PRC Economy - New Reflections : April 20 2015

The Technology & Economic Forum is a venue to discuss issues pertaining to Technological and Economic developments in India. We request members to kindly stay within the mandate of this forum and keep their exchanges of views, on a civilised level, however vehemently any disagreement may be felt. All feedback regarding forum usage may be sent to the moderators using the Feedback Form or by clicking the Report Post Icon in any objectionable post for proper action. Please note that the views expressed by the Members and Moderators on these discussion boards are that of the individuals only and do not reflect the official policy or view of the Bharat-Rakshak.com Website. Copyright Violation is strictly prohibited and may result in revocation of your posting rights - please read the FAQ for full details. Users must also abide by the Forum Guidelines at all times.
Austin
BRF Oldie
Posts: 22734
Joined: 23 Jul 2000 11:31

Re: PRC Economy - New Reflections : April 20 2015

Postby Austin » 01 Jan 2019 18:29

Shanmukh wrote:China's real estate market goes for a toss. If this really plummets, then I think China will be in deep trouble. Not sure how they can weather that upheaval. But then again, this is all western news and who knows how much they are cooking up stuff to keep the Chinese under pressure?

https://www.thestar.com/news/world/2018 ... omies.html


The thing is with such interdependency in global economy and with Western Economy equally in difficult situation as China is but something the MSM does not want to talk about , If China faces long term recession then the cookies around the world will crumble ....China is now the elephant in the room and with US stock market behaving as it is we know we have a big problem in hand

Just listen to Jeff Gundlach has to say , he is the Bond King


Lisa
BRFite
Posts: 957
Joined: 04 May 2008 11:25

Re: PRC Economy - New Reflections : April 20 2015

Postby Lisa » 01 Jan 2019 22:54

https://www.ft.com/content/ae94de0e-0c1 ... 8c761d2745

The future might not belong to China

Replicating the success of other high-growth economies is about to become far harder

Martin Wolf

Do not extrapolate from the recent past. China has had a hugely impressive four decades. After their triumph in the cold war, both the west and the cause of liberal democracy have stumbled. Should we conclude that an autocratic China is sure to become the world’s dominant power in the next few decades? My answer is: no. That is a possible future, not a certain one.

The view widely held in the 1980s that Japan would be “number one” turned out to be badly mistaken. In 1956, Nikita Khrushchev, then first secretary of the Communist party of the Soviet Union, told the west that “We will bury you!” He proved utterly wrong. The examples of Japan and the Soviet Union highlight three frequent mistakes: extrapolating from the recent past; assuming that a period of rapid economic growth will be indefinitely sustained; and exaggerating the benefits of centralised direction over those of economic and political competition. In the long run, the former is likely to become rigid and so brittle, while the latter is likely to display flexibility and so self-renewal.

Today, the fiercest political and economic competition is between China and the US. A conventional view is that by, say, 2040, China’s economy will be far bigger than that of the US, with India far smaller still. But might this view be mistaken? Capital Economics, an independent research firm, answers “yes”, arguing that China's period of stellar outperformance might be coming to an end quite soon. (See charts.)


There are two powerful arguments why this view will prove to be mistaken: first, China’s has great potential for continuing catch-up on the productivity levels of the most advanced countries; and, second, it has a proven ability to generate sustained rapid growth. It is brave to bet against both potential and capacity. But, argues Capital Economics, in its “Long-Term Global Economic Outlook”, we should. As with Japan in the 1980s, the policies of ultra-high investment and rapid debt accumulation, which kept China growing so fast after the 2008 financial crisis, make it vulnerable to a sharp deceleration.

Crucially, China’s investment rate, at 44 per cent of gross domestic product in 2017, is unsustainably high. This extraordinary investment rate did maintain the growth of supply and demand after the 2008 crisis. But China’s public capital stock per head is already far bigger than Japan’s at comparable incomes per head. Slowing urban household formation means that fewer new homes now need to be built. Not surprisingly, returns on investment have collapsed. In sum, investment-led growth must come to an early end.

Because of its size, China has also hit the buffers on export-driven growth, at a lower level of income per head than other high-growth east Asian economies. The trade war with the US underlines this reality. China’s working-age population is also declining. Given the huge rise in debt as well, sustaining fast growth will be very hard.


Future demand will depend on the emergence of a mass-consumer market, while growth of supply will require an upsurge in growth of “total factor productivity” — a measure of innovation. Yet, in 2017, private consumption was only 39 per cent of GDP. If it is to drive demand, the savings rate must tumble and the share of household incomes in GDP must jump. Neither will be easy to achieve. But the biggest hurdle of all, especially to the needed upsurge in productivity growth, is the shift towards a more autocratic political system.

For one and a half decades, China has benefited from the reforms introduced by Zhu Rongji, premier from 1998 to 2003. No comparable reforms have happened since his time. Today, credit is still being preferentially allocated to state businesses, while state influence over large private businesses is growing. All this is likely to distort the allocation of resources and slow the rate of innovation and economic progress, even if an outright financial crisis is avoided.

In sum, China may well fail to replicate the success of other east Asian high-growth economies, in becoming a high-income country in short order. It will surely be far harder for it to do so, because the distortions in its economy are so large and the global environment is going to be so much more hostile.


Meanwhile, suggests Capital Economics, the arrival of robotics and artificial intelligence might re-ignite productivity growth in the west and, above all, in the US. If one wished to be optimistic, one would also hope that experience of Donald Trump’s incompetence and malevolence will be salutary. His hardcore supporters are a minority. Majorities of the disgusted should win and then bring about the renewal of economic competition and social concern that the US needs.

