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namaste friends
Sep 18, 2004

by Smythe
What & Why

From wikipedia:
The socialist market economy[17] of China is the world's second largest economy by nominal GDP and by purchasing power parity after theUnited States.[2] It is the world's fastest-growing major economy, with growth rates averaging 10% over the past 30 years.[18]
China is also the largest exporter and second largest importer of goods in the world. China is the largest manufacturing economy in the world,[19] outpacing its world rival in this category, the service-driven economy of the United States of America. ASEAN–China Free Trade Area came into effect on 1 January 2010. China-Switzerland FTA [20] is China's first FTA with a major European economy. The economy of China is the fastest growing consumer market in the world.

From <http://en.wikipedia.org/wiki/Economy_of_China>

How

Debt:
Chinese banks added 89 trillion yuan of assets, mostly through loans, in the past five years, equivalent to the entire U.S. banking industry’s, CBRC data show. By comparison, U.S. commercial banks held $14.6 trillion of assets at the end of September, according to the Federal Deposit Insurance Corp.

From <http://www.bloomberg.com/news/2014-02-14/china-banks-bad-loans-rise-to-highest-since-financial-crisis.html>

Economic Growth:

Gross domestic product (GDP) grew at an annual rate of 7.7% in the October-to-December period, down from 7.8% in the previous quarter.
But it was still higher than the government's target rate of 7.5%.
China is trying to maintain strong growth while rebalancing its economy.
China has said it wants to move away from an investment-led growth model to one driven by domestic consumption.

From <http://www.bbc.com/news/business-25805227>

Shadow Banking:

http://www.bbc.com/news/business-26335304

quote:

The shadowy threat from China’s lenders

Wenzhou juts out from China's eastern coast in Zhejiang province. Its wide, tree-lined streets, dominated by huge modern buildings, give no hint of the turmoil that has gripped its economy in the past couple of years.

Wenzhou has been at the forefront of China's experiments with private industry since reforms began over 30 years ago. As a result, its average income is double that of China.

But now it has gone wrong. Thousands in unofficial lending suddenly went unpaid. The Chinese central bank reports that 89% of households and 57% of firms have borrowed money, but not from banks.
A whole network of people and organisations threatened to come crashing down. There was a quiet rescue by the local government.
The source of this crisis was China's shadow banking system. Shadow banking is the slightly sinister name for trusts, leasing and insurance companies - or any other non-bank financial institution - which perform banking functions without a banking licence.
Every country has unofficial lenders, but China's are in a league of their own. Individuals, companies - even local governments - who can't get loans from state-controlled banks have been on a borrowing binge from unofficial sources for years.
Now the concern is that the whole unstable pyramid is about to come crashing down, bringing the Chinese and perhaps even the global economy with it.

'Efficient but high rates'

For firms like Zhejiang Brothers Printing Company that operates a factory that prints decks of cards, borrowing from shadow banks is the only way that they can grow.

Zhou Feng, the 30-year-old boss, told me that without the high-interest loans from shadow banks he couldn't take on large orders. He usually pays 24-30% for these loans, which in his case are usually for just three to five days, and give him much-needed cash.
Zhou told me: "We still prefer to use shadow banking as a channel to get money to solve business problems as it's efficient and quick, though the rate is much higher than the banks… If the money can't arrive on time, we may have trouble."
He admitted that it would be better to borrow from the bank, but added that up to half of the companies in Wenzhou were in the same position as his.

Following the crisis a short while ago, the government is now piloting a programme to get shadow loans registered. I was there on the first day of this amnesty for shadow bankers and borrowers. Unsurprisingly, no-one turned up.
Still, Zhou Dewen, the local official in charge was convinced, and willing to admit, that shadow banking can be regulated, although it poses a significant risk.

"Shadow banking has reached a very high level. Without any law and supervision, such huge amounts of loans will pose a big threat," he said. "It's so risky and also has caused many crises."

Shadow banking for savers

So how big a problem are China's shadow banks?
This won't be reassuring, but the answer is no-one really knows. The shadow banking sector in China is largely unregulated by the banking authority, so although there are figures from the National Audit Office, they are likely to be less than precise.
Shadow loans are estimated to make up 20% of all loans. The Wenzhou official puts the figure at 3.7 trillion yuan ($604bn; £362bn) for the country. What is evident though is that if there were a banking crisis, there would undoubtedly be a massive impact on the economy, since debt is estimated to be more than 200% of GDP.

And it's not just loans. Savers are also affected by shadow banking.

