Going from 1 to 2 is a 100% increase from 2 to 3 only a 50% increase. China is slowing as all developing economies do and will. It may not make its 7% target as US hopes for 2%. Bradshaw’s article is excellent in that is spends out the impact on others as China slows but the notion that China would pull the rest of a faltering world economy along was not of Chinese making. It has other plans mainly the urbanization of its largely rural population and that is centered on growth in domestic demand in a multiplier process with slight foreign trade impact.
Chengbu is a small town, less than 300,000. Every corner of this town is in process of change with the central avenue going from, if lined, 4 lanes to six wide lanes, sidewalks tore up new sewer systems going down and such. Store fronts being redone, signage upgraded and on and on; a massive football stadium up in 7 months. There is one person living on the street, apparently from a different language and ethnic group; he seems happy there. Compare ….
Chengbu is a small town, less than 300,000. Every corner of this town is in process of change with the central avenue going from, if lined, 4 lanes to six wide lanes, sidewalks tore up new sewer systems going down and such. Store fronts being redone, signage upgraded and on and on; a massive football stadium up in 7 months. There is one person living on the street, apparently from a different language and ethnic group; he seems happy there. Compare ….
2
Vale is not trying to sell its assets in Argentina because of the Chinese crisis. It's trying to sell them because our government has placed limitations on foreign exchange and won't allow them to locally sell their dollars at their real value.
2
Bad graph. The size of the circle representing US trade with China seems as big as half the US! Better to represent US exports to China as a proportion of GDP, in which case it's small indeed
Let's not blow China out of proportion to its influence on the US economy or its financial system.
Let's not blow China out of proportion to its influence on the US economy or its financial system.
6
Yes, I had the same complaint when the NYT was spilling ink on how sanctions on Russia were going to hurt Germany's exports. Upon researching, the proportion of GDP turned out to be minuscule.
3
Can China still afford to loan the U.S. money? Aren't they our main bond buyer?
I don't believe there will be a so terrible slowdown in the chinese economy. It will only slow when there are no longer rural poor people in the country. What makes China grow fast is the fact that millions of rural poor people move to the city to do more productive jobs. If demand is not enough to keep industry growing, they can raise it by lowering interest rates or devaluating their currency. Chinese are very hardworking, very frugal and their government does not need parliament approval to take the necessary measures to keep the economy working and growing. Besides, there are other large asian nations with economies growing and modernizing fast, who can help prop up the chinese economy. What is happening now in China is the same that happened in South Korea in the 1980s: the economy is in a transition to a new phase, where the living standards of the local population will improve fast in order to sustain growth, as the export-oriented model is no longer enough to do it.
8
A lot has happened in China in my lifetime. I was told to eat all my food because of all those starving in China. One can get on youtube and get a good look around the major cities, ride the bullet trains by looking out the window on many trips that last 30 minutes or more travelling at about 180 mph. I have yet to see a hungry person, graffiti, anyone not well dressed or a slum. Markets are ephemeral, irrational if you will. Examine the last two weeks and tell me this has more to do with rigged trading than fundamentals.
5
Ironically what appears to be bad for China through the blinders of Capitalism's need for unending material growth is probably good for the planet. The Earth cannot survive 1 billion Chinese with cars, eating more meat, or wallowing in the wasteful lifestyles of the US. The turn towards Auto Addiction from bicycles was a major mistake for the Chinese simply trying to copy the US. But capitalism demands endless material conspicuous consumption even if it kills the planet and ironically actually denies mobile public Green Transit, parks, schools, healthcare and other shared resources for all. It is peculiarly ironic that the NY Times had an article the other day showing the drops in pollution from satellite data over the endless War zones just from the drop in economic growth. Beijing's cars and factories already make it buried in a shroud of pollution - is this really how we want to live?
12
Couldn't have said it better myself....
A Chinese market correction in it's tiny limited insular equity markets is of primary concern to those with significant investments in that market.
China's lessening demand for natural resources including minerals, metals, agricultural products and fossil fuels is of concern to those nations, corporations and plutocrats dependent upon Chinese demand for those commodities.
China's economic faltering is of grave concern to China's collective term limited one party leadership continuing ability to reign and rule.
China is most concerned about it's own values and interests.
China's lessening demand for natural resources including minerals, metals, agricultural products and fossil fuels is of concern to those nations, corporations and plutocrats dependent upon Chinese demand for those commodities.
China's economic faltering is of grave concern to China's collective term limited one party leadership continuing ability to reign and rule.
China is most concerned about it's own values and interests.
1
China’s fundamentals are not in question; everything else is. Past GDP doesn’t make you recession-proof.
2
After you read this article, parse its content with the reality of immigration to Europe and other first world countries....
Special note to the fact that it's third world/oil countries, where China has done a great deal of business, that are experiencing biggest population growth.
Special note to the fact that it's third world/oil countries, where China has done a great deal of business, that are experiencing biggest population growth.
Yep, just like Japan's boom in the 80s & 90s, people were betting the farm on the Japanese economy and predicting that Japan will take over the world. History repeats itself.
4
In a nutshell, what happened in last few days was that a glitch in ATM and people were rattled.
1
China has never been that attractive a market for Americans to sell into, save mainly to Apple products.
Great place to set up a factory, then have your know-how and IP plundered.
Now it looks like a great place to buy non-financial assets, provided the State does not object, e.g. ocean-side property, and certain strat industries.
Great place to set up a factory, then have your know-how and IP plundered.
Now it looks like a great place to buy non-financial assets, provided the State does not object, e.g. ocean-side property, and certain strat industries.
China's communist government's management of the economy through subsidies, regulations and manipulation of the currency is not at all unlike the U.S. federal government's economic policies. Both governments lack the knowledge only the free market can provide. Both will inevitably come a cropper as a result of ignorance.
1
I'm unconvinced about the depth, significance, and facts of what is going on in China -- i.e. is there anything really here other than an expected economic slowing and a predictable equities crash after a propaganda driven run up?
I don't thing we know; more to the point, most information is that the Chinese government itself has very poor (and greatly manipulated...) data about the state of the Chinese economy.
While the facts of what is actually happening are obscured and will take some time to come into focus (months...), most notable is the hype around the story. There is a confluence of factors driving the media frenzy, with our popular view of China shifting almost overnight from an unstoppable, brilliantly led economic and rising military juggernaut destined to dominate East Asia and then the world, to a society perhaps on the verge of an economic stall that might lead to instability and worse.
See "Japan Inc." of the late 70s and early 80s -- didn't quite pan out that way.
I don't thing we know; more to the point, most information is that the Chinese government itself has very poor (and greatly manipulated...) data about the state of the Chinese economy.
While the facts of what is actually happening are obscured and will take some time to come into focus (months...), most notable is the hype around the story. There is a confluence of factors driving the media frenzy, with our popular view of China shifting almost overnight from an unstoppable, brilliantly led economic and rising military juggernaut destined to dominate East Asia and then the world, to a society perhaps on the verge of an economic stall that might lead to instability and worse.