The most interesting other economy is not Europe, which seems destined for a slow relative decline, but India, due to be the world’s most populous country in the near future. India is far poorer than China and so still has great potential for fast catch-up growth. Capital Economics forecasts 5-7 per cent annual growth until 2040. This is at least conceivable. India’s savings rates and entrepreneurial capacity are high enough to deliver such a rate. It will need much policy reform. But India’s politics are increasingly focused on economic performance. This does not guarantee success. But it does make it more likely.

Disheartened liberal democrats must not despair. The euphoria and hubris of the “unipolar moment” of the 1990s and early 2000s were grave mistakes. But the triumph of despotism is still far from inevitable. Autocracies can fail, just as democracies can thrive. China confronts huge economic challenges. Meanwhile, democracies must learn from their mistakes and focus on renewing their politics and policies.

P.S. Do not know how to post the graphs, sorry!

Mukesh.Kumar
BRFite
Posts: 792
Joined: 06 Dec 2009 14:09

Re: PRC Economy - New Reflections : April 20 2015

Postby Mukesh.Kumar » 01 Jan 2019 23:28

Lisa wrote:https://www.ft.com/content/ae94de0e-0c1a-11e9-a3aa-118c761d2745

The future might not belong to China

Replicating the success of other high-growth economies is about to become far harder

!


Very interesting article Lisaji. Something along the lines I have been thinking about for some time. Not the reasons, but the futility of extrapolation. Interestingly the resonance came from an ethical case I was developing for interviewees. Which kind of resonates with how in a stochastic world the only thing that we can do is consistently plug away at the right thing (Karmanye Vadhikaraste, Ma phaleshou kada chana, Ma Karma Phala Hetur Bhurmatey Sangostva Akarmani- link ethics to it).
And if there is anything that a government should focus on it is in building a just society which is meritocratic. Where access to universal education and health care is there. With inequality not being allowed to build up. Rather than try to super charge economic growth through investment.
Thoughts?

nam
BRFite
Posts: 1876
Joined: 05 Jan 2017 20:48

Re: PRC Economy - New Reflections : April 20 2015

Postby nam » 01 Jan 2019 23:51

I could never understood this better productivity argument which comes up when comparing western economy with China. Is it that Chinese worker cannot produce faster than a American worker?

No country is building naval ships as fast as the Chinese. Does it indicate they have better productivity at ship building? A chap in London would probably move more money around than Shanghai, but how does it help?

Automation (AI & robotics) may help American workers, so can it help the Chinese. Those extra people will move on to other jobs.

It is a simple case of supply & demand. As long as China is able to produce, what people want to buy, it's economy will chug along. US is able to grow, because it produces stuff which people want. From Google to Aero engines.

Rich Europeans countries who once ruled the waves, produce nothing which sell. The only thing now driving their economy is tourism!

Lisa
BRFite
Posts: 957
Joined: 04 May 2008 11:25

Re: PRC Economy - New Reflections : April 20 2015

Postby Lisa » 02 Jan 2019 01:10

Mukeshji,

You are a couple of leagues ahead of me. Will need time to fully understand the depth of your thought.

Namji,

I have always had an eye on the concepts of cost of production engineering with the knowledge that now more than at any time previously, AI will allow the mechanised production of near or about anything. If this can be believed, why would the US need to import anything as they are already self sufficient vis-a-vis raw materials? When the cost of this engineering crosses to a point significantly below that of a Chinese worker, many may be in for a rude surprise. I am not sure that India will escape this idea and I am genuinely in fear of its ultimate impact.

P.S. Just an opinion of an uneducated one.

nam
BRFite
Posts: 1876
Joined: 05 Jan 2017 20:48

Re: PRC Economy - New Reflections : April 20 2015

Postby nam » 02 Jan 2019 01:40

Lisa wrote:I have always had an eye on the concepts of cost of production engineering with the knowledge that now more than at any time previously, AI will allow the mechanised production of near or about anything. If this can be believed, why would the US need to import anything as they are already self sufficient vis-a-vis raw materials? When the cost of this engineering crosses to a point significantly below that of a Chinese worker, many may be in for a rude surprise. I am not sure that India will escape this idea and I am genuinely in fear of its ultimate impact.

P.S. Just an opinion of an uneducated one.


In general if AI is able to do what we expect it to do, fundamentally none of us will have jobs and whatever it produces cannot be sold.. as no one will have the capability to pay!

If US reaches a level where it become free from manufactured import, then it will lead to a crash in Chinese wages and this might cause Chinese worker to be competitive against AI production in US!

So again a case of supply & demand. There will be something for humans to do as they are ultimately the consumer, human or AI produced.

It will effect countries, however countries will move on to do other things. Also if US manages to become import free, it will have difficult time trading with the world. No one will buy, unless it imports. A reverse Trump style trade war..

chola
BRF Oldie
Posts: 3094
Joined: 16 Dec 2002 12:31
Location: USA

Re: PRC Economy - New Reflections : April 20 2015

Postby chola » 02 Jan 2019 10:16

Their population’s willingness and ability to receive (and copy) foreign ideas will be plus for them regardless of the trade war.

https://www.hollywoodreporter.com/amp/news/5-trends-at-chinese-box-office-2018-1171864


Both Indian and Japanese film imports spiked in 2018, with films from these culturally distinctive territories generating box office totals that would be inconceivable in the U.S.