These shadow banks and some not-so-shadowy banks also sell so-called wealth management products (WMPs), which offer returns that far outstrip the official deposit interest rate of 3%. But these are riskier and reminiscent of some of the horrifyingly complicated products sold in the US and Europe before the global financial crisis that started in 2007. How many are high-risk is unknown.
We spoke to one shadow banker who asked not to be identified. He told me that he charged interest rates of up to 100% and lent on average 6m yuan per month, which is just under £600,000.
"[The government] can never get rid of the borrowing in the society. So shadow banking will exist forever," he said. "They can only ban the very high-rate loans but can't ban all shadow banking. It's like gambling. Though gambling is banned in China, many people play cards or mahjong to gamble."

Worried victims

Sometimes, though, the authorities do crack down.

One of China's most notorious shadow bankers, Wu Ying, is now serving a life sentence in prison (a death sentence had been mooted). I met her father in his one-room bedsit. Outside, a group of victims gathered and shouted at him to return their money.
In another town, I met a victim who lost everything that her mother had saved to retire on. She lent the money to her boss to earn more interest than the meagre rate offered by the bank. His shadow banking operation collapsed and he later killed himself.
She told me: "I am more worried about what would happen to my mum if she finds out that she lost all her money and she can't accept that. She is too old and also has high blood pressure. She can't handle this kind of news."
The personal impact is huge - as are the consequences for the country.
The problem originates with the state-owned sector. The big four state-owned commercial banks and other mainly state-controlled banks account for nearly all official lending. Their customers tend to be state-owned firms. It means that there has been little scope for private banks - foreign banks account for less than 3% of total assets in the banking sector.
To address this, informal lending, which has existed for a long time in China, has grown rapidly in the past five years, because - extraordinarily enough - local governments also began to borrow from the shadow banking system.

During the midst of the global financial crisis the central government launched a spending programme of 4tn yuan to prevent a recession. However, rather than provide funding for this centrally, it left it to local governments to find the finance for these projects.

Bigger than Lehman?

If China were to have a banking crash, then the issue will be if the government can afford to rescue the banks without crashing the system.

If it can, then it is still a disaster since the cost to growth will be severe. If it can't, then China would be in crisis and the global consequences would be dire.

In some ways since every saver is affected in the world's most populous country, it could even have a bigger effect than the collapse of Lehman Brothers in 2008.

Either way, it's a troubling outcome.

From <http://www.bbc.com/news/business-26335304?print=true>





Talk of a Chinese shadow banking crisis is on the rise, leaving many investors in the U.S. and elsewhere wondering: What exactly does that mean?
Shadow banking is unregulated, high-yield lending that largely takes place off banks' balance sheets. China's central bank wants to restrain risks related shadow banking in that country, but has shown little interest in shutting it down entirely.
Fears about China's banking system have flared recently because of a financial product known as a wealth management product, or WMP, that was widely expected to default this week until an 11th-hour agreement resolved the situation. This particular WMP has a three-year maturity and was supposed to bring a return of between 9.5 percent and 11 percent—far above the 3 percent deposit rate banks are paying. The initial principal investment was roughly $500 million.
WMPs are pervasive in China, and many are seen as being at risk of going bust. They are often invested in risky assets such as pawn shops, or in infrastructure projects that have no revenue. And sometimes they aren't invested but are just rollovers of WMPs that have matured.
It's feared that investors will abandon WMPs, which despite their risk provide credit to small and midsize businesses. That would lead to tighter credit and an economic slowdown. It could also lead to a run on the banks if investors fear they're too exposed.
Some China experts are less concerned, for two reasons.
First, the nation has a lot of money to recapitalize any bank it wants to. Second, it has a "closed capital account." That means money does not flow freely across its borders but moves only if the Chinese government says it can move. The implication is that the government can shut down, or almost wall off, the banking system. It's debatable whether that's a good thing, but in the short term, it means that China can control or stop money from leaving the country or even leaving the banks.
WMPs are widely believed in China to be guaranteed by the government, but it's not clear if that's true. That leads to a different fear of many market watchers: If the Chinese government bails out investors in a WMP, it could make the risks associated with them much higher and avoid short-term problems in exchange for much bigger ones down the road.

From <http://www.cnbc.com/id/101370538>



But:
With small and medium-sized enterprises - by far the economy's most important growth engine - unable to acquire sufficient funding from the formal financial sector, they have been forced to turn to informal channels. As shadow banking has become the primary source of finance for SMEs - which tend to be higher-risk borrowers - the financial risks in China's economy have grown exponentially.
Exacerbating matters, the central bank's repeated efforts to tighten the money supply raises the cost of capital. Last June, the annualised interbank lending rate surged to more than 10 per cent - a level that it almost matched in December. SMEs ultimately shoulder these costs, diminishing their ability to contribute to overall economic growth.

From <http://www.scmp.com/comment/insight-opinion/article/1444591/shadow-banking-biggest-threat-chinas-economy>





The question is, when?