See "Japan Inc." of the late 70s and early 80s -- didn't quite pan out that way.
4
It could not be any worse than Standard and Poors and Moodys evaluation of the major banks, i.e. Lehman Brothers 4 days prior to their collapse.
3
The stock market is not the economy. Apple CEO says Apple is selling very well in China. Yet Apple stock went down along with China's. The very rich in both countries , Aka the 1%, make their money by speculating and not by investing in products that consumers can buy. Here in the U.S. , companies don't invest in products but offer stock buyback so that enrich the CEO and stockholders but do nothing for the economy . Plenty of money goes into speculating , very little into producing goods for consumers to buy. Solutions: regulate Wall Street speculation, tax highly the 1% and lower taxes for the rest. Result: more money will go into goods, job creation and infrastructure.
14
Glad to see we gave away our industrial manufacturing so we can import cheap junk. Who did this to us? Nixon, the Republicans, other sellouts?
1
Don't just blame on person or one party. All of the people, regardless of party, in the Legislature and the Executive have been party to selling the U.S. to China. Bubba, the Bushes, Obama, Ronny, etc. The great brains on Wall Street, the Wal-Marts in the U.S, the Nikes, the Tech companies like Apple, Dell, Intel, etc., all are responsible. It's the 1% and ALL the political and economic geniuses inside Wall Street AND the Boys and Girls inside the Beltway.
4
We all know - or we should know - what happens when we put all our eggs in the same basket.
In China, the problem has been dismal consumer demand. Now, I hope, China's leaders have come to realize that they have to stimulate domestic demand as well; they cannot count on exports only.
Big irony is that, at least over here in Finland, stimulating domestic demand is absolute NO in these austerity years. That, in turn means less exports for China. And so we end where we started.
In China, the problem has been dismal consumer demand. Now, I hope, China's leaders have come to realize that they have to stimulate domestic demand as well; they cannot count on exports only.
Big irony is that, at least over here in Finland, stimulating domestic demand is absolute NO in these austerity years. That, in turn means less exports for China. And so we end where we started.
1
Surely no one ever thought that any investment, and especially a bet in a country with China's government system, is a sure bet.
1
Our FORMER financial adviser did.
1
Almost ten years ago the economist Stephen Roach described the global economy and its financial adjunct as a four-engine airliner flying on only two engines: Chinese production/natural resource demand, and U.S. consumption. Nothing else held it in the air.
Ten years later, U.S. demand is down because of the collapse of the boom based on the real estate bubble and a long and only tentative recovery thanks to the preference for austerity to stimulus by the moneyed class. This is also the case in Europe. One engine falters.
And so the Chinese production engine falters, as well because of rising costs, and the market for raw materials also falters.
The short-term answer is more demand through financial stimulus, but the few people who command most financial resources will not allow this for fear that it will reduce the value of their debt-based assets through inflation.
The airliner is still in the air, but losing altitude. Lighten ship as it will, the trajectory is downward.
Ten years later, U.S. demand is down because of the collapse of the boom based on the real estate bubble and a long and only tentative recovery thanks to the preference for austerity to stimulus by the moneyed class. This is also the case in Europe. One engine falters.
And so the Chinese production engine falters, as well because of rising costs, and the market for raw materials also falters.
The short-term answer is more demand through financial stimulus, but the few people who command most financial resources will not allow this for fear that it will reduce the value of their debt-based assets through inflation.
The airliner is still in the air, but losing altitude. Lighten ship as it will, the trajectory is downward.
8
China has entered an uncertain stage. The transition to an internal demand-driven economy will neither happen smoothly nor will it happen overnight. The reduction in exports and the drain on investment is already under way.
1
now everyone realizes how risky it is to trust a communist country and has now woken up from China's beautifully deceiving prapagandas - businesses are always short-sighted where there is money to be made - is it worthy after all ?
2
So, do you have to be old to remember the high growth rates experienced early on by other industrializing/developing economies. Remember the USSR's rapid growth? It's easier to maintain high rates at the beginning but a little harder once you've done all of the basic stuff. Did people really think China would grow at 8, 9, or 10 percent forever? Really? Maybe they're listening to the Donald.
1
No, they are listening to the U.S. Government and the greatest minds in the Universe from Wall Street and the financial advisers of the country.
2
Maybe its time for the people in power in this country to take a
long look at the global economy and revise their sun rises in the east,
and sets in the west philosophy. Personally I look for goods manufactured in
the US, latin America or Europe.
long look at the global economy and revise their sun rises in the east,
and sets in the west philosophy. Personally I look for goods manufactured in
the US, latin America or Europe.
2
Many of those people in power you are talking about have massive investments in these other countries along with income that, in order to avoid paying U.S. taxes, have been diverted to offshore accounts. Revise their suns in the east? Not likely.
1
China's market up 140% last year and down about 50% now. This is a correction and to be expected.Many speculators were involved and they lost. We have a small exposure to china for exports. China is sill at 7% GDP, we would love to have 5%. Our exposure to China buying out debt is about 1,3 trililon out of our 16 trillion debt. most of our debt is owned by US citizens.
WE panicked, like we do over lots of things we don't understands and we are an ignorant country overall.
WE panicked, like we do over lots of things we don't understands and we are an ignorant country overall.
6
Unlike President Obama, I do not trust the Chinese communist party with determining the health of the US economy nor do I trust generals in the Iranian Army to verify that Iran is not producing nuclear weapon.
Hoping for the continued implosion of China's economy with glee. Yes, China's evil corrupt totalitarian government deserves nothing less. Hopefully their economy will lead to widespread social unrest and ultimately the demise of the CCP and the fleeing and imprisonment of China's leaders. Amen.
1
There is a Chinese admonition, be careful what you wish for, it may come true. The tendency towards glee over China's troubles is understandable but if what you describe happened, the resulting turmoil and effect on the global economy would be devastating.
2
True, and we're all aware of that, but the CCP is so corrupt and brutal to its citizenry that its fall would on balance be a good thing, at least for the people of China, if not for the rest of the world, and the US would benefit from the CCP's fall too, with all their hacking, thieving and fleecing of Americans, on balance too.
1
Most of the China specialists have ignored the changing economic fundamentals on China, which is one of the reasons why Western economies took recent China shock as it is. Clearly, most of our economists, Keynesians or monetarists, have not fully explained these changes.
Determinants of economic growth are (1) productivity growth ,(2) working-age population to the total (demography), and (3) % of these working-age population actually working (participation rate).
According to Harry X. Wu of Hitotsubashi University of Japan (like London School of Economics), China's total factor productivity TFP), 1% ave. growth during 1978-2012, turned negative since 2007. This TFP growth was less than Japan's 4% (1950-1970), Taiwan's 3% (1966-1990) or South Korea's 2% (1966-1990). This means China's spectacular growth came from debt-driven and inefficient investment. (source: WSJ 9/1/14 Mark Magnier)
Furthermore, China is facing demographic change right now. Their working-age population ratio is peaking out before China changes from 'developing' status to 'developed' one. (source: Nihon Keizai Shimbun, editorial 7/27/2015, Tamura). Our demographic change happened before China after Japan. Our Ave. labor productivity annual growth declined to 1.3% (2007-2014) from 2.6% (2000-2007). Our economic growth has been stagnant since the financial crisis. Now, you understand why China is facing similar problem like us or Japan.