Some 15 Japanese films were shown theatrically in China this year, up from nine titles last year. Hirokazu Kore-eda's Cannes Palme d'Or winner Shoplifters even earned $14.1 million in the Middle Kingdom, a huge total for a prestige art house title, easily dwarfing the $795,000 the movie earned in North America. Several Japanese anime films, such as Doraemon the Movie: Nobita's Treasure Island ($31 million) and a remastered version of Studio Ghibli's My Neighbor Totoro ($22 million) also did robust business. Trailing the smash success of Aamir Khan's Dangal in 2017 ($191 million), 10 India films were brought into China in 2018, including strong earners like Khan's Secret Superstar ($118 million) and Bajrangi Bhaijaan ($45 million). No other national film audience close to China's size has shown a willingness to watch culturally distinct, subtitled filmmaking at such scale.



I still think they will cave in to Trump but my New Years Brunch with a few other veteran desi analysts on the Street this morning has me thinking even if they do it will have positive results for them in the long term.

No matter how we view them in this stereotypical sense of a closed commie state, their actions are surprisingly open and liberal in their ingestion of ideas. It is a primary reason they haven’t collapsed like the USSR or folded into hermitdom like North Korea.

Austin
BRF Oldie
Posts: 22734
Joined: 23 Jul 2000 11:31

Re: PRC Economy - New Reflections : April 20 2015

Postby Austin » 02 Jan 2019 10:31

DT seems to be under pressure now after the Stock Market Fiasco , He needs to get the deal with China else face a massive stock market loss in US if the glimpse of what happened in last week in US Trading is any thing to go by.

Right now he is under pressure twitting about Deal with China and Talks going well to boost up Stock Market , He has put himself in the corner and he will have to compromise to get this trade deal done quickly else the guy who takes credit for stock increase will go down with it.

sanjaykumar
BRF Oldie
Posts: 3764
Joined: 16 Oct 2005 05:51

Re: PRC Economy - New Reflections : April 20 2015

Postby sanjaykumar » 03 Jan 2019 06:30

nam wrote:I could never understood this better productivity argument which comes up when comparing western economy with China. Is it that Chinese worker cannot produce faster than a American worker?

No country is building naval ships as fast as the Chinese. Does it indicate they have better productivity at ship building? A chap in London would probably move more money around than Shanghai, but how does it help?

Automation (AI & robotics) may help American workers, so can it help the Chinese. Those extra people will move on to other jobs.

It is a simple case of supply & demand. As long as China is able to produce, what people want to buy, it's economy will chug along. US is able to grow, because it produces stuff which people want. From Google to Aero engines.

Rich Europeans countries who once ruled the waves, produce nothing which sell. The only thing now driving their economy is tourism!



Germany exported $1.5 trillion of mostly industrial goods last year. France one half trillion. As Europe is a continental sized economy they just don't export that much to the rest of the world (of course a massive exception is German autos, and also Airbus).

Their own intra-country sales are massive.

I believe India is eventually going the Europe way and not the Chinese path.



mappunni
BRFite -Trainee
Posts: 84
Joined: 14 Jul 2017 19:07

Re: PRC Economy - New Reflections : April 20 2015

Postby mappunni » 08 Jan 2019 21:07

China's best hope is that Trump, Wall Street, and the whole world are willing to play pretend

https://amp.businessinsider.com/chinas-economy-is-terrible-without-the-trade-war-2019-1


pankajs
BRF Oldie
Posts: 10584
Joined: 13 Aug 2009 20:56

Re: PRC Economy - New Reflections : April 20 2015

Postby pankajs » 10 Jan 2019 10:12


To quote the BoE chief exactly from the above link ...
What about other currencies?

"That said, I think it is likely that we will ultimately have reserve currencies other than the USD. The evolution of the global financial system is currently lagging behind that of the global economy, and there are asymmetric concentrations of financial assets in advanced economies relative to economic activity.

For example, EMEs’ share of global activity is now 60%, but their share of global financial assets lags behind at around one-third. And half of international trade is currently invoiced in US dollars, even though the US has a much lower 10% share of international trade. As the world re-orders, this disconnect between the real and financial is likely to reduce, and in the process other reserve currencies may emerge. In the first instance, I would expect these will be existing national currencies, such as the RMB.

However, history suggests these transitions will not happen overnight. The US economy overtook Britain’s in the second half of the 19th century, but it took until the 1920s before it became a dominant currency in international trade. "

Note the following ...

1. In the 1st highlight he says, ".... currencies ... " Notice the "s" at the end of currencies.
2. In the 2nd highlight, he again stresses on currencies instead of a currency.
3. In the 3rd highlight, notice the word "first", meaning there will be other on the list of reserve currencies apart from USD and RMB.
4. The 4th highlight is critical. US surpassed UK economically by the end of 1880's but USD did not displace the the Pound till about 1920's.

His stress on currencies is not mistake given that there are multiple references to it. Currencies is exactly what he meant to say.

He is right that over time the USD will loose it status to a basket to currencies which will include the USD, RMB and a few others. RMB is not taking over the world of reserve currencies but it will definitely be one in the mix.

