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anonymous
Q: Just how rooted is the economy?
It seems the real estate bubble has finally popped.
The thing that really struck me when I first came to China two years ago was the number of new sedans and SUVs on the road. The ratio of new cars to old dungers is remarkably high, especially when you consider that the annual GDP per capita of this country is $7000US per annum. How can they afford them? The answer is simple. Go to the bank and stump up with some collateral. Constantly appreciating house prices made this occurrence into a mug's game (which might explain how a man can buy a Buick (can you think of a better symbol of American capitalism and imperialism?) and hang a picture of Mao in it AND be an economically successful individual rather than an unemployable dullard).
I have received a tip off from an economist whose book is due out soon that since the fracking boom, energy costs have been driven as low as $4 per mcf of natural gas. China, on the other hand pays around $12 per mcf. We all know that the Chinese economic miracle is a result of extremely low labour costs, so this next point is fundamental to understanding what the world's current economic situation is. Please feel free to draw your own conclusions as to why the Russians have been deploying methods from the North Korean's playbook for the last year or so. This new economic data accounts for Putin and to some extent (maybe), Xi's strongman actions too of cracking down on things like corruption when he was on the standing committee for the previous ten years when corruption was rampant. He must have had some kind of epiphany, huh?
Consider that labour is 8% of total manufacturing costs and energy is 13%, the cost of energy in the US means that China could give their labour away and still not be competitive. Russia don't make anything while the Saudis are just an oil exporter. If any of these countries do anything to antagonize the west, the west can simply stop trading with them. Obviously there is a degree of antagonism, to say the very least.
The possibility of absolute energy independence for all countries brought about by this new technology means that it will no longer be necessary for western countries to trade with despotisms and kleptocracies. There might also be some soft power methods available to make citizens of some countries press for changes just like the Arab Spring. People are generally more motivated by their wallets than by abstract principles of freedom, fairness, equality and decency.
The White House won't be controlled by a man who used to staple flyers to lamp posts for much longer. The potential to set up a new trading bloc exists for the Americans right now, and if they take advantage of this, then the structure of the world could change completely. Especially if someone could create some sort of tax incentives to lure American industries back to the States. Where would this leave China? Without a real estate bubble your average guanxied businessman is really only left with the option of setting up a new round of insurance derivatives or re-hypothecating a few container loads of precious metals before using his ownership of them as collateral to buy his daughter a Mercedes and a shop which sells a bunch of stuff none of the local people can afford so she can have the face experience of being a Chanel dealer. It seems that the last 10-15 years were an opportunity for China which has ultimately gone begging. Why? We have greed and corruption to thank. Hopefully someone smarter than me can keep this tin afloat.
I'm not American by the way. It's sad to see such lowbrows having so much power and ultimately crashing the economy with their vanity and organizational ineptitude. I know people refer to them as the financial elite, but after having met them, I don't think this word belongs within five sentences of such people.
I can't find your question.
Anyway, the reason there are not many old cars on the roads is because cars have not been here long.
There are just not that many 20 year old cars.
Next is energy. Yup. The west goes to war for energy, China effectively undercuts the west by offering loans and infrastructure development with dodgy regimes. But who can blame them, according to the western boss people China is dodgy too. But China are not firing million buck missiles into family homes in the name of freedom to get oil.
The Guy in the Whitehouse? He was elected. He had to post flyers on lamposts because that's how democracy works. Who will vote for the dude sitting in the corner too shy to tell people how smart he is?
Lure industry back to the states? There are plenty of other emerging low cost manufacturing bases emerging.
You sound similar to me. Your time in China is helping you question the order of the world.
Are we the product of western brainwashing to believe that democracy is the ultimate system of governance? Or is it possible other systems will prove to be better?
Time will tell. Evolution never stops. Today is tomorrows dark age 
.
sam239:
"But China are not firing million buck missiles into family homes in the name of freedom to get oil."
Sure they are, maybe not million-buck missiles but lethal armaments all the same. Ever heard of X*******, the oil- and other-resource rich Mus. region way out in the west that was taken over by C**** for the purpose of exploiting its resources?
ScotsAlan:
To be honest Sam, I need to read up on the history of the example you give.
There is indeed a strange concept in China of "owning" a country.
Last night I was having a discussion with a Chinese woman about this weeks Scottish vote. She honestly believes England owns Scotland, and the vote in Scotland is similar to a child wanting to abandon it's parent.
I always assumed the "invaded" border countries were used as a buffer against hostilities. Going back to the days of MADness and the big fall out with the soviets after Krushchev's secret speech warning of the dangers of the personality cult.
But I will read up on it.
Anyway, I doubt the OP will reply. This is just another 100 flowers campaign .
DrMonkey:
I like your answer, minus one major point : China does not fire missiles, but it provides a lot of weapon for free or under production cost in Africa. For example, a militia, named Seleka, toppled the established regime there, with fresh new weapons made in China. The militia was trained and armed in Sudan, and came via Tchad. A lot of the militia are teenagers. Granted, they are replacing an older evil by a new one, but the discourse "China build hospital and roads, it does not bombard" is just a nice legend.
ScotsAlan:
I agree with you Dr M. You are totally correct.
But they are not the only ones supplying guns, are they?
I bet we will never know where ISIS are getting their arms. I am not suggesting anything by that. It's a simple statement of fact. We will never know. It could be China, or Russia or Iran. We will never know.
Shining_brow:
Another relevant question relating to the guns - how much do the governments in the lands of those gun-producers know that's where the arms are going? If ISIS is using AK-47's and M-16's, do the Russian and US governments have a duty to crack down on the manufactuers???
By 'rooted', do you mean 'fucked'?
laowaigentleman:
I know. It's a Kiwi term too. I am from New Zealand. I don't know if the person asking is a Kiwi or an Aussie though. I noticed that the Scottish chap didn't understand the question. Perhaps he thought "root" meant how sound the economy of China was or perhaps how screwed the world economy is.
Personally, I think China's economy is screwed. I can't understand how the economic miracle happened. There are so many liars, embezzlers and incompetents in positions of power here. It was probably even worse when the foreign companies first arrived. There's hope for the next generation, but those who were raised during the cultural revolution are shady and cynical for the most part.