Determinants of economic growth are (1) productivity growth ,(2) working-age population to the total (demography), and (3) % of these working-age population actually working (participation rate).
According to Harry X. Wu of Hitotsubashi University of Japan (like London School of Economics), China's total factor productivity TFP), 1% ave. growth during 1978-2012, turned negative since 2007. This TFP growth was less than Japan's 4% (1950-1970), Taiwan's 3% (1966-1990) or South Korea's 2% (1966-1990). This means China's spectacular growth came from debt-driven and inefficient investment. (source: WSJ 9/1/14 Mark Magnier)
Furthermore, China is facing demographic change right now. Their working-age population ratio is peaking out before China changes from 'developing' status to 'developed' one. (source: Nihon Keizai Shimbun, editorial 7/27/2015, Tamura). Our demographic change happened before China after Japan. Our Ave. labor productivity annual growth declined to 1.3% (2007-2014) from 2.6% (2000-2007). Our economic growth has been stagnant since the financial crisis. Now, you understand why China is facing similar problem like us or Japan.
2
President Xi's economic stewardship is in severe doubt. Labor strife seems to be inevitable since the gov't thinks that not paying workers is ok. The commodities exporters to China and the countries benefiting from Chinese loans are thrown off balance. China will certainly have to scale back its aggressive foreign policy.
2
China growth relies on selling stuff to Europe and the united states I guess a few years of double digit unemployment and book cooking in USA and EU means China has to slow down as they shift gears into a consumer society.
I was at my bank as the Chinese college kids were mobbing the place opening new bank accounts the banker told me these kids are loaded. The Banker said American kids have no money in comparison. The ratio is 100 to one if one of our kids deposits 1000 they drop 100,000 in cash into the bank. sit with that for a while.
How Long before China sells their lump of Treasuries and buys up distressed commodity assets in emergent markets that borrowed in cheap dollars ? Those cheap dollar loans at zero rates that have to be paid back in a dollar that is 25% higher?
Buckle in kids we are in for a rocky ride. Can the Fed buy up all of those treasury's? The Dollar will go higher and treasury's drop The Market is last man standing then its USA game over. China cashes out and buys the dirt cheap real assets and dumps its paper. We are left with a paper tiger that burns up in an instant.
I was at my bank as the Chinese college kids were mobbing the place opening new bank accounts the banker told me these kids are loaded. The Banker said American kids have no money in comparison. The ratio is 100 to one if one of our kids deposits 1000 they drop 100,000 in cash into the bank. sit with that for a while.
How Long before China sells their lump of Treasuries and buys up distressed commodity assets in emergent markets that borrowed in cheap dollars ? Those cheap dollar loans at zero rates that have to be paid back in a dollar that is 25% higher?
Buckle in kids we are in for a rocky ride. Can the Fed buy up all of those treasury's? The Dollar will go higher and treasury's drop The Market is last man standing then its USA game over. China cashes out and buys the dirt cheap real assets and dumps its paper. We are left with a paper tiger that burns up in an instant.
3
There aren't enough "dirt cheap assets" in the whole world to offset any wholesale Chinese sell-off of US Treasuries. They need some sort of asset to buy that is liquid and reliable in order to recycle their huge trade and current account surpluses.
Besides, currently, demand for Treasuries in quite high both among foreign and domestic buyers.
Besides, currently, demand for Treasuries in quite high both among foreign and domestic buyers.
3
really not enough dirt cheap assets there are 9 trillion in loans out side of our system that are on fire now. Like all those Swiss Mortgages that were held out side of Switzerland that worked well huh? China is going to off load their Treasuries while they push people into the safe haven risk off play its happening. Get ready for the unwind reset and decline of US as the reserve currency its coming like watching a slow train wreck. China can begin a consumer economy on their home turf. Looking at retail sales, the US isn't pulling their weight for the so called recovery our 20 somethings are eyeball deep in student loan debt.
You can invest in Gopro they dont make the stick, the velcro for the helmet, the camera, the components inside the camera but their stock is worth $100. go figure ...hahaha
You can invest in Gopro they dont make the stick, the velcro for the helmet, the camera, the components inside the camera but their stock is worth $100. go figure ...hahaha
Ultimately, how good for us is China's growth as an economic world power?
I can't imagine that it's low prices have been very good for the american worker.
And all of that resource extraction hasn't been that good for the environment
And we're so afraid of offending china because of the economic issues that we don't speak up on its foreign policy.
There has been easy money to be made from China for the corporations and it's been a mainstay of walmartesque prices but I think that unraveling our relationship with its economy might be a very good thing in the future.
I can't imagine that it's low prices have been very good for the american worker.
And all of that resource extraction hasn't been that good for the environment
And we're so afraid of offending china because of the economic issues that we don't speak up on its foreign policy.
There has been easy money to be made from China for the corporations and it's been a mainstay of walmartesque prices but I think that unraveling our relationship with its economy might be a very good thing in the future.
7
China was never a sure bet, the only people who thought so were those who typically believe in never ending bubbles.
The surest indicator that China was taking a reverse course was when the Central Government started focusing more on Nationalistic endeavors like venturing into disputed land expansions and the cracking down of social media and journalists. Similarly with Putin's Nationalistic endeavors in the Baltic Sea and Crimea; whenever a country takes its focus off of its domestic economy, fair labor practices and freedom of expression and puts that focus on strange, pointless, land disputes, you know there is something wrong with its domestic policies, which is reflected ultimately in its economy.
The surest indicator that China was taking a reverse course was when the Central Government started focusing more on Nationalistic endeavors like venturing into disputed land expansions and the cracking down of social media and journalists. Similarly with Putin's Nationalistic endeavors in the Baltic Sea and Crimea; whenever a country takes its focus off of its domestic economy, fair labor practices and freedom of expression and puts that focus on strange, pointless, land disputes, you know there is something wrong with its domestic policies, which is reflected ultimately in its economy.
3
China's real problem are much much deeper than anybody realizes.
To start with, the education system is overcrowded and mediocre. Classes normally have 50-70 students in middle/high school, and the focus is overwhelmingly on rote memorization and test-taking. Combine that with the government's discouragement of creative and original thinking, and you have an entire generation of students who are great at taking tests, but have few real-world work skills such as creative thinking and working in teams.
The second problem is demographics. because of the one-child policy, China, just like Japan before it, is headed for a demographic nightmare, in which there are not enough workers to support all the senior citizens.
The third problem is that the emphasis on economic growth at all costs has resulted in the wholesale destruction of China's environment. The air pollution is bad, to be certain, but the water pollution is even worse. Likewise, the emphasis on economic growth has led to the development of crony capitalism, in which greed and corruption have become the dominant political and economic values, and both money and brainpower are fleeing the country in droves. It's not just coincidence that pretty much anybody who can is buying property abroad and sending their kid(s) to school in an English-speaking country.