There was another livemint report posted within last week in another thread based on a study that was talking of future of global economic landscape. That report has one critical line that would help clarify the future reserve currencies. I remember the gist but will not put it down here without the exact quote.

yensoy
BRFite
Posts: 1093
Joined: 29 May 2002 11:31
Location: USA

Re: PRC Economy - New Reflections : April 20 2015

Postby yensoy » 10 Jan 2019 10:26

RMB can never be a reserve currency unless there are ways for countries to earn RMBs. Today the RMB is highly controlled and trade balance is highly skewed in favour of China, and no other ways to obtain RMB like foreign aid and remittances. So you can take a big loan from China to start your RMB account, then you spend the RMB buying products and machinery from China which you can sell/use to earn local currency. What next?

pankajs
BRF Oldie
Posts: 10584
Joined: 13 Aug 2009 20:56

Re: PRC Economy - New Reflections : April 20 2015

Postby pankajs » 10 Jan 2019 10:36

Quite right ...

Plus as of today RMB does not even meet the technical requirements for a reserve currency. There are workaround that folks are talking about but it will not work to the extent of making it global reserve currency.

Plus It also does not inspire confidence. Confidence is the bedrock of international system and the reserve currency status. If you buy a property in China or a RMB bond there is no garuntee of due process that is available in US/USD backed bonds.

BUT, lets us grant RMB all of the above i.e. that is China starts running a MASSIVE current account deficit, it meets convertibility & transparency norms, it reforms its internal systems most especially law & judiciary to inspire confidence in its financial instruments by outsiders.

Even then RMB is not going to be THE reserve currency of the world like USD is right now. At best it will be one in the mix.

Austin
BRF Oldie
Posts: 22734
Joined: 23 Jul 2000 11:31

Re: PRC Economy - New Reflections : April 20 2015

Postby Austin » 10 Jan 2019 12:51

RMB has already been given Reserve Status by IMF so it is a reserve currency by this standards as others.

All they need now is Capital Account Convertibility which Chinese says will do it by 2020.

The problem with USD is US is weaponising its currency and using it to further political agenda like sanctions etc so eventually people will have a choice to move to other currency

I am not sure if Yen and Pound deserve to be in Reserve basket of IMF

pankajs
BRF Oldie
Posts: 10584
Joined: 13 Aug 2009 20:56

Re: PRC Economy - New Reflections : April 20 2015

Postby pankajs » 10 Jan 2019 13:08

Being granted a status by IMF or being in the SDR basket means only so much. Capital Account convertibility will again take them forward by only so much more. The rest will depend on the trust of other parties.

Does anyone wonder why USD is still king in this neck of the woods not having more than 10% share of the global trade. That's righty ... it is trust based and China has a long way.

https://en.wikipedia.org/wiki/Reserve_currency
Skip down to the "Global currency reserves" section

RMB formed 1.23% of the global reserve by 2017. So it is already a global reserve currency.

BUT notice who all are ahead of RMB on the list as of now.

Yen
Pound
Canadian dollar
Australian Dollar

As of NOW, Canada and Australia enjoy higher trust than China on safeguarding investors interest and they are not even in the SDR basket! The data is pretty clear.

Austin
BRF Oldie
Posts: 22734
Joined: 23 Jul 2000 11:31

Re: PRC Economy - New Reflections : April 20 2015

Postby Austin » 10 Jan 2019 13:56

Well Trust and Sentiments can dissapear over night what matter is hard data , Look how Apple just lost its value over night , How US stock market dropped and DT was in panic blaming fed and every body and worst asking to Buy on Dip !

These are hard times for Global Economy and US is not as strong as I used to think and china is not weak here , It holds the high card and can play the waiting game , while DT is for quick return which will be valid for him till the next election result.

IMHO , Japan is a dead country with 250 % Debt to GDP it is a basket case and worse it does not have any resources to bank on.
Same goes for UK and its pound , High Debt and Brexit is screwing them as well , Both Yen and Pound is only surviving because of Fed


Australia has better economic fundamentals and is resource rich country , I would rate them any day higher than Japan or UK.

There is nothing such as safe guard in Western system if the Government wants it can confiscate any thing it wants for any reason it wants , Look how country under sanction even for political reason can get their reserves or property confiscated.

RMB is gaining traction and China Trade Volume with the World will ensure that it will get much better ...... IMF recognisation of RMB is key and important element , You can get a reserve status without IMF recognising it.

PBOC will eventually move to capital account convertibilty but still does not prevent chinas RMB gaining traction much like India too does not have capital account convertibility.

ANy ways Time will Tell , 2019 will be an interesting year

Austin
BRF Oldie
Posts: 22734
Joined: 23 Jul 2000 11:31

Re: PRC Economy - New Reflections : April 20 2015

Postby Austin » 10 Jan 2019 13:58

Beijing says latest US-China trade talks were extensive, made progress on forced tech transfers

https://www.cnbc.com/2019/01/10/beijing ... talks.html

In a Thursday morning statement, China's Commerce Ministry said the just-concluded round of trade talks with the U.S. were extensive and established a foundation for the resolution of each others' concerns.
The U.S. side had issued its own statement earlier in the day, noting a long list of outstanding issues, but also recognizing that China had pledged to purchase "a substantial amount" of products and services from the U.S.
Gao Feng, a spokesman for China's Commerce Ministry, said Thursday afternoon that progress had been made during the talks on structural issues including forced tech transfers and the protection of intellectual property rights

Austin
BRF Oldie
Posts: 22734
Joined: 23 Jul 2000 11:31

Re: PRC Economy - New Reflections : April 20 2015

Postby Austin » 10 Jan 2019 14:06

Trump advisor Kevin Hassett: 'Heck of a lot of US companies,' not just Apple, could see China troubles

https://www.cnbc.com/2019/01/03/kevin-h ... lainternal

pankajs
BRF Oldie
Posts: 10584
Joined: 13 Aug 2009 20:56

Re: PRC Economy - New Reflections : April 20 2015

Postby pankajs » 10 Jan 2019 14:17

If "Japan is a dead country with 250 % Debt to GDP it is a basket case" what is China with a 300% debt to GDP?

