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Q: China - Apocalypse Now?
I've just read somewhere that Moody forecasts Chinese economic growth for this year to be 6.8% and then 6.5% for 2016.
WTF! From a 9% average to one that is around 6%. Something has changed and we can't avoid that fact. I'm not trying to generate panic, but at the same time, it seems like we've now passed the stage where things are "business as usual" in China.
My guess is that the Chinese government is going to continue spending on local infrastructure projects such as railroad expansion and investing in various energy sources. Nonetheless, some of this investment comes across as overextension.
What the heck do we have in store for us? I've got no idea man.
8 years 45 weeks ago in Business & Jobs - China
the numbers are actually worse than they publish, electricity usage and auto sales are actually down from last year, these are pretty good indicators that gdp is actually already in the range of 4 to 5 %, i predict the party will eventually change the credit laws ( jail for not paying a credit card for 60 days currently and allow bankruptcy, and no down payment cars and houses), they have to keep the bubble growing to avoid anarchy, maybe the current guy can pass off the problem to next leader but a decade is a long time in the modern world.
kasuka91:
Your observation about how having the government allow for businesses and individuals to pursue the option of bankruptcy, along with other policies geared towards credit liberalisation are valid, it still does not put me at ease! Lol.
Even in the case of making it easier for people to get credit, confidence is still needed for that to happen. What confidence do people have in the strength and resilience of the Chinese consumer? The stability of the political economy?
I dunno, this seems like it could be the tinder for disorder.
the numbers are actually worse than they publish, electricity usage and auto sales are actually down from last year, these are pretty good indicators that gdp is actually already in the range of 4 to 5 %, i predict the party will eventually change the credit laws ( jail for not paying a credit card for 60 days currently and allow bankruptcy, and no down payment cars and houses), they have to keep the bubble growing to avoid anarchy, maybe the current guy can pass off the problem to next leader but a decade is a long time in the modern world.
kasuka91:
Your observation about how having the government allow for businesses and individuals to pursue the option of bankruptcy, along with other policies geared towards credit liberalisation are valid, it still does not put me at ease! Lol.
Even in the case of making it easier for people to get credit, confidence is still needed for that to happen. What confidence do people have in the strength and resilience of the Chinese consumer? The stability of the political economy?
I dunno, this seems like it could be the tinder for disorder.
There's a huge, massive difference between
* Recession (ie. country X more money getting out that money getting in)
* Growth slowdown (ie. country X having more money getting in than getting out, but that money surplus is smaller than it used to be)
A 10% or even 5% growth can't go on eternally. Go in a country with nothing and give it some loan, 10 years of peace, and a somewhat rational management : of course the growth will skyrocket at a crazy 20%. Look at Botswana or Rwanda as textbook examples. It's easy to double or triple almost nothing. It's much harder to double something really big. Say, it's easy to double your railroad cover or your power supply when it's close to nothing, it's harder when you reached 100% capacity. After a decade or two of that kind of growth, level of life increases, cheap workers are not so cheap, there are much less low hanging fruits for investment, so growth slowdowns. Eventually, you get 1%, 2% growth like in most Western countries. Close to an equilibrium, where you need really good management and policies to reap benefits (or by selling the family jewels, or pillaging your middle class, hahem...).
China is not going to crumble just right now, they have lots of new infrastructure, and this kind of change goes with lots of inertia. If a factory decide to move elsewhere, it's going a year or two between the decision and the actual completion of the move. China have cash, giving it room for manoeuvers. Ok, so far, the way that cash is spent (moar infrastructure and ridiculous stock market policy) is questionable.
The real question is : can China have 1% or 2% growth, while giving to its people perks like a social security net, proper healthcare, rule of law, balancing inequalities, lowered pollution levels. It's going to be hard to justify being in power when you have 2% growth but with none of the perks others manage to offer. Unless you suppress dissent and nip in the bud this kind of public consciousness, So far Chinese people didn't show much ability to look beyond their personal benefit, much less to criticize efficiently their overlords, but who knows, they might start to ask questions when the easy times are gone.
kasuka91:
That's very true. There is a difference between a recession and growth slowdown. I don't know about whether that difference is big though. Doesn't China need a certain level of growth to create the jobs needed to soak the new wave of graduates and rural migrants who come into the cities for work?
If that's not met, then what may seem like growth in the short term might amount to a lot of instability in the long term.