China’s premier has warned that future defaults on bonds and other financial products are “unavoidable” underlining concerns that a wave of bad debts threatens to derail growth in the world’s second-largest economy.
Li Keqiang said on Thursday that China was likely to see a series of defaults as the government accelerates financial deregulation, although he added the government would take steps to ensure they do not pose a threat to the wider financial system.
In the past, the government has always stepped in to bail out companies but Mr Li has decided to allow several small, mostly privately owned, companies to default on their debts in order to address the problem of “moral hazard” in the economy, according to people familiar with the government’s thinking.
Some analysts have warned that by doing so, Beijing could trigger investor panic and prompt a “Lehman moment” in China’s increasingly debt-dependent economy.
Beijing’s challenge is laid bare by the failure of Haixin Steel, a privately owned mill in the heart of China’s coal country, to repay loans that came due last week. The default, disclosed to the Financial Times by steel traders, could send shockwaves through the local banking and shadow banking sectors.

From <http://www.ft.com/intl/cms/s/0/27f9f4aa-aa82-11e3-9fd6-00144feab7de.html>


Contrarian Views:
It looks like a colossal accident waiting to happen: China’s first true bond default has laid bare the country’s financial risks just as $400bn in debt comes due this year for cash-strapped local governments.
But a curious thing has happened in recent days. Far from triggering a wave of defaults, the concerns about the Chinese bond market have instead nudged local governments closer to financial safety.
Bonds issued by local government financing companies – long seen as one of the big problems hanging over the Chinese economy – have found favour among domestic investors and brokerages. Credit costs for provinces and cities have declined as a result, making it easier for them to obtain the cash to pay off their maturing debts.
When Chaori, a struggling solar cell maker, missed an interest payment this month – the first real domestic default in the modern era of China’s bond market – it was seen as a sign that the government would finally allow companies to fail. Analysts predicted that investors would start to pick between borrowers in the bond market, flocking to safe, lower-yielding paper and demanding higher rates from riskier companies.
Yet such predictions failed to grasp the political realities of China’s financial system. And those are that Beijing will draw a line between weak private companies and weak government-backed companies; it will let the former default but not the latter.

From <http://www.ft.com/intl/cms/s/0/bf2e2834-add2-11e3-9ddc-00144feab7de.html>


A Texas sharpshooter and a China analyst walk into a bar…
Last week’s default of little Chaori 11, China’s first onshore corporate default, brought with it some analyst hyperbole which has been rightly called out. Leaving aside for a moment this was BofAML’s second Bear Stearns call this year, their point was that Chaori 11 would be the moment that the market started to seriously re-assess financial risk in China. So far, not so much.
From the FT:
Some have expressed fears that the Chaori default could create a domino effect where investors quit the bond market altogether, sparking a liquidity squeeze or a credit crunch.
However, the domestic bond markets have so far treated the default as a non-event. Average yields on investment grade debt have fallen this year, while the spread between highly-rated and low-rated credit has been widening steadily for the past six months – an indication that investors had already begun re-pricing risk.
Everybody knew the bond was in trouble, Choari has just 1,500 employees, is privately owned, and falls under the supervision of the Shanghai government, which is seen as one of the more progressive local authorities. A perfect trial balloon then, but whether its default can really “result in a revelation of risk exposure and correction across the board” is almost as debatable as whether it will start a chain reaction that leads to Lehman. It obviously does pay to keep in mind how panic can spread when information is suppressed but calling this one in advance is… difficult.

From <http://ftalphaville.ft.com/2014/03/10/1793302/barely-stearns-in-china/>


China Megathread:
http://forums.somethingawful.com/showthread.php?threadid=3466532

:china:


BBC Documentary - How China Fooled the World

https://www.youtube.com/watch?v=HUSjMnmS5lI

namaste friends fucked around with this message at 03:48 on Mar 18, 2014

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namaste friends
Sep 18, 2004

by Smythe
From the Canada Housing Bubble Megathread:
http://forums.somethingawful.com/showthread.php?threadid=3533827&userid=0&perpage=40&pagenumber=83#post427000564

EoRaptor posted:

Don't ignore that this has happened in other countries. GM started offering financing for their cars, and eventually they became a financing company that happened to make cars. They grew into other types of lending, got huge, and then imploded (and got bailed out).

This type of thing happens when buying power drops below the capital cost of a good or service (industry or consumer). Nominally, banks are supposed to step in here and use their financial expertise to turn future revenue into current credit, allowing the transaction to proceed. Banks eventually became unable to overcome their own risk model, as they could no longer muster the internal expertise needed to evaluate a given purchase correctly. As a response, manufacturers borrowed from the banks against their own output, and lent that to their own purchasers based on the information their had about their business relationship.