US companies in China in trouble. True but what does that tell us about Chinese economy?

https://www.cnbc.com/2019/01/03/us-comp ... onomy.html
Companies from Apple to Ford are flashing warning signs about the Chinese economy

In other words, because Chinese economy is in trouble Apple to Ford are in trouble. Get the cause and effect wrong get the analysis wrong.

pankajs
BRF Oldie
Posts: 10584
Joined: 13 Aug 2009 20:56

Re: PRC Economy - New Reflections : April 20 2015

Postby pankajs » 10 Jan 2019 14:37

Had come across this a couple of days back ... quite a lot of data for those willing to spend ~8 minutes

https://www.bloomberg.com/news/audio/20 ... bill-radio
Victor Shih, associate professor of political economy at UC San Diego, on how the interest payments alone on China’s debt servicing is 22% of the country’s GDP. Hosted by Pimm Foxx and Lisa Abramowicz.

Interest payment alone is 22% of GDP! Not as a % of Revenue.

One solution is to drop the interest rate to ZERO. Problem solved like with Japan.

Other points to note
1. Domestic Debt = 300% of GDP
2. External debt = $2.5 Trillion
3. $1.2 Trillion have to rolled over this year
4. Chinese banks have borrowed in dollars abroad to part finance OBOR/BRI.
5. China has constantly increased its external debt to roll over the existing debt and and pay for some of the interest. Now what is it called when borrowing is used to pay back not only principal but also interest?

Quite an interesting analysis for the curious.

Austin
BRF Oldie
Posts: 22734
Joined: 23 Jul 2000 11:31

Re: PRC Economy - New Reflections : April 20 2015

Postby Austin » 10 Jan 2019 17:59

These Chinese debt figures are exaggerated by Western commentators for their own reason , I hear everybody but I take what the IMF takes as official value of debt not the state or country figures.

You can find debt to GDP ratio of every country on this site and these are official IMF figures https://tradingeconomics.com/

ZERO interest rate is the worst solution to the problem least of all you wipe the saving class, US is finding that out now as Fed begins to increase interest rate and market are panicking and DT is threatening Fed not to increase the interest rates.

Alan Greenspan has mentioned that historical interest rates were between 4-5 % across centuries this rate is good for debtors and creditors and savers

ArjunPandit
BRFite
Posts: 1873
Joined: 29 Mar 2017 06:37

Re: PRC Economy - New Reflections : April 20 2015

Postby ArjunPandit » 10 Jan 2019 18:13

Austin wrote:ZERO interest rate is the worst solution to the problem least of all you wipe the saving class, US is finding that out now as Fed begins to increase interest rate and market are panicking and DT is threatening Fed not to increase the interest rates.

US interest rates are not near zero.
1. currently fed fund rates are 2.5%
2. Fed has been increasing interest rates since 2015 or 2017 depending upon what is the bottom you want to consider
US and Japan are not the only countries with near zero interest rates, this has been tested by many other nordic countries. With a country of china it will be huge. But then it would leave a large no. of chinese with no option of savings to speak of. They would only have to invest in market, one form or another.
As you rightly point out the main problem is not not debt servicing but will be sustaining the revenue growth to the assumptions on which everything has been priced at a broader macro level in china

Austin
BRF Oldie
Posts: 22734
Joined: 23 Jul 2000 11:31

Re: PRC Economy - New Reflections : April 20 2015

Postby Austin » 10 Jan 2019 20:47

Zero interest rates are no way a virtue , It creates lot of bubble in economy and destroys the savers. Like currently US is experiencing with rise in interest rate the stock market is wobbling and DT is blaming the Fed and he is right , I can sympathitise with him because during BO era they have near zero interest rates , to top it up they even did multiple QE.

You need a real interest rate that is determined by market forces and not a artifically supressed one like Zero , Near Zero or Negitive .....Those wise men sitting on those Golden throne cannot determine the interest rate should be zero and then increase it when they feel they should , This is mockery nothing else.

That is why Alan Greenspan had mentioned that Historically interest rates has been 4-5 % which was considered optimum for debitors and creditors ......BTW he is quoting that is the historical one but that does not mean that is the ideal one that is something that needs to be determined by Market forces and real economy not a artifically supressed one where People in Golden Tower decide what the interest rate should be and inflation should be.

Austin
BRF Oldie
Posts: 22734
Joined: 23 Jul 2000 11:31

Re: PRC Economy - New Reflections : April 20 2015

Postby Austin » 13 Jan 2019 13:49

What does China own in the U.S.? | CNBC Explains


Austin
BRF Oldie
Posts: 22734
Joined: 23 Jul 2000 11:31

Re: PRC Economy - New Reflections : April 20 2015

Postby Austin » 14 Jan 2019 12:06

China is a house of cards, it will collapse on its own: David Stockman


disha
BR Mainsite Crew
Posts: 6732
Joined: 03 Dec 2006 04:17
Location: gaganaviharin

Re: PRC Economy - New Reflections : April 20 2015

Postby disha » 18 Jan 2019 11:19

https://www.bloomberg.com/news/articles/2019-01-17/forget-the-trade-war-china-is-already-in-crisis?srnd=businessweek-v2

Posting in full since lot of gems in this article.