To start with, the education system is overcrowded and mediocre. Classes normally have 50-70 students in middle/high school, and the focus is overwhelmingly on rote memorization and test-taking. Combine that with the government's discouragement of creative and original thinking, and you have an entire generation of students who are great at taking tests, but have few real-world work skills such as creative thinking and working in teams.
The second problem is demographics. because of the one-child policy, China, just like Japan before it, is headed for a demographic nightmare, in which there are not enough workers to support all the senior citizens.
The third problem is that the emphasis on economic growth at all costs has resulted in the wholesale destruction of China's environment. The air pollution is bad, to be certain, but the water pollution is even worse. Likewise, the emphasis on economic growth has led to the development of crony capitalism, in which greed and corruption have become the dominant political and economic values, and both money and brainpower are fleeing the country in droves. It's not just coincidence that pretty much anybody who can is buying property abroad and sending their kid(s) to school in an English-speaking country.
5
In terms of buying property abroad, there's a little more to it than that. It has been explained to me that buying property in China is essentially buying a long-term lease from the government. At some point -- I think seventy years down the road -- title is open to review. Whereas buying overseas gets the family an asset that stays in the family. It was explained to me that if real estate prices dropped Chinese real estate buyers overseas would _not_ necessarily bail, because stagnant or negative growth in the short term is trumped by the worth of a reliable family asset in the long term.
2
Unfortunately, President Obama has succeeded in his stated goal of diminishing the US as an economic powerhouse. He has piled trillions of debt onto the citizens like a drug pusher getting a child addicted to heroin. You don't get richer by spending more than you can have and more than you can possibly pay back. The success of America is now determined by the Chinese communist party. When they sneeze, we catch a cold. The American people who voted for president Obama have destroyed their country. They destroyed the middle class and created and super rich government class. Hillary Clinton admittedly made over 100 million dollars since her husband left office. The past 6 years has been a shameful history in America.
2
In addition to all the economic and industrial problems that China is facing today, we must add that is "lack of quality control of Chinese products for exports." The whole world is stopping consuming Chinese products because they do not last too long. As one of my friends said very accurately. What can you expect when you buy a cheap product made in China.
So unless, China improves her industrial quality control, more financial problems China will face. And with that, all the countries that provide natural resources to that country will be in financial problems.
So unless, China improves her industrial quality control, more financial problems China will face. And with that, all the countries that provide natural resources to that country will be in financial problems.
3
What your friend should have said is "you got what you paid for". Cheap stuff from anywhere is bad and expensive stuff are usually better no matter the place of origin. China make both the highest quality and the lowest quality smartphones, TV and just about anything.
2
And another centrally-managed economy bites the big one. The old men running China are going to have to let go.
1
The "old man" running China is 8 years older than Obama and 6 years younger than Hillary Clinton.
1
The West should have been much more careful doing business with feckless China. It is always a huge mistake to put profit ahead of the welfare of one's country. China will never be trustworthy.
4
No cellphones! No cars! What on earth would we its people do to survive without those? My God! Don't say it . . . . Actually walk and work with our hands!
In that case, for sure the world will have come to its end!
In that case, for sure the world will have come to its end!
1
Surely you don't mean walk and work with our hands like monkey? Our feet (what you call the walking hands) aren't very good at working.
1
There are limits to the human population this globe can sustain. We may have already surpassed that point. In any event until our economic system evolves into one based on sustainability, there will be turmoil. Our separate economies have been based on the premise of infinite growth for centuries. You cannot have infinite growth when resources are finite. We now live in a global economy and no one will be immune to disruptions as growth falters within it. Those that embrace sustainability will be the ultimate survivors.
4
China falters at over 6% growth and the U.S. expands to over 2% growth. The media's prevailing China narrative is embarrassing, considering its relationship to their inability to participate in profits in the China market. Other U.S. industries are happy to continue to feed at the, albeit smaller, China trough.
3
China is an extremely important part of the modern world and the global economy, few nations are isolated from the demand and production of other nations (the US might be the most insulated with a huge labor market, immense natural resources, and gigantic consumer, production, and capital bases). Much of China's growth in the past 20 years has been from foreign trade and investment but something people outside China don't see is the enormous investment the Chinese government has made building more than just roads but also entire cities. This has created incredible demand for labor and resources and has stimulated the economy to a large degree. Now that this internal growth period is over and as some have reported there are cities with no one living in them, this government demand and "artificial" economic activity is gone and the world we sill the impact when it comes to reduced demand for the resources that were required to build it and the things the workers who built it consumed.
2
As China prepares for a state visit to Washington (preceded by a visit to China by Putin) next month, the aura of instability in China is given full amplification by the US mainstream media. Coupled with the huge explosion at Tianjin, the Shanghai index volatility is touted as the lead-up to a perfect storm that will bring China to its knees just at the time it is about to position its currency as a global financial counterweight to the US dollar. And it would seem fortuitous that just as the Fed is on the verge of raising interest rates, the "weaknesses" in China's economy (and political system) would be trumpeted, leading to a now-expected delay. Everything about China, including its growth estimates are now presented as "widely questioned." Perhaps its time that the rest of the world stopped looking to China to prop up their own internal economic weaknesses.
12
Your last sentence is he main point of action for the rest of the world. Put your own economic houses in order, beginning with the domestic issues of replacing decaying infrastructure.
You cannot grow forever. The Chinese made a pivotal mistake. They uprooted millions of Chinese peasants from their villages to dump them in horrible urban dwellings to build cheap stuff. Meanwhile, natural resources were exhausted, corruption was rampant. This is the new face of the ''global economy''. Brilliant!
4
This is an outstanding summary article, but I wish Keith and other writers would be more clear about the Chinese political leadership's objectives. Reporters use the phrase "social stability" as if it was a legitimate objective of the government. In reality, "social stability" is code for political and economic dominance by the Chinese Communist Party. Beijing is desperate to keep growth going as they know a recession could lead to the masses marching on the Forbidden City. President Xi and his colleagues know that their legitimacy is pinned on a healthy economy. The inevitable (and yes, necessary) down cycles of capitalism don't work for the CCP, hence the insanity of the last few weeks. Keith and his colleagues in the media should not disguise the raw power politics behind recent developments.
2
". . . multinational corporations and countries are having to respond to a new reality as a once sure bet becomes uncertain."
The only sure bet is that China will steal your intellectual property. No uncertainty there.
The only sure bet is that China will steal your intellectual property. No uncertainty there.
3
If an American car manufacturer makes 10 cars per day in America but moves manufacturing to China and makes 9 cars per day, but makes more profit because of cheap labor, is more wealth being created by the move? Is productivity increased or is China just reducing the value of its currency? Globalist profit based on speculative currency plays appears to be America's expansion of the race to the bottom.
The government of each country should act in behalf of their country as if it was its own monopoly and they should manage the flow of capital on behalf of its citizens. Right now government has abdicated its responsibility to privately owned monopolies and their interests do not always line up with the general welfare of the people. This has created oligarchs who buy government power.