The only risk in this model is the supplier 'pumping up' prices and loans to try to make more money, or financial diversification outside their core market where they are unable to properly asses risk. Other risks, such as payment defaults and industry downturn, exist in pretty much any model, and are accounted for.

Haixin seems to have gone for financial diversification strategy. This lead to a bunch of poorly evaluated decisions, and the end result is they are no longer able to pay back their underwriters. The only thing unique is that the government has chosen to let them implode rather than recapitalizing them.

I actually doubt this will have the desired effect. Instead, investment is going to concentrate in larger firms that have 'too big to fail' status, and the economy is going to slow while the financial sector consolidates its wealth. Rich will get richer, and whatever existed of the middle class will vanish.

namaste friends
Sep 18, 2004

by Smythe
Sources:

The Economist - http://economist.com
Financial Times - http://ft.com
FT Alphaville - http://ftalphaville.ft.com
South China Morning Post - http://scmp.com

Not really focused on the economy but: http://danwei.com

zerohedge has a lot of lovely disaster porn. Good for a laugh but i refuse to link those loving idiots.

namaste friends
Sep 18, 2004

by Smythe
So I started this megathread because of my interest in Canada's housing bubble. I used to live in Vancouver which is arguably the most expensive place to live in North America. The funny thing is, there's really no reason for it to be so other than the appearance of a lot of mainland chinese immigration and investment, almost all of which is in real estate.

The other reason is that I find it really hard to find good information on what's going on with China's economy. At least at a level I can easily understand. I can't read chinese and I find technical articles like those found on the FT and FTalphaville sites difficult to understand.

Hopefully other find this topic interesting and will be able to share greater insight into wtf is happening.

Slow News Day
Jul 4, 2007

Cultural Imperial posted:

I used to live in Vancouver which is arguably the most expensive place to live in North America.

Hahaha, what? I take it you have never lived in San Francisco or Manhattan.

Maybe you meant "the most expensive place to live in Canada"?

namaste friends
Sep 18, 2004

by Smythe
http://www.4-traders.com/INDUSTRIAL...-Loan-18111947/

quote:

Du Ronghai received an urgent phone call from his private banker at Industrial & Commercial Bank of China Ltd. about an investment opportunity promising a 10 percent annual return. Only for the privileged few, he was told.

Du, who owns an apparel manufacturer in southern China, said he hopped on a plane the next morning for a four-hour flight from his home city of Harbin. That afternoon, at an ICBC office in Guangzhou, he looked at the sales contract he was required to read in person and invested 3 million yuan ($488,000), his first foray into the high-yield world of shadow banking. The employee kept telling him the product, called a trust, was so good that bank staff were pooling money to buy it, he said.

"I knew nothing about it, but the return was very, very tantalizing, and the way they presented it was like if I don't buy it now, someone else will grab it in seconds," said Du, who at the time, about two years ago, had almost 30 million yuan parked at Beijing-based ICBC in deposits earning less than 3 percent annual interest. "I was thinking, if I can't trust ICBC, who else can I trust?"

More than 700 ICBC clients including Du invested 3 billion yuan in what was known as Credit Equals Gold No. 1. The product was issued by one of 67 companies with license to act as intermediaries between banks and borrowers in providing shadow financing. In January, it almost became the nation's biggest trust default in at least a decade, jolting global markets until an 11th-hour bailout.

Mixing Funds

The drama highlighted the risks of shadow banking, which over the past three years has evolved from underground lending among individuals and small companies into a complex and interconnected web, estimated by JPMorgan Chase & Co. to be valued at $7.7 trillion, involving the nation's biggest banks, state-owned firms, local governments and millions of households.

The mixing of funds makes it more difficult for the government to rein in the nation's credit supply and to shield its state-controlled banks from rising defaults as the economy cools. Banks had an estimated 6.6 trillion yuan of off-balance- sheet loans channeled mostly through trusts to risky corporate and local-government borrowers, according to Mike Werner, a Hong Kong-based analyst at Sanford C. Bernstein & Co.

That figure is equal to more than 80 percent of banks' shareholder capital and has increased 65 percent annually for the past three years, Werner wrote in a Jan. 22 note.

'Chain Reaction'

As China's top legislators start their annual meeting in Beijing tomorrow to set economic targets, efforts by policy makers to crack down on unregulated lending threaten to undermine financial stability.

"The failure of one product could lead to defaults of many others in a chain reaction," said Christine Kuo, a Hong Kong- based analyst at Moody's "The fall of shadow banking, starting with trusts, will spill over to the whole financial system, trapping banks and other stakeholders. That's why the government is extremely cautious for fear that any misstep may trigger a systemic crisis."

At stake is what the an industry trade group, estimates are $1.8 trillion of products developed by trust companies. Lenders also created $1.6 trillion of high- yield wealth-management investments, up 40 percent in the nine months through Sept. 30, according to JPMorgan.