Once again, the world’s investors are turning their worried gaze toward China. And for good reason. Economic growth in the third quarter sank to 6.5 percent, the slowest pace since the depths of the global financial crisis in 2009. Car purchases fell last year for the first time in more than two decades. Apple Inc.’s warning in early January that iPhone sales in China were sagging alerted the world to how a slowing Middle Kingdom would drag down global growth and corporate profits. But the locals figured that out a while ago. Even after a recent uptick, the stock market in Shanghai has still plunged by more than a quarter from its 2018 high. The outlook isn’t any rosier. Tariffs on Chinese exports to the U.S. imposed by President Donald Trump are starting to pinch the country’s factories. A steep and unexpected plunge in imports in December signaled just how sharply the economy is decelerating. That’s led Beijing to turn the volume down on its bravado and negotiate with Washington to defuse the conflict.
A trade pact, if it happens, may soothe investors, and perhaps even juice economic growth—at least temporarily. But it won’t bring an end to China’s woes. While tariffs are a nuisance, the real problems run deeper, embedded in China’s financial structure.
What goes widely unnoticed is that China is already in crisis. No, it’s not the sort of hold-on-for-dear-life collapse the U.S. had in 2008 or the surprising, ferocious meltdowns the Asian Tiger economies experienced in 1997. Nonetheless, it’s a crisis, complete with gutted banks, bankrupt companies, and state bailouts. Since the Chinese distinguish their model of state capitalism as “socialism with Chinese characteristics,” let’s call this a “financial crisis with Chinese attributes.”
This crisis is not merely about the current slowdown in growth. It’s been going on for a while, and by the looks of it, isn’t going away anytime soon. How it’s resolved—or isn’t—will have repercussions much bigger than a few quarters of poor growth performance. This crisis is about China’s economic future and whether or not it can manage the structural transformation necessary to propel the economy into the ranks of the world’s most advanced. And it also will determine if China will be a pillar of global growth—or a threat to the world’s financial stability.
On the surface, the whole idea that China is in a crisis may sound ridiculous. Growth has tapered off, but it remains relatively strong—assuming you believe the government’s figures. Banks and companies aren’t tumbling into insolvency on a massive scale. The yuan has even shown signs of strength in recent days. While anxiety over the state of the economy has mounted—thus the pullback by Chinese shoppers—the mood in China hasn’t degenerated into the gloom that usually accompanies financial upheavals.
Crisis? What crisis?
True, China may never suffer the panicked fiasco that emanated from Wall Street in 2008. This financial crisis with Chinese attributes isn’t taking the same course as most others. Rather than a sudden explosion that destroys banks and jobs, China’s version is protracted, moving so slowly that it can be hard to notice. Ultimately, though, the cost and pain will be similar to—perhaps even worse than—that of the traditional crises we’ve come to expect.
A few years ago, some China watchers (this writer included) predicted the economy could tumble into a 2008-like collapse. All the warning signs for catastrophe were flashing bright red: a housing bubble, excess capacity in industries from steel to solar panels, and most worrisome of all, a debt buildup of gargantuan proportions. Total debt relative to national output surged to 253 percent in mid-2018, from only 140 percent a decade earlier, according to the Bank for International Settlements. No emerging economy since the 1990s has had such an outsize debt expansion and escaped some sort of financial calamity. China would have to defy history to dodge a debt disaster.
We’ve been watching and waiting for China’s Lehman Brothers moment—then waiting some more. It never arrived. Some analysts have come to figure it never will—that, indeed, China is too big to fail. The Chinese government, the new argument goes, has so many levers of control—over banks, big corporations, and capital flows—that it can suppress the sort of crisis a more liberal economy can’t prevent. This superpower was on display in 2015 after a stock market bubble burst, fueled by shifty lending and bureaucratic ineptitude. Money flooded out of the country as the currency staggered. What would likely have laid other emerging markets low was just another day’s work for China’s powerful mandarins. The government organized a stock bailout and clamped down on capital outflows. Crisis averted.
That approach is representative of Beijing’s overall strategy toward its debt problem. The government—obsessed with social stability—isn’t allowing the debt bomb to detonate. But the financial crisis with Chinese attributes is inflicting the same damage on the economy anyway.
As in any debt crisis, the health of China’s banks is being dangerously eroded. Although nonperforming loans officially reached the highest level in a decade at the end of 2018, they remain at less than 2 percent of the total outstanding, according to the government. Hardly anyone believes that statistic. Charlene Chu, a senior partner at Autonomous Research and one of the foremost experts on China’s credit woes, estimates that 24 percent of total credit, worth some $8.5 trillion, has gone sour. That may sound outrageous, but in the 1997 meltdown, nonperforming loans in Indonesia, South Korea, and Thailand reached about a third of their total loans.
As is often the case in crises, the true extent of the debt and the damage is probably higher than anyone can guess. In an October study, S&P Global Ratings noted that the amount of local government debt in China remains a mystery, since so much of it is held off balance sheets. That “hidden” debt could be “multiples of the publicly disclosed amount”—as high as $6 trillion. S&P calls that sum “a debt iceberg with titanic credit risks.” Local governments have often done the heavy lifting on growth-stimulating infrastructure spending, but with so much debt, that role is reaching its limits.