The government of each country should act in behalf of their country as if it was its own monopoly and they should manage the flow of capital on behalf of its citizens. Right now government has abdicated its responsibility to privately owned monopolies and their interests do not always line up with the general welfare of the people. This has created oligarchs who buy government power.
2
Anyone with half a brain had to know that China could not sustain 10% annual economic growth. The Chinese are no smarter than any other nation; they simply started at a lower point in building their economy and it had no place to go but up. They have grown too much too fast, as proven by the choking pollution and the massive population transfer from rural locations to cities. Now they will pay the price of reduced expectations and a moderating economy. The millions of Chinese waiting in line to jump on the economic band wagon will simply have to wait longer to enjoy the good life of capitalism.
5
?
Do the Cayman-Island leveraged buyout crowd, and the conservative politicians they support, really trust the Communist bosses, who control The Peoples Republic of China, to run Earth's economy, or did they just transfer Western Civilization's manufacturing sector to their Communist partners for the money?
Do the Cayman-Island leveraged buyout crowd, and the conservative politicians they support, really trust the Communist bosses, who control The Peoples Republic of China, to run Earth's economy, or did they just transfer Western Civilization's manufacturing sector to their Communist partners for the money?
3
Why do obviously intelligent corporate management teams across the globe wake up stunned by the slow down in shipments of "whatever" it was they were selling to China on an ever faster conveyor belts that sent goods one way and received money the other. No one believed China's growth numbers. No one truly knew what was going on, we all love money and money begets... well you may remember the mortgage crises. Yup geed keeps us "bubbling" along...
1
China's biggest issue is demographics. The one child policy means the population is going to age very quickly. They are fast approaching a time when a huge percentage of their population will no longer be able to work and a reverse pyramid of workers to retired people will be in place. Saving is a priority over consuming. Low demand growth and money chasing returns will be the norm.
Think of Japan a few decades ago on a much larger scale.
Think of Japan a few decades ago on a much larger scale.
The world economy is basically built on falsehoods. You had the mortgage crisis here - surely the value of houses will never go down, right? - then we loaned Wall Street trillions of dollars at zero interest rates. Seriously, how could that go wrong? But as far as China goes, come on; for years they've been building entire cities - empty cities - just to create construction jobs. And people are surprised this isn't sustainable?
So, which bubble can we inflate next to create some more oligarchs?
So, which bubble can we inflate next to create some more oligarchs?
1
The sex appeal of a huge untapped consumer market and a ravenous appetite for resources is understandable, but the basic problems with China have always been there.
China cooks the books, China has failed to develop healthy domestic consumption (save for risky speculation) and is entirely dependant on exports. China's labor problems - China is no longer the low cost producer - and now economic problems create the possibility of political instability. Chinese government is opaque and now appears not up to the job of managing a modern economy and free markets. In short China can never be the waive of the future as a crony capitalist dictatorship.
Make money from China when you can but don't get dazzled by sheer size or mere potential.
China cooks the books, China has failed to develop healthy domestic consumption (save for risky speculation) and is entirely dependant on exports. China's labor problems - China is no longer the low cost producer - and now economic problems create the possibility of political instability. Chinese government is opaque and now appears not up to the job of managing a modern economy and free markets. In short China can never be the waive of the future as a crony capitalist dictatorship.
Make money from China when you can but don't get dazzled by sheer size or mere potential.
1
China the power house of manufacturing and exports is not alone in this predicament of economic woes, where the fundamentally flawed economic system has fact caught on and the results of the mayhem evident. However, the west including the US, UK etc have fallen back in there own manufacturing on account of worst ramifications of and far worst last effects of the last decades. The cost of manufacturing and labor in the US , UK, EU, Canada, South America etc is some 100 folds higher and switching back manufacturing to these countries will just increase the prices for the consumers resulting in inflation . Hence to avoid such further chaos, in the west , in particular the US, which already has some over $20 plus trillion federal deficit and owes China some over $17 trillion debt it would be far better for US not to go on some republican malignant narcissistic, chronic scapegoating , grab bagging, perversity of inequality and rights only of their kind binge. The modus operandi of the fundamentally flawed economic system and proven facts that it does not work should be a warning that what goes around, comes around.
1
Either it was too early in the morning. Or, you do not bother to proof your statements before posting them for attribution. Or, in your seeking to impugn one group for everything negative. You my friend posted a seriously error ridden rant, with no support for your assertions.
This sort of analysis is what happens when what you want to happen interferes with your analysis of what is happening. Once again London's Guardian newspaper provides some reasoned counterbalance to the US media's geopolitically driven analysis. Today Seamus Milne provides an excellent analysis as to why China is likely to come out of this (long term) quite well and it is the US that really needs to worry about this crisis as it is largely an after affect of the still unresolved 2008 US financial crisis that reflected the flawed nature of the US financial system and economy. China’s economy is still growing at 5-7% as it shifts from export-led growth to consumption. That is nearly 3X as fast as the "healthiest" Western developed economies. The rest of the world would love this kind of "slow down". As Milne note this is after 30yrs of 10% per yr growth. Milne also notes China is still a hybrid economy with lots of gov involvement which means its financial system is shielded from the impact that a stock market plunge like this would have on a western-style private banking system. Post 2008 China had 78% growth between 2007 and 2014, the US managed 8%. That gave it a huge 282% debt to GDP ration but again as Milne notes is mostly debt between state-owned entities so no Lehmans-type collapse etc... BTW China's rise has brought out something really ugly in the US media's attitude towards China and its transparent eagerness for the country to fail despite the implications.
17
So tell us, Nathan, what Chinese newspapers, widely available on the mainland, are accurately reporting the Chinese markets and economic situation for all to read? None? Therein lies the problem with China.
2
The current U.S. and UK growth rates are just under 4%. Chinese growth rate is unknown, but yes, most estimate in the 5-7% range. That isn't a significant difference; certainly not "three times". Chinese growth rates have normalized over time; it was much easier to grow 10% when per capita output is a tiny fraction of rich, industrialized nations.
1
"still growing at 5-7%" — doubt it. And it was all fake government project growth before.
1
I have traveled through China for many years and observed in places like Nanning and Guilin, abandoned construction projects where projected communities in the making became virtual ghost towns as contruction abruptly stopped for lack of funding. Add to it the empty apartments in cities like Beijing, Zhuhai and Shanghai all presaged the hard fact this bubble was destined to burst. The unrealistic real estate development expectations, increasing damages from climate changes and the destabilization of governments who depended on China's money caused by Muslim militancy, like Syria, its inability to compensate for the lack of exports sales with domestic sales, all contribute to China's unsustainable economic growth.
10
Well, maybe the game is over. The economic and social model is exhausted. Now we should focus on the people´s reaction to a decrease in income, less jobs, less government help....etc. But with the addtional ingredient of limited freedom.
Can you imagine 100 million on a protest? And it´s only a fraction of the total pop.