Channeling Capital

Banks have more than their reputations on the line. They have channeled their own capital as well as clients' money through trusts to risky borrowers they're normally prohibited from lending to, such as coal mines and property developers, according to the Trustee Association.

Provided by Syndigate.info, an Albawaba.com company

(c) 2014 All rights reserved. Albawaba.com

namaste friends
Sep 18, 2004

by Smythe

enraged_camel posted:

Hahaha, what? I take it you have never lived in San Francisco or Manhattan.

Maybe you meant "the most expensive place to live in Canada"?

Sorry I wasn't very clear.

http://www.cbc.ca/news/canada/british-columbia/vancouver-s-housing-2nd-least-affordable-in-world-1.2505524

Median house price/median income.

Slow News Day
Jul 4, 2007


Median house price/median income comparison does not take into account the fact that Canada's welfare system is superior to that of the USA. Heck, your schools are cheaper and your healthcare is free. This means people in Canada can save up much easier than people in the USA.

I know Vancouver is expensive, but it's definitely not the "2nd least affordable in the world."

namaste friends
Sep 18, 2004

by Smythe
Another good post:

FrozenVent posted:

An important thing to remember when discussing china is that the government will go to great length to keep people employed - people with jobs don't have as much time to revolt.

The Chinese government basically hosed the worldwide tanker market last year because their shipyards were slowing down and starting to layoff people. China's gonna delay the crash as long as they can artificially, but when it does go down... It's going to be a disaster of epic proportion.

Slow News Day
Jul 4, 2007

Cultural Imperial posted:

Another good post:

People have been predicting China's crash for well over a decade. Predictions like that are made by economic incumbents (USA and allies, i.e. the West) to sow doubt in people's minds about China's upcoming rockstar status. It's the way a veteran boxer looks at a young trainee, shakes his head and goes, "tsk tsk... he's training too hard." And then gets beaten a few years down the line by said trainee, who is now the champion.

Dr.Zeppelin
Dec 5, 2003

Cultural Imperial posted:

Another good post:

Is there some kind of "short the hell out of China" mutual fund you can buy

karthun
Nov 16, 2006

I forgot to post my food for USPOL Thanksgiving but that's okay too!

Dr.Zeppelin posted:

Is there some kind of "short the hell out of China" mutual fund you can buy

http://finance.yahoo.com/q?s=FXP

It look like a recession might be priced in already , the ETF is up 23% over the last 3 months.

Dr.Zeppelin
Dec 5, 2003

karthun posted:

http://finance.yahoo.com/q?s=FXP

It look like a recession might be priced in already , the ETF is up 23% over the last 3 months.

Not necessarily, it was a lot higher in 2012 and a LOT higher in 2009 looks like.

Ardennes
May 12, 2002

Dr.Zeppelin posted:

Not necessarily, it was a lot higher in 2012 and a LOT higher in 2009 looks like.

The Shanghai Composite is again hovering around 2000. A recession could be priced in, it has reached that level before.

Ultimately, it is a lot of opaqueness in the Chinese bond market especially and it is unclear exactly how many bad loans are being effectively backed by the big public banks.

namaste friends
Sep 18, 2004

by Smythe
Before you guys go all Bill Ackman and poo poo, like China is some Herbalife whale, I strongly urge you to read Kalenn Istarion's post on shorting here:

http://forums.somethingawful.com/showthread.php?threadid=3569987&userid=0&perpage=40&pagenumber=22#post424850697

Do not gently caress around with short selling unless you know what you're doing. John Paulson lost hundreds of millions before he struck it rich shorting the US housing collapse.

In fact, read everything on this page: http://forums.somethingawful.com/showthread.php?threadid=3569987&userid=0&perpage=40&pagenumber=22

Ardennes
May 12, 2002

Cultural Imperial posted:

Before you guys go all Bill Ackman and poo poo, like China is some Herbalife whale, I strongly urge you to read Kalenn Istarion's post on shorting here:

http://forums.somethingawful.com/showthread.php?threadid=3569987&userid=0&perpage=40&pagenumber=22#post424850697

Do not gently caress around with short selling unless you know what you're doing. John Paulson lost hundreds of millions before he struck it rich shorting the US housing collapse.

In fact, read everything on this page: http://forums.somethingawful.com/showthread.php?threadid=3569987&userid=0&perpage=40&pagenumber=22

I don't know if anyone was recommending actually shorting Chinese stocks. This is more of a macro-economic thread, also at this point, the timing is completely up in the air because Chinese still has enough capital to keep the economy rolling along admittedly at a slowing pace. In macro-economic terms, it is more complex because we (the real public at least) don't have a firm idea of much of the inner-mechanics of what is happening in China, and the extent Chinese figures are actually accurate.