China is dealing with another feature of a financial crisis: capital flight. Because of strict controls, money can’t gush out as it probably would under a less restrictive regime. But it ends up overseas anyway. Chinese have topped the list of foreign buyers of U.S. residential real estate for six consecutive years, according to the National Association of Realtors. In the 12 months to the end of March, they snapped up more than $30 billion worth of American homes. Canadians purchased only a third as much; Brits and Indians, a quarter each.
In theory, the Chinese-style financial crisis has advantages over the run-of-the-mill sort. By maintaining growth and employment, Beijing is buying time to fix the system. Regulators are attempting some sort of cleanup: Corporate defaults were up sharply last year. In reality, the government is perpetuating the crisis by taking out the financial garbage much too slowly. What’s probably required is a massive overhaul of bloated state-owned enterprises. Even worse, policymakers keep adding refuse to the pile. They remain fixated on achieving growth targets impossible to reach without infusions of more credit. China is a debt junkie, and like any addict, it needs a fix—of credit—to keep going. When that short-term relief wears off, the economy begins to slow down again. Chinese leaders get the shakes, lose their determination to tackle the debt, and inject another hit of credit.
They’re trying it again. Much of the recent slowdown results from government efforts to constrain debt. So policymakers are, as usual, turning the credit spigot back on. In early January the central bank reduced the amount of cash it mandates banks hold in reserve, allowing them to lend more. Inevitably, that means more bad loans. “More debt is generated, and that debt is used to create all the things that have caused the problem over the past decade,” says Dinny McMahon, author of the book China’s Great Wall of Debt.
In that sense, the government is making the financial crisis with Chinese attributes worse than a standard crisis. Lehman moments might be terrifying, but they’re also cleansing, an opportunity for the market to scrub out the bad stuff and clear room for new, good stuff. Beijing, by stopping that from happening, is allowing the waste to rot and fester, likely enlarging the costs of the unavoidable cleanup.
Eventually the state will have to step in and fix the mess, just as the U.S. government did in 2008. China’s banking repair will likely require the mother of all Troubled Asset Relief Programs. We can get a rough idea from past crises of how big the bill might be. South Korea’s government spent the equivalent of 31 percent of national output repairing its financial system in the wake of the 1997 crisis. Applying that as a guide, China’s tab could reach $3.8 trillion. It could be even higher. Indonesia coughed up 57 percent of its gross domestic product in its post-1997 restructuring.
Meanwhile, the economy is weighed down. Too much of China’s debt has been amassed in unproductive ways—unnecessary factories, insolvent “zombie” companies—and that gross misallocation of resources is eating away at key drivers of growth. The New York-based Conference Board, a research association, figures total productivity growth in China has been negative since 2012.
All this leads to a downward spiral. With the nation already buried in debt, each attempt to stimulate the economy with fresh credit has a smaller and smaller payoff. As research firm Fathom Consulting explained in an October study, China’s old economic model “is exhibiting diminishing marginal returns.” There are signs of that happening. Despite months of prodding lenders, credit growth has not picked up steam as policymakers have wished. Heightened anxiety over the economy combined with the already staggering level of debt is making it more difficult for the government to rely on additional credit to keep China growing.
Perhaps there will come a point where even Chinese policymakers recognize that the debt is so dangerous that controlling it must take precedence over growth. It’s difficult, though, to imagine what will wake them. Higher inflation could be a game changer, since that would make it more challenging for the central bank to keep pumping in the cash the system needs to stay afloat. But that isn’t in the cards, at least in the short term. A sharp drop in inflation is raising concerns that China might enter a deflationary period that would make its debt an even heavier burden to bear.
The only real solution, as McMahon notes, is “changing the way the economy grows.” Economists and policy wonks have argued for eons about China’s need to “rebalance”—shift its growth engine from investment to consumption. That’s not happening quickly enough. Each time the government uses debt to prop up growth, it’s a setback for reform of the economic system. Beijing, according to London-based Fathom, is “avoiding the economic realities of rebalancing while storing up problems for the future.”
The underlying issue is that the liberalizing reforms that could set the economy on a healthier track have all but evaporated, and there’s no revival on the horizon. President Xi Jinping’s top priority is imposing Communist Party control on everything, so he’s kept the state-led, investment-heavy economic agenda that’s at the heart of this characteristically Chinese financial crisis. His latest industrial policies may aspire to fancier products—robots, microchips, electric cars—but they could create the same old mess: too many factories, too much debt, too much waste.
Even if Xi’s approach gives birth to new sectors and growth, that won’t necessarily undo the harm already done. The bad loans won’t magically transform into gold. The only real difference between a regular financial crisis and a financial crisis with Chinese attributes is the duration. Most normal financial upheavals last months; China’s may drag on for years. As the world’s premier emerging economy, the People’s Republic should be a source of succor to a slipping world economy. But until it finally resolves its financial crisis, China will instead remain a source of global stress.