P.S: For the graphics: Why is 11% investment PInk for Argentina and 20% is Green for Greek. Is this biased?
Can you imagine 100 million on a protest? And it´s only a fraction of the total pop.
P.S: For the graphics: Why is 11% investment PInk for Argentina and 20% is Green for Greek. Is this biased?
2
The collapse in the emerging market demand is due primarily to the Fed's tightening of the money supply and the incredible rise of the dollar over the past two years. Even though our own unemployment is greater than 10% based on U6, the Fed's desire for greater banking profits through high interest rates has had a real negative effect on the global economy. Although the Fed hasn't formally raised rates, about every other week one of the usual suspects cones out hinting that a rate rise is around the corner. The dollar has risen 25% again st the Euro in a short period of time and the Strong Dollar is wreaking havoc on our own export sectors as well as the emerging markets. While we can't do anything about structural problems in Russia, China or the EU, we must take immediate steps to support the Fed at 1 25 to the Euro, thus helping our own economy and the emerging markets in these uncertain times.
1
I worked on the Vale-INCO project in New Caledonia. It was an effort to extract nickel from low-quality ore. The Chinese were heavily involved in building a nickel refinery at the Port Goro site and elsewhere on the island. I bet they're dumping everything there, which will affect the economy of the whole island and France, since New Caledonia is a French colony.
1
The way China is trying hard to cover it's economic weaknesses by an excessively high dose of monetary stimulus and investment craze at the cost of domestic demand boost and wage rationalisation is sure to destabilise world markets with a potential threat of global recession, and serious consequences on the existing geopolitical order. But, more than that, it's feared that the unwritten social contract between the Chinese rulers and the citizens involving a trade off between the authoritarian order and high economic growth might come unstuck carrying with it the seeds of social implosion and unrest.
9
high time the chinese understood the word correction...any good thing never lasts for ever and having said that the chinese slowdown may be better now for the chinese themselves with less corruption and inflation
1
When the financial crisis occurred in 2008 China became the place where development (i.e. fossil-fuel based capitalism style development using the energy of oil and coal in bulldozers, cement mixers etc.) could occur on favorable terms. There were hardly any other such places left in the world. (All other countries were already built up or they were not worth building up.) Now China has reached its limit and that means effectively the world has too! Get used to it, the Earth is indeed finite and you, like Columbus, have encountered its spherical shape with your own eyes. On either side of China (Europe and Japan) there is only deflation and crisis and now that is what China has too! Congratulations conventional economists! You have turned a beautiful green place into cementscapes that will not feed a pigeon in 20 years.
12
It's called "not putting all your eggs in one basket".
6
Maybe it is good news for American workers who lost hundreds of thousands of jobs (if not millions) to China. I wish China well, but China seems to have been the rising tide which lowered the American boats.
9
But don't expect those jobs to ever come back — they just don't exist anymore, they have been automated away.
3d print manufacturing will further reduce the need for workers in the "making" of anything.
3d print manufacturing will further reduce the need for workers in the "making" of anything.
I am sure there are a myriad of econmic wizards out there dissecting what has gone wrong with China and the Wall Street meltdown. Allow me the simplest of theories. Wall is run by blind greed. China looked like a never ending source of slave labor that could be exploited forever. Corporations had found Nirvana in maximizing profits for decades to come. Same type of thinking that had the idiots driving off the cliff in 2008. Obama and the U.S. Gov`t. decided they were TOO BIG TO FAIL and bailed them out with BILLIONS of taxpayer dollars. Wall Street realizes they are bullet proof no matter how greedy/ stupid they are; and can go right back to business as usual. Seven years later; Here We Go Again!!!
15
China hiccups and the rest of the world has indigestion. And maybe the world economy is going to get even sicker, which is certainly bad news for many people. But smart people have been saying for years that China's growth was unsustainable, that there were huge property and debt bubbles a-building. Now their prophecies of disaster (or something approaching disaster) appear to be coming true.
Lesson No. 1 from this: A bunch of communists simply don't know how to run a market economy.
Message to Communist Party leadership: transparency, the rule of law, and reasonable regulatory regimes are necessary in a free market. Unfortunately, you still don't get it. You have met the enemy, and the enemy is yourselves.
Let's look on the bright side: Perhaps China's planned ascent to world primacy is not going to come off, after all. And maybe that means one-party rule, denial of human rights, and colonialist oppression in Tibet and Xinjiang will eventually come to an end.
Lesson No. 1 from this: A bunch of communists simply don't know how to run a market economy.
Message to Communist Party leadership: transparency, the rule of law, and reasonable regulatory regimes are necessary in a free market. Unfortunately, you still don't get it. You have met the enemy, and the enemy is yourselves.
Let's look on the bright side: Perhaps China's planned ascent to world primacy is not going to come off, after all. And maybe that means one-party rule, denial of human rights, and colonialist oppression in Tibet and Xinjiang will eventually come to an end.
6
The big economic elephant in the global room.
Is it too much for Wall Street and their school of economists to grasp that China's aging rock star economy was built and driven by its groupie United States ?
And that just perhaps these economic cheerleaders should be readressing their own house order?
Rather than worry about how fashionable their wardrobe shares are hanging and when to schedule their next red-carpet interest rate makeover. Sheez.
Is it too much for Wall Street and their school of economists to grasp that China's aging rock star economy was built and driven by its groupie United States ?
And that just perhaps these economic cheerleaders should be readressing their own house order?
Rather than worry about how fashionable their wardrobe shares are hanging and when to schedule their next red-carpet interest rate makeover. Sheez.
6
The bigger the boom, the bigger the bust.
1
Now that the economic bubble in China has burst and commodities like steel which you noted, but more importantly oil the major source of income in many countries besides Russia are also deflating who is going or able to fill the massive consumption void? European is in the death-like vice of austerity while the U.S. with its anti-Obama, anti-spending Republican controlled Congress refuses even to repair our seriously deteriorated infrastructure and workers are still struggling under the weight of decades of stagnant wages and massive income inequality. Unless the oligarchs of the world are finally willing to share a bit of the wealth and order their political minions to turn on the Keynesian faucet, we may be in for a long cold economic winter. Well, at least, we'll have cheating heating oil and gas.
17
We have a convoluted relationship with China and the next decade will decide whether we are friend or foe. Chinese have been around from 500 years before Christ. They think of themselves as a civilization. The United States has been around for only 240 years. The citizens of both countries are proud of their heritage.
For thousands of years China called themselves the “Middle Kingdom”, meaning they were the center of civilization and all other countries and cultures were inferior to theirs. For much of China’s history they did not pay close attention to the rest of the world. They believed that non-Chinese were barbarians and they had nothing to learn from them.
Up until the mid 18th century China had no interest in conquering other lands. When they visited other parts of the world China was not out to conquer. They accepted gifts from the barbarians and had no interest in ruling them. Often they would invite the barbarians to visit China and provide gifts, called tribute, to the Emperor of China. The Chinese explorers would leave in peace believing they had nothing to learn from others. This attitude was costly for China. http://lstrn.us/1LxNKk6
For thousands of years China called themselves the “Middle Kingdom”, meaning they were the center of civilization and all other countries and cultures were inferior to theirs. For much of China’s history they did not pay close attention to the rest of the world. They believed that non-Chinese were barbarians and they had nothing to learn from them.