DrMonkey:
China does not exactly shines in term of transparency, so the real numbers are quite a mystery for the common mortals. I read articles where people try to extrapolate from things like electricity usage and what not : 4%-ish, with various approaches to the extrapolation. The youth employment might solves itself with all the elders going to retirement, but I'm not sure Chinese youth are willing to work and live like their elders ^^
Shining_brow:
"The real question is : can China have 1% or 2% growth, while giving to its people perks like a social security net, proper healthcare, rule of law, balancing inequalities, lowered pollution levels."
Funny - they couldn't/wouldn't do this at the higher growth rates, what chance when it goes down???
DrMonkey:
@shining_brown How dare you doubting, are you trying to stir disorder and troubling the pubic harmony ?
Bound to happen, they've been growing way above average for a long time now. Which is good for them. But they're likely to regress more toward the mean for growth.
Silly to assume the factors that affect every other place in the world don't apply here for some reason.
RandomGuy:
And yet most Chinese believe that the rules of global economy do not apply to their country, that the government is always going to fix everything. Silly Chinese, they will fall from sky high when they realize that the CCP is not some mighty entity.
expatlife26:
Anytime you have a big outlier, it should be up to them to specify why they won't regress and not the skeptics at explain why it will.
China has this kind of state capitalism model that they've done well with, but they also had a bunch of other stuff working in their favor.
Credit where it's due, China has been pretty stable for a low income country. Infrastructure for industry is good. Massive labor market with people who organize into work units and are willing to take a lot of shit.
But they're losing out on cost leadership to south asia and greater indochina. There's no really compelling reason to make jeans here instead of bangladesh. Other than momentum. The more heavy industrial/tech stuff they still have an edge for a while but the current trend is more other countries catching up than China pulling away.
There isn't a really good reason why they're going to avoid the middle income trap.
Just came across this article about China:
https://www.stratfor.com/weekly/chinas-crisis-price-change?utm_source=fr...
I like this organisation, they seem to know their stuff.
Incongnito:
Great source to form a sensitive point of view regarding world's geopolitics. This China's move is purely strategic and well-orchestrated to position their currency and themselves with stronger international influence. The rest is utter speculation.
Man, how things can get from bad to worse within a week!
Share prices are continuing to fall and now the powers that be are rushing to try and piece everything back together by once again, reducing rates and cash reserves.
Weirdly enough, I think that the root cause of all this panic stems from a lack of communication on the part of those managing the economy. What exactly is the grand plan for the Chinese economy? What is the overall plan and philosophy behind all of the recent decisions the government has made? A clear plan needs to be outlined and effectively communicated to the markets on a world stage. We always hear about Abenomics, what happened to the Xi market (lol) economy?
ambivalentmace:
blocking domestic websites from mentioning "stock crash" and leaving the public uninformed may be the ccp standard operation procedure, but when you mess with peoples money and dont tell them the truth, the panic gets worse, if they keep playing this charades game with no honest answers for the public, they will make this much worse than it already is, repeating history really sucks.
http://www.newsmax.com/Finance/DavidStockman/china-stocks-pboc-rates/2015/08/25/id/671919/kasuka91:
@ambivalentmace Definitely agree. It's really beginning to seem as if the ccp are now way in over their heads. A diagnosis, along with a clearly defined action plan needs to given, and NOW.
Maybe those on the ground can't hold them to account, but it seems as if the global markets are able to..
DrMonkey:
I feel that there were no grand plan, it was something like "the big boys have stock markets, we should have one". The handling of the bubble showed an incredible ignorance on how economy works. It's stuffs I learned in high-school, seriously...
Shining_brow:
Yeah, never blame on malice when ignorance (stupidity) is more likely.
Although, willfully leaving people ignorant will be malicious... I suspect the big boys got in early, and made a killing from the nongs and tuhaos who got in later... and then it all just got out of control. Too many got in, and reality started to hit.
This is what happens when you have greedy peasants playing the stock market like a roulette wheel.
kasuka91:
Did they have much else of a choice though?
Came across this interesting article about the limited investment options that are out there for ordinary Chinese savers:
https://www.stratfor.com/analysis/why-chinas-stock-markets-matter
DrMonkey:
@kasuka Instead of gambling, buying flats and generally wait others to do things with your money, you can also use your money to create new things. It can be something as modest as an indie video game or something more ambitious with a R&D oriented startup. Innovating, instead of following.
Hey, since in the 70's people would beat each other to death with a hoe cause the government said so, I'm sure it won't be hard to convince people not to panic...