As for the geopolitics, China is obviously a rising great power, beyond that is more cloudy especially future economic dominance.

karthun
Nov 16, 2006

I forgot to post my food for USPOL Thanksgiving but that's okay too!

Note that FXP is a 2x short ETF. So you don't want to short the short if you think that FTSE China 25 is going down.

Fojar38
Sep 2, 2011


Sorry I meant to say I hope that the police use maximum force and kill or maim a bunch of innocent people, thus paving a way for a proletarian uprising and socialist utopia


also here's a stupid take
---------------------------->

enraged_camel posted:

People have been predicting China's crash for well over a decade. Predictions like that are made by economic incumbents (USA and allies, i.e. the West) to sow doubt in people's minds about China's upcoming rockstar status. It's the way a veteran boxer looks at a young trainee, shakes his head and goes, "tsk tsk... he's training too hard." And then gets beaten a few years down the line by said trainee, who is now the champion.

That's not the narrative I've been seeing pushed over the past decade, which is that China is destined to dominate the world with a super-powerful economy that will leave the West in shame. This narrative has been so prevalent that shitloads of people already believe that China is the most powerful country in the world.

Widespread worry about the stability of the Chinese economy wasn't really a thing until the past few months. This looks a lot more like Japan in the 80's, where everyone thought it was going to surpass the West and become the most powerful country in the world for the same reasons they think that China will now (that reason being Asian Magic apparently.)

ronya
Nov 8, 2010

I'm the normal one.

You hate ridden fucks will regret your words when you eventually grow up.

Peace.
Important thing to remember is that there's a lot of ruin in a nation, and when the inevitable financial crisis finally occurs, it is not likely to reverse all of that growth.

Fojar38
Sep 2, 2011


Sorry I meant to say I hope that the police use maximum force and kill or maim a bunch of innocent people, thus paving a way for a proletarian uprising and socialist utopia


also here's a stupid take
---------------------------->

ronya posted:

Important thing to remember is that there's a lot of ruin in a nation, and when the inevitable financial crisis finally occurs, it is not likely to reverse all of that growth.

Right, but even now after decades of lightning-fast growth the Chinese economy is only half as big as the American economy and it's starting to cool. Narratives of China surpassing the US are exaggerated in basically every way but China will definitely be a great power for the foreseeable future.

Deleuzionist
Jul 20, 2010

we respect the antelope; for the antelope is not a mere antelope

enraged_camel posted:

People have been predicting China's crash for well over a decade. Predictions like that are made by economic incumbents (USA and allies, i.e. the West) to sow doubt in people's minds about China's upcoming rockstar status. It's the way a veteran boxer looks at a young trainee, shakes his head and goes, "tsk tsk... he's training too hard." And then gets beaten a few years down the line by said trainee, who is now the champion.
Cool analogy, no attachment to reality. Predictions of China's downfall are predicated on the fact that China has created a credit bubble that slowly approached, then equalled and finally by a large margin overtook the catastrophic bubble that popped in the US in 2008, not in some cozy antromorphization of superpowers.

Sheng-Ji Yang
Mar 5, 2014


ronya posted:

Important thing to remember is that there's a lot of ruin in a nation, and when the inevitable financial crisis finally occurs, it is not likely to reverse all of that growth.

China's social and political situation would explode though. The only thing keeping the very big problems at bay (massive divide between coastal urban/rural life, no political rights, oppression of non-Han) is the constant insane growth. If that were to even just slow down, much less reverse, China would be in for some very rocky times. And unlike the Soviet collapse, the entire world economy is heavily connected to China.

Helsing
Aug 23, 2003

DON'T POST IN THE ELECTION THREAD UNLESS YOU :love::love::love: JOE BIDEN
Can anyone think of any economy in the last thirty years that has grown rapidly without relying in part on asset bubbles or the presence of a valuable commodity like oil?

Wistful of Dollars
Aug 25, 2009

I think we need a "Has China crashed yet?" site.

namaste friends
Sep 18, 2004

by Smythe

Helsing posted:

Can anyone think of any economy in the last thirty years that has grown rapidly without relying in part on asset bubbles or the presence of a valuable commodity like oil?

That's why I find this topic fascinating. China's gone from an agrarian medieval society to 21st century economic titan in the span of 60 years.

How long did it take America?

Fojar38
Sep 2, 2011


Sorry I meant to say I hope that the police use maximum force and kill or maim a bunch of innocent people, thus paving a way for a proletarian uprising and socialist utopia


also here's a stupid take
---------------------------->

Cultural Imperial posted:

That's why I find this topic fascinating. China's gone from an agrarian medieval society to 21st century economic titan in the span of 60 years.

How long did it take America?

Not that difficult when a decent chunk of the world has already advanced to a post-industrial society and is pouring money and investment into China.

