their supercharged credit growth.

China followed Japan and South Korea in using exports to pull itself out of poverty. But China�s immense scale has now become a limitation. As the world�s largest exporter, how much more growth can it count on from trade with the U.S. and especially Europe? Shift the economy toward innovation? That is the mantra of every advanced economy, but China�s rivals have a big advantage: Their societies encourage free thought and idiosyncratic beliefs.

When I talked to Chinese college students, I would ask them about their plans. Why, I wondered, in an economy with seemingly limitless potential, did so few choose to become entrepreneurs? According to researchers in the U.S. and China, engineering students at Stanford were seven times as likely as those at the most elite Chinese universities to join startups.

One interview with an environmental engineering student at Tsinghua University stuck with me. His parents grew wealthy by building companies that made shoes and water pumps. But he had no desire to follow in their footsteps�and they didn�t want him to either. Better that he work for the state, they told him: The work was more secure, and perhaps he could wind up in a government position that could help the family business.

Will Mr. Xi�s campaign reverse China�s slowdown or at least limit it? Perhaps. It follows the standard recipe of Chinese reformers: remake the financial system so that it encourages risk-taking, break up monopolies to create a bigger role for private enterprise, rely more on domestic consumption.

But even powerful Chinese leaders have trouble enforcing their will. I reported earlier this year on the government�s plan to handle one straightforward problem: reducing excess steel production in Hebei, the province that surrounds Beijing. Hebei alone produces twice as much crude steel as the U.S., but China no longer needs so much steel, to say nothing of the emissions that darken the skies over Beijing. Mr. Xi weighed in by warning local officials that they would no longer be judged simply on increasing GDP; meeting environmental goals would count too.

In late 2013, Hebei staged an event called �Operation Sunday.� Officials sent demolition squads to destroy blast furnaces, and imploding mills made great TV on the 7 p.m. news. But it turned out that the destroyed mills had long been out of production, so blowing them up didn�t affect output. Indeed, China�s steel industry is on track for record production this year.

In China, I have learned, yellow isn�t just the color of development. It is also the color of a setting sun.

# ? Nov 24, 2014 15:50

Ceciltron: Jan 11, 2007; Text BEEP to 43527 for the dancing robot!; Pillbug

Cultural Imperial posted:

http://online.wsj.com/articles/in-china-coal-hub-city-struggles-to-survive-amid-economic-slowdown-1416778046

My girlfriend is from Jixi, and told me that this is news to nobody. Basically everyone knows that the local government is falsifying data, all the while the number of visible ultra-rich is booming. She specifically mentioned that the local government put together a kind of "fancy chart" to convince everyone things were going great recently.

# ? Nov 24, 2014 17:34

namaste friends: Sep 18, 2004; by Smythe

Ceciltron posted:

My girlfriend is from Jixi, and told me that this is news to nobody. Basically everyone knows that the local government is falsifying data, all the while the number of visible ultra-rich is booming. She specifically mentioned that the local government put together a kind of "fancy chart" to convince everyone things were going great recently.

That's awesome. So what exactly is the rate of China's gdp growth?

# ? Nov 25, 2014 07:09

Poil: Mar 17, 2007

Let me see if I got this straight.

A large portion of the Chinese economy is made up of constructing and producing things no one actually buys or uses. And they pay for this by taking loans that aren't regulated. On top off that all of the numbers they have, and presumably also base decisions off of to some extent, are so fudged the whole country could look like Detroit and still be in an economic growth? Please tell me I'm understanding this wrong. :psyduck:

# ? Nov 25, 2014 14:23

computer parts: Nov 18, 2010; PLEASE CLAP

Poil posted:

Let me see if I got this straight.

A large portion of the Chinese economy is made up of constructing and producing things no one actually buys or uses. And they pay for this by taking loans that aren't regulated. On top off that all of the numbers they have, and presumably also base decisions off of to some extent, are so fudged the whole country could look like Detroit and still be in an economic growth? Please tell me I'm understanding this wrong.

"Look like Detroit" is a bit of an exaggeration but yes. This is sort of the opposite of what happened in the US/Europe, where the Chinese just decided to say "build all the infrastructure for stimulus" and didn't stop.

# ? Nov 25, 2014 14:28

rex rabidorum vires: Mar 26, 2007; KASPERI KAPANEN KASPERI KAPANEN KASPERI KAPANEN KASPERI KAPANEN KASPERI KAPANEN KASPERI KAPANEN KASPERI KAPANEN KASPERI KAPANEN KASPERI KAPANEN KASPERI KAPANEN KASPERI KAPANEN KASPERI KAPANEN KASPERI KAPANEN KASPERI KAPANEN KASPERI KAPANEN KASPERI KAPANEN KASPERI KAPANEN

So its sounds fairly analogous to the credit default swaps from '07/08. Except some how more opaque and a poo poo ton more money at stake. That is impressive.

# ? Nov 25, 2014 16:16

Ardennes: May 12, 2002

computer parts posted:

"Look like Detroit" is a bit of an exaggeration but yes. This is sort of the opposite of what happened in the US/Europe, where the Chinese just decided to say "build all the infrastructure for stimulus" and didn't stop.

Yeah, I don't know if I expect Detroit, Chinese labor costs are still so low that I doubt manufacturing would disappear but there is going to have be a large correction that is going to impact their growth for a while. Basically, the whole GDP growth project has most likely gone awry and China may very well be caught in a lower-middle trap while having to deal with a rapidly aging population, and some truly impressive environmental damage.

The whole build up fantasy of the Chinese "taking over the world" just isn't going to be happen for a long while if ever.

https://www.youtube.com/watch?v=OTSQozWP-rM

Ardennes fucked around with this message at 17:08 on Nov 25, 2014

# ? Nov 25, 2014 17:06

namaste friends: Sep 18, 2004; by Smythe

Chinese labour costs are going up and China is losing its competitive advantage believe it or not.

# ? Nov 25, 2014 17:25

Ardennes: May 12, 2002

Cultural Imperial posted:

Chinese labour costs are going up and China is losing its competitive advantage believe it or not.

It is to an extent, and exports will be squeezed but at the same time they still export a very large amount of the world's manufactured goods.The Chinese economy isn't going to dry up but growth will simply because there is no way to really sustain it.

Also, almost certainly reported growth and thus reported total GDP is likely significantly lower than official numbers.

Ardennes fucked around with this message at 18:07 on Nov 25, 2014

# ? Nov 25, 2014 17:44

computer parts: Nov 18, 2010; PLEASE CLAP

A lot of Detroit's manufacturing just moved to lower cost of living states too, it didn't go out of country.

# ? Nov 25, 2014 17:49

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# ? May 10, 2024 00:23

Ardennes: May 12, 2002

computer parts posted:

A lot of Detroit's manufacturing just moved to lower cost of living states too, it didn't go out of country.

A big part of it is also simply the racial history of the United States, and you don't have the similar issues expect in Tibet/Xinjiang.

In the case of China, wages are lower in the interior and the countryside than the coast, but the coast also has immediate access to shipping routes so I don't know if you are going to have the same dynamics.

# ? Nov 25, 2014 18:12

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