pankajs
BRF Oldie
Posts: 10584
Joined: 13 Aug 2009 20:56

Re: PRC Economy - New Reflections : April 20 2015

Postby pankajs » 19 Jan 2019 00:22

https://www.scmp.com/economy/china-econ ... ashingtons
Jobs in China’s export-import industries wither in the heat of Washington’s trade war with Beijing
Demand for labour at China’s importers, exporters, and related manufacturers fell by 40 per cent in the last quarter of 2018 from a year earlier, showing the trade war with the US has taken its toll, a survey released on Friday revealed.

...

However, the decline in fourth quarter trade-related employment was slightly smaller than in the third, when hiring in those sectors plunged 53 per cent, the quarterly survey showed.

Austin
BRF Oldie
Posts: 22734
Joined: 23 Jul 2000 11:31

Re: PRC Economy - New Reflections : April 20 2015

Postby Austin » 21 Jan 2019 09:35

China says its economy grew 6.6 percent in 2018. That's the lowest official pace in 28 years

China on Monday announced that its official economic growth came in at 6.6 percent in 2018 — the slowest pace since 1990.
That full-year figure matched expectations from analysts polled by Reuters.
Fourth-quarter GDP growth also matched expectations, coming in at 6.4 percent on-year from 6.5 percent in the third quarter.

Singha
BRF Oldie
Posts: 64521
Joined: 13 Aug 2004 19:42
Location: the grasshopper lies heavy

Re: PRC Economy - New Reflections : April 20 2015

Postby Singha » 21 Jan 2019 10:48

the OBOR/BRI was the big play to deal with overcapacity , growth path and labour surplus in the chinese internal economy. export steel, cement, products, services, even lakhs of workers into all corners for 20 years until china could close the gaps and move to higher value added manufacturing as well as number of workers would start waning.

but OBOR/BRI scam fell apart due to exposure of harsh lending norms and debt trap. none but the most despotic/desperate would want to land their country in that trap. and western bloc is amping up the pressure from either direction. in contrast US was quite generous in funding its european allies post war as a long term play. and korea/japan too got a lot of help.

emperor Xi runs the risk of looking discredited and losing face if he cannot surmount these issues and justify his proposed lifelong reign at the helm.

he probably has a window of another 2 years before plots in the politburo, and lesser economic growth lead to one of those periodic convulsions that china is known for. last one was 1991...its nearly 30 years now.....

Austin
BRF Oldie
Posts: 22734
Joined: 23 Jul 2000 11:31

Re: PRC Economy - New Reflections : April 20 2015

Postby Austin » 21 Jan 2019 15:35

China has retained the status of the second world economy in 2018

https://ria.ru/20190121/1549638664.html

BEIJING, January 21 - RIA News . China at the end of 2018 retained the status of the second largest economy in the world, said Ning Jizhe, head of the state statistical office of China, on Monday.

With a total GDP of 82.07 trillion yuan (about 12 trillion dollars), China in 2017 also secured the status of the second economy of the world, second only to the United States.

"In 2018, China’s total GDP exceeded 90 trillion yuan, which is about 8 trillion more than in 2017. If we assume at the average rate, China’s total economy reached 13.6 trillion dollars, confidently ranking second in the world" - said at a briefing Ning Jizhe.


According to published data, China’s GDP growth in 2018 was 6.6%, which was the worst figure since 1990, but it coincided with the official forecast of the authorities, who expected growth of about 6.5%. At the same time, the country's GDP growth rates in the fourth quarter slowed down to 6.4% per annum.

Austin
BRF Oldie
Posts: 22734
Joined: 23 Jul 2000 11:31

Re: PRC Economy - New Reflections : April 20 2015

Postby Austin » 21 Jan 2019 15:36

Me thinks in the next crash which can happen any where China , EU or US as due to Domino effect all will get impacted.

China will have to devaluate its currency and that will impact its nominal GDP figure perhaps significantly

Austin
BRF Oldie
Posts: 22734
Joined: 23 Jul 2000 11:31

Re: PRC Economy - New Reflections : April 20 2015

Postby Austin » 24 Jan 2019 15:48

Ex-RBI Governor Rajan Says U.S-China Dispute Far Bigger Than Trade


Austin
BRF Oldie
Posts: 22734
Joined: 23 Jul 2000 11:31

Re: PRC Economy - New Reflections : April 20 2015

Postby Austin » 24 Jan 2019 16:15

Davos Round Table Discussion on Chinese Economy


Austin
BRF Oldie
Posts: 22734
Joined: 23 Jul 2000 11:31

Re: PRC Economy - New Reflections : April 20 2015

Postby Austin » 24 Jan 2019 23:32

Wilbur Ross Says U.S., China ‘Miles and Miles’ From Resolving Trade War

https://www.bloomberg.com/news/articles ... -trade-war

Austin
BRF Oldie
Posts: 22734
Joined: 23 Jul 2000 11:31

Re: PRC Economy - New Reflections : April 20 2015

Postby Austin » 28 Jan 2019 19:39

Malaysia to Terminate $20 Billion China-Backed Rail Project

https://www.bloomberg.com/news/articles ... emium-asia

Katare
BRF Oldie
Posts: 2352
Joined: 02 Mar 2002 12:31

Re: PRC Economy - New Reflections : April 20 2015

Postby Katare » 29 Jan 2019 03:52

China’s total debt (private and govt) is north of 300%, federal govt’s debt is below 50% of GDP.

First number is very risky but the second is very robust. So if deleveraging happens central govt would be in pretty strong position to stabilize frayed nerves.

Suraj
Forum Moderator
Posts: 12084
Joined: 20 Jan 2002 12:31

Re: PRC Economy - New Reflections : April 20 2015

Postby Suraj » 29 Jan 2019 03:57

I see the situation as the opposite. The central government has a very low direct exposure to the total debt load, including state, local and shadow banking liabilities. Deleveraging is almost always rapid and messy, and it would appear easier if Beijing already had coverage of the wider scope of the problem - which will hit them one day - than that it's still out on the horizon. In effect it's easier to control a crisis when you already have a significant handle on it, than expect clear decision making when something 6x larger than the current scope hits rapidly.


Return to “Technology & Economic Forum”

Who is online

Users browsing this forum: No registered users and 7 guests