Up until the mid 18th century China had no interest in conquering other lands. When they visited other parts of the world China was not out to conquer. They accepted gifts from the barbarians and had no interest in ruling them. Often they would invite the barbarians to visit China and provide gifts, called tribute, to the Emperor of China. The Chinese explorers would leave in peace believing they had nothing to learn from others. This attitude was costly for China. http://lstrn.us/1LxNKk6
There was once an Asian country that boasted the 2nd-largest economy in the world. It’s economic growth was far outpacing that of North America and Western Europe. It was an export juggernaut with very high rates of public and private investment to GDP. It’s government bureaucrats worked hand in glove with the private sector to foster world-beating companies abroad and gravity-defying real estate and equity levels at home.
It was truly one of the main “engines” of global growth that, surely, without which, the world economy as a whole would suffer.
I am, of course, referring to Japan in 1989, not China of early 2015. Then, as now, that engine of growth did indeed stall. Japan’s consistent 4-5% GDP growth, quite high for a developed nation, evaporated, arguably, even more quickly than China’s growth is today.
How did the world’s other 2 economically developed regions at the time, US/Canada and Western Europe, fare as Japan took a deflationary nosedive and contributed NOTHING to global growth?
The Dow Jones Industrials, almost without any significant pause, went from around 2600 at the beginning of 1990 to 11500 at the end of 1999.
Western Europe, represented by Germany’s DAX Index, went from 1800 to 6500 in the same period.
Let's take a deep breath and not make too much of this!
It was truly one of the main “engines” of global growth that, surely, without which, the world economy as a whole would suffer.
I am, of course, referring to Japan in 1989, not China of early 2015. Then, as now, that engine of growth did indeed stall. Japan’s consistent 4-5% GDP growth, quite high for a developed nation, evaporated, arguably, even more quickly than China’s growth is today.
How did the world’s other 2 economically developed regions at the time, US/Canada and Western Europe, fare as Japan took a deflationary nosedive and contributed NOTHING to global growth?
The Dow Jones Industrials, almost without any significant pause, went from around 2600 at the beginning of 1990 to 11500 at the end of 1999.
Western Europe, represented by Germany’s DAX Index, went from 1800 to 6500 in the same period.
Let's take a deep breath and not make too much of this!
8
China is approaching the limits of economic development possible under a command and control regime. The straight jacket imposed by the Chinese ruling elite--which forces ideological beliefs over creative freedom and entrepreneurial effort--puts huge constraints on economic growth. Look no further than China's severe restrictions on internet access as but one indicator of why the days of skyrocketing growth are over. In terms of individual citizens' income, nothing short of a political revolution with accompanying freedoms could now move China into the ranks of the world's wealthiest nations.
7
Anyone -- business person, financier or World Banker--who thought China was a "sure bet" is a fool. Ok to fool themselves, not ok to fool others. One reason to ease up on the integration of capital markets.
9
China is the ultimate mortgage-backed security. Like you couldn't really take 1,000 sub-prime mortgages and make a AAA bond, you can't take 10 million dishonest Chinese "businessmen", paying bribes to 10 million dishonest government officials, and make a AAA economy. It's "tigers and flies" all the way down, and the world is going to feel it for a long time.
26
This article fails to disentangle the temporary from the long-view. Long-time China watchers have expressed no surprise about the correction now taking place there mainly because of over-extended residential construction and the too highly leveraged banking sector. But let's not lose sight of the long-term. Population about 1.4 billions; middle class 300+ millions, lifted out of extreme poverty about 600+ millions. That still leaves over 500 million people to improve their living standards, in a country making massive investments in infrastructure and education to allow this to happen. So they may not grow at 10% per year any longer, but 10 years of growth compounding at 7% per year still doubles their economy in ten years and still creates a hugely growing incremental market for imports and exports. Cycles and corrections shouldn't blind-side us for a moment into thinking that China won't continue to be one of the major long-term drivers of the international economy. There are problems and constraints for sure, but China is one country where social and political cohesion depends on solving them. On this side of the world we tend to be too focused on the very short-term, and while that has its utility, it can obscure more fundamental realities that matter a lot over the medium and long-term future.
38
@Mark in Canada: all true, except that China has been and continues to attempt to "manufacture" artificial growth in their economy in the face of some of its real fundamentals. Much of America's economic miracle is based on voracious consumer spending, perhaps as much as 2/3 of our activity, in fact.
This is not the case in much of China. These people have been big savers for decades because they often don't have social services such as unemployment insurance to tide them over during lean times, and no nationalized health care, either. So, they sit on their money.
The Chinese oligarchy has mostly made its trillions based on the consumption habits of the Western nations. It became the factory to the world. But much of that is slowing down and even coming to a halt. What can make up for its relative lack of exports? Not Chinese consumers picking up the slack. So what does the oligarchy do? Make massive investments in unnecessary construction projects, which do very little to stimulate long-term economic growth. Essentially, they created a construction-boom bubble economy. Now those empty buildings and projects are sitting idle. There is no simple fix here.
1
I profoundly disagree with this analysis and its paradigm--the platform of assumptions that model how we view economic reality.
The paradigm: its snapshots show bumps and ridges rather than trends. Its weighted constants (imports, exports, global effects) are misappropriated. Its model of cause and effect reverses the data, in general and specific terms.
China built and buttresses its economy through exports. The world's third largest exporter, according to IMF data, China's "exports increased tenfold in 15 years," outpacing world growth (only threefold!) by diversifying and finding new opportunities in markets and products. Its supply and shipping processes remain the global standard.
An exporting nation can not shake the global tree since it is depends on other nations buying their wares! Its drop in purchasing reflects changing demand, not a fundamental internal realignment. Over the long term, situated in the region with the highest demand for new infrastructure (ex: the incredible trans-Asian railway), home to the global-leading region in manufacturing and synergy (the 9 city Pearl River zone), with global population expanding by another billion people by 2025, China's long term trend is without peer by income and output.
Finally, capital--the cause of bubbles, market crashes, shake ups, recessions, and even national collapses (see Greece, Iceland) is no longer tied to nations; its risks are tied to a global class of institutions and individuals (see Argentina!).
The paradigm: its snapshots show bumps and ridges rather than trends. Its weighted constants (imports, exports, global effects) are misappropriated. Its model of cause and effect reverses the data, in general and specific terms.
China built and buttresses its economy through exports. The world's third largest exporter, according to IMF data, China's "exports increased tenfold in 15 years," outpacing world growth (only threefold!) by diversifying and finding new opportunities in markets and products. Its supply and shipping processes remain the global standard.
An exporting nation can not shake the global tree since it is depends on other nations buying their wares! Its drop in purchasing reflects changing demand, not a fundamental internal realignment. Over the long term, situated in the region with the highest demand for new infrastructure (ex: the incredible trans-Asian railway), home to the global-leading region in manufacturing and synergy (the 9 city Pearl River zone), with global population expanding by another billion people by 2025, China's long term trend is without peer by income and output.