The paradigm of industrialization had already been well established by the time China industrialized, whereas it was completely uncharted when England and the US industrialized.

computer parts
Nov 18, 2010

PLEASE CLAP

Cultural Imperial posted:

That's why I find this topic fascinating. China's gone from an agrarian medieval society to 21st century economic titan in the span of 60 years.

How long did it take America?

It only took the USSR about 30 years, command economies are good for short term economic growth.

Slaan
Mar 16, 2009



ASHERAH DEMANDS I FEAST, I VOTE FOR A FEAST OF FLESH

Fojar38 posted:

The paradigm of industrialization had already been well established by the time China industrialized, whereas it was completely uncharted when England and the US industrialized.

There have been detailed maps of most of China since like 4000 BCE...

computer parts
Nov 18, 2010

PLEASE CLAP

Slaan posted:

There have been detailed maps of most of China since like 4000 BCE...

He's talking about the path of industrialization.

Slaan
Mar 16, 2009



ASHERAH DEMANDS I FEAST, I VOTE FOR A FEAST OF FLESH
Oh, yeah, I see that now. But red text plus the standard 'only white people can explore places' beliefs made me go down the other path.


But yeah, the way to quickly modernize is to heavily finance the growth of a few heavy industries to bring in foreign money and train workers on modern techniques. You also do basic land reform to make peasants move from their land to the cities more quickly so that there is a greater workforce. Its the path that the USSR, South Korea and China went down. Most of the Asian Tigers, Brazil, etc as well. The US and UK basically did it as well, just over a longer period of time.

tbp
Mar 1, 2008

DU WIRST NIEMALS ALLEINE MARSCHIEREN

Slaan posted:

Oh, yeah, I see that now. But red text plus the standard 'only white people can explore places' beliefs made me go down the other path.

I don't see how you could have possibly made that error.

Helsing
Aug 23, 2003

DON'T POST IN THE ELECTION THREAD UNLESS YOU :love::love::love: JOE BIDEN

Slaan posted:

Oh, yeah, I see that now. But red text plus the standard 'only white people can explore places' beliefs made me go down the other path.


But yeah, the way to quickly modernize is to heavily finance the growth of a few heavy industries to bring in foreign money and train workers on modern techniques. You also do basic land reform to make peasants move from their land to the cities more quickly so that there is a greater workforce. Its the path that the USSR, South Korea and China went down. Most of the Asian Tigers, Brazil, etc as well. The US and UK basically did it as well, just over a longer period of time.

The US sort of followed that model but Britain, perhaps because it industrialized first, doesn't really fit that description.

Slaan
Mar 16, 2009



ASHERAH DEMANDS I FEAST, I VOTE FOR A FEAST OF FLESH
In the case of the UK, the textile industry was a heavy driver of their industrialization. To feed the mills for that industry, the British took over places like Egypt and India which were good for both cotton farming and food; this could be considered land reform in that the incoming cash crops lowered agricultural prices at the same time new jobs were opening up in industries like textiles and ship building. It was a much more organic process than we have seen recently, to be sure, though.

tbp posted:

I don't see how you could have possibly made that error.

I live in the US South. "Columbus found the new world and showed the naked locals 'magical boomsticks'," and "The Spanish explored South America and found cannibal Aztecs," and "The British went into deepest darkest Africa to explore the savage wilderness" are literally taught in our schools. It is, unfortunately, the basic idea here that only White Europeans are able to really map out anything. So when he said 'China, which was uncharted unlike the US/UK' I read it as this.

cafel
Mar 29, 2010

This post is hurting the economy!

Slaan posted:

In the case of the UK, the textile industry was a heavy driver of their industrialization. To feed the mills for that industry, the British took over places like Egypt and India which were good for both cotton farming and food; this could be considered land reform in that the incoming cash crops lowered agricultural prices at the same time new jobs were opening up in industries like textiles and ship building. It was a much more organic process than we have seen recently, to be sure, though.

Well the British also had much more direct land reform in form of the Inclosure Acts. British industrialization was certainly more organic, but that's doesn't preclude a certain amount of government driving some of the process.

Fojar38
Sep 2, 2011


Sorry I meant to say I hope that the police use maximum force and kill or maim a bunch of innocent people, thus paving a way for a proletarian uprising and socialist utopia


also here's a stupid take
---------------------------->

Slaan posted:

So when he said 'China, which was uncharted unlike the US/UK' I read it as this.

Except that is literally not the combination of words I used to form my sentence.