Finally, capital--the cause of bubbles, market crashes, shake ups, recessions, and even national collapses (see Greece, Iceland) is no longer tied to nations; its risks are tied to a global class of institutions and individuals (see Argentina!).
14
As a basis of support for my view, I cite 3 findings from an 2007 IMF report (older, but proven accurate, given forward conditions, esp. during the recession):
"First, the dramatic transformation of China's export structure over the past 15 years implies that its business environment is relatively flexible, enabling it to move in and out of different sectors."
"Second, our results point to an export sector that is taking advantage of China's large supply of workers and of the increasing fragmentation of production across countries currently under way, especially in Asia."
"Third, our finding that China's rapid export growth has been accompanied by falling export prices implies that consumers around the world have benefited from lower prices.'
See the entire report here: [http://www.imf.org/external/pubs/ft/fandd/2007/09/amiti.htm].
"First, the dramatic transformation of China's export structure over the past 15 years implies that its business environment is relatively flexible, enabling it to move in and out of different sectors."
"Second, our results point to an export sector that is taking advantage of China's large supply of workers and of the increasing fragmentation of production across countries currently under way, especially in Asia."
"Third, our finding that China's rapid export growth has been accompanied by falling export prices implies that consumers around the world have benefited from lower prices.'
See the entire report here: [http://www.imf.org/external/pubs/ft/fandd/2007/09/amiti.htm].
1
Your comment and 2 previous ones (Canadian and Brit readers) are less subjective than the writer's views and look at the long term aspects of China's planning. 10% is great, 5-7% not bad, specially when you were anticipating. Good post.
Professional economists dont get it with China:
The biggest issues for China are domestic and they are HUGE issues with no simple solution.
China's actual challenge in the 21 Century will be to sustain its truly giant population with food and jobs.
For those who dont know, famine was a major issue in the 20th Century for China. Their infamous "One Child per Family" policy arrived out of a well-deserved fear that there were too many people to reasonably feed.
And there is the the labor unrest in China at football-statium-size factories for the last 5 years. That should have been a big hint that very-controlling China has a domestic population that is restless and looking for big change -- changes that might be impossible for the Chinese govt to satisfy.
The biggest issues for China are domestic and they are HUGE issues with no simple solution.
China's actual challenge in the 21 Century will be to sustain its truly giant population with food and jobs.
For those who dont know, famine was a major issue in the 20th Century for China. Their infamous "One Child per Family" policy arrived out of a well-deserved fear that there were too many people to reasonably feed.
And there is the the labor unrest in China at football-statium-size factories for the last 5 years. That should have been a big hint that very-controlling China has a domestic population that is restless and looking for big change -- changes that might be impossible for the Chinese govt to satisfy.
16
Xi's crackdown on "corruption" has probably contributed to the damage. China had a working economic system that was based on playoffs and informal profit sharing. It may not have been pretty, but it was a way of working around bureaucracy. Doing everything the official way will lead to slowdowns and shortages.
1
Uncertainty and lack of rule of law is the reason for anchor babies. I know a Chinese billionaire who says the government can take away his gains on a whim, so he had his son born in USA. I went to school with the Chinese Michael Dell who only decided to attend university (in U.S.) when a Chinese official style his company and handed it to the official's own son. California is full of anchor baby factories. Chinese are taught from early youth to hate foreigners and especially Americans, but Chinese want an American anchor baby. Garfield Medical Center in Monterey Park, CA every other Saturday morning buses of Chinese women come 9am go see for yourself. It is off route 10, 10 minutes east of downtown L. A. If you go to L.A. Downtown office to get your child's birth certificate you'll see it is full of fathers and mothers who act like they've never been in the USA before (I'm not talking about language skills but rather they seem confuse to see we get in line rather than swarm the clerk, we can drink the tap water, ...)
36
Wow so much ethnocentrism and hatred in one post and not surprisingly, given the subject is China, it's one of the top ranked comments. "Chinese are taught from early youth to hate foreigners and especially Americans." Really? Is that while they are taking their Disney English classes, watching American movies, driving their American cars or watching the NBA on their iPhones. The reality is Chinese these days are much more good natured positive to Americans than a lot of US citizens are to them. I expect a lot of this is because the positive relations they have with just about every other part of the world shields them to a certain extent from US anger and bitterness that and they probably mostly interact with Americans who want to make money from them. We are seeing are rerun of the post California Gold Rush where Chinese who made up a significant portion of the new state's population were driven out by pogroms, race riots and uniquely racist legislation culminating in the China Exclusion Act. What was their crime. They worked too hard were too smart and most importantly they provided a convenient scape goat for all those who had come to the West Coast seeking the American Dream only to find their timing was bad. Same thing today. American Dream on hold China and the Chinese are the scapegoat.
4
There is no such thing as perpetual economic expansion. Anyone who believes that also believed the same folly that led to the mortgage crises.
48
These people have never plotted a geometric progression?
What gets me is that on one NYT page, someone is always saying that declining population is a threat to continued economic growth, and on a nearby page, someone else is saying growth is necessary to support expanding population. It can't be both: what if it's neither?
Going back to the late 70's when entities like Procter & Gamble saw "a billion consumers and one soap," China has been the global free lunch for the growth crowd. Completely ignoring that the "miracle" was based on cheap labor and a complete disregard for health and environment.
Multiply the Tientjin disaster by the number of large cities in China to get the full scope of consequences when all the externalized costs of unchecked development come to roost.
What gets me is that on one NYT page, someone is always saying that declining population is a threat to continued economic growth, and on a nearby page, someone else is saying growth is necessary to support expanding population. It can't be both: what if it's neither?
Going back to the late 70's when entities like Procter & Gamble saw "a billion consumers and one soap," China has been the global free lunch for the growth crowd. Completely ignoring that the "miracle" was based on cheap labor and a complete disregard for health and environment.
Multiply the Tientjin disaster by the number of large cities in China to get the full scope of consequences when all the externalized costs of unchecked development come to roost.
15
Great insightful comment Nancy.
"China has been the global free lunch for the growth crowd." Love this so much.
"China has been the global free lunch for the growth crowd." Love this so much.
3
What is economics behind sustainability of huge capacity through over investment in steel and cement and in accelerated housing development, amassing the largest buildup of bad debt in history?
More than one in five homes in China’s urban areas is vacant, with 49 million sold but vacant units, and 3.5 million homes that remain unsold. Virtually every completed high speed railway line has incurred losses. To top it all Beijing’s 2022 Winter Olympics will be on manufactured snow as it barely snows in Beijing, nobody is wiser on horrendous cost.
These flabbergasting indications defies logic.
With the rapid economic growth and ballooning revenues, policymakers have become arrogantly complacent and over‐confident, ignoring the pragmatics. The very success has made China kicking away the ladder by which it has reached its current heights.
This is a key lesson for China, from itself.