Typo
Aug 19, 2009

Chernigov Military Aviation Lyceum
The Fighting Slowpokes

Helsing posted:

The US sort of followed that model but Britain, perhaps because it industrialized first, doesn't really fit that description.
The British industrialization model was heavily based on colonialism. In a pre-industrial society the Malthusian agricultural trap was the defining economic factor. Colonialism allowed Britain to input additional factors of land (i.e America) and labor (i.e Slaves, Indians) along with the agricultural revolution of the preceding centuries to resolve the food issue. This is important because industries are a massive net food drain since factory workers/cottage industries don't' produce food.


quote:

Well the British also had much more direct land reform in form of the Inclosure Acts. British industrialization was certainly more organic, but that's doesn't preclude a certain amount of government driving some of the process.
The amount of government intervention was massive, from directing the course of colonialism to secure resources to protectionism (i.e the navigation act, tariffs to protect infant British textile manufacturing from cheaper Indian weavers)to the development of a nascent welfare safety net (the poor laws).

Every single industrializing country followed a state driven model, it's just that some of them was done better (Britain, Germany, South Korea, Japan, the US, China post-1979) than others (Much of the Arab world, ARGUABLY China pre-1979).

Dusz
Mar 5, 2005

SORE IN THE ASS that it even exists!

enraged_camel posted:

People have been predicting China's crash for well over a decade. Predictions like that are made by economic incumbents (USA and allies, i.e. the West) to sow doubt in people's minds about China's upcoming rockstar status. It's the way a veteran boxer looks at a young trainee, shakes his head and goes, "tsk tsk... he's training too hard." And then gets beaten a few years down the line by said trainee, who is now the champion.

There might be some truth to this but alone it is not proof that a Chinese crash is not coming. Also, I've heard about "internal problems in China" from people at the opposite political end of Western neo-liberal pundits (Chomsky, for example).


I'd rather the thread be about Chinese economy instead of some lovely holier-than-thou witch hunt against some guy you don't like. And yeah, you did read that sentence all wrong. At least wait until Fojar actually says something objectionable before jumping on the guy (or rather, don't do it at all in this thread).

Typo
Aug 19, 2009

Chernigov Military Aviation Lyceum
The Fighting Slowpokes

enraged_camel posted:

People have been predicting China's crash for well over a decade. Predictions like that are made by economic incumbents (USA and allies, i.e. the West) to sow doubt in people's minds about China's upcoming rockstar status. It's the way a veteran boxer looks at a young trainee, shakes his head and goes, "tsk tsk... he's training too hard." And then gets beaten a few years down the line by said trainee, who is now the champion.
Except of course there are very good reasons to be dubious about the Chinese economy. Factors from its utterly untransparant banking system which as far as anyone can tell (see http://www.hup.harvard.edu/catalog.php?isbn=9780674027541) requires continuously recapitalization by the government because of Non-performing loans to the massive amounts of externalities generated by its growth (see the sky over Beijing on a regular day) are all pretty good reasons to doubt how sustainable the Chinese model is.

I mean, "Chinese collapse" is an overplayed meme and I don't think its particularly likely, but the reverse (the Chinese Juggernaut becoming the new #1) is another overplayed meme that seems just as unlikely.

Typo fucked around with this message at 19:35 on Mar 18, 2014

Typo
Aug 19, 2009

Chernigov Military Aviation Lyceum
The Fighting Slowpokes

Cultural Imperial posted:

That's why I find this topic fascinating. China's gone from an agrarian medieval society to 21st century economic titan in the span of 60 years.

How long did it take America?
Its not really a good comparison because the technology both "hard" (i.e machinery) and "soft" (organizational) of the 20th century already existed by 1979 or 1949. Therefore China had the option of rapidly importing technology, investments and expertise far in advance of its own (either from the Soviets or the west) to fuel growth.

If this was 1865 America then you are stuck with either developing those on your own or waiting for someone else to developing it for you. Either way it would be take a lot longer.

And it's not just China either, countries with lower GDP per capita tend to have much faster GDP/capita growth rate across the board:

http://en.wikipedia.org/wiki/Convergence_(economics)

Typo fucked around with this message at 19:38 on Mar 18, 2014

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Helsing
Aug 23, 2003

DON'T POST IN THE ELECTION THREAD UNLESS YOU :love::love::love: JOE BIDEN
Britain did use protectionism to shield the growth of its industry and it practiced "land reform" of a sort via enclosures of common land, but I don't think the British government consciously stimulated industry in the 18th century in the same way that the USA, Japan, South Korea, or China did in the 19th and 20th centuries. I'd have to check some historical sources before saying anything more than that.

The British did subsidize and protect their industry under the Henry VII and Henry VIII in the 16th century and I know that in the 18th century guys like Daniel Defoe called for that sort of plan to be repeated but my general impression is that the British industrial revolution mostly happened without any direct stimulation from the government (other than protectionism and the opening up of colonial markets of course), which is not the case in the other countries we're discussing. I admit I might be off here if anyone has evidence to the contrary.

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