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Posts: 2

Governor

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Q: Does anyone have an opinion as to the future of the Chinese economy?

Personally, I believe that the Chinese economy is headed for a noise dive into a long term depression.

9 years 24 weeks ago in  Lifestyle - Wuhan

 
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Posts: 1098

Shifu

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This is a hard question to answer because the economy here is so opaque but I'll have a go. Long term, China will likely surpass the United States as the world's dominant economic power. GDP growth remains robust and the sheer number of people combined with free market reforms will continue to grow the Chinese economy. Infrastructure is improving nationwide and wages have been growing faster than inflation. The crackdown on corruption is real although there's a long way to go on that front. 

 

In the short term, they're in for some serious problems due to the real estate bubble, local government debt and the gross imbalances in the economy. Property investment is WAY too high and consumer spending way too low as a percentage of the economy. There are zillions of unoccupied residential units and a bursting bubble would massively hurt the wealth of average Chinese. 

 

 One should keep in mind that great economic powers don't grow in a straight line. The United States experienced numerous recessions and depressions on its way to the top. China is overdue for a downturn after decades of uninterrupted growth but this shouldn't stop the economic juggernaut that Deng Xiaoping unleashed not too long ago. China's getting rich whether we like it or not. 

royceH:

The China Daily newspaper last month reported that wages in Xinjiang have been increasing by 15% annually for the last five years.  Armed with that information I've been doing my own survey re the article's veracity.  Haven't yet met a single person who's had even a modest increase for a long time.  Myself, I'm on less now than three years ago.

Seems the article was bullshit.

 

9 years 24 weeks ago
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Scandinavian:

actually GDP growth isn't steady. China has just expirienced the first drop in productivity since the cultural revolution. (productivity = GPD per man hour)

9 years 24 weeks ago
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9 years 24 weeks ago
 
Posts: 364

Governor

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Well thought out arguments from dongbeiren above. I my self went from optimistic to cautiously optimistic to pessimistic about the Chinese economy.

 

I think that in the short-medium term China will grow just fine, maybe surpassing the USA. What I'm pessimistic about is:

 

1. China's ability as a high income, advanced economy. Things like education, environment, food safety, innovation and human, and economic rights make me think that China might not be able to make a transition to an advanced economy. Deep and structural reforms are needed and I'm just not seeing these being carried out.

 

2. The abilities of China as a society to handle a recession. We've all seen how Chinese people handle adversity. Another problem is that the CCP has all its "legitimacy" come from economic growth, and when this stops there would be a lot of angry people with nothing to lose in the streets. Worst case is, even though I despise the CCP, there is no real opposition, and if the CCP falls, it will create a huge power vacum in China.

 

I'm not saying what I just wrote is right, or that it will happen, but these are things that are making me feel uneasy. Also remember that for every doomsayer like me, there are even more optimists about China with even better reasoning.

Spiderboenz:

The CCP will find a way to blame it on USA/Japan, and will steadily build up xenaphobia within the population shortly before everything falls apart. 

9 years 24 weeks ago
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dongbeiren:

I share your concern about the ability of the people to handle a recession - look at the people smashing windows at real estate developers' offices when prices go down. A lot of people here are unwilling to accept the blame for making a bad investment and will blame anybody but themselves for their financial losses. There could be major social unrest if the housing market collapses though I'm sure the CCP has a plan in place to deal with it and they probably have a pretty good idea of what's going on. If not, taxi to the airport! 

9 years 24 weeks ago
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Burak43:

@Spiderbonez: I'm sure that'll happen, but that's part of the problem, antagonizing your largest trading partners is foolish at the best of times, and it will not exactly help in a recession.

 

@dongbeiren: Of course the CCP has a plan in hand centrally, but I have my doubts about the implementation of such a plan in a short time period. China and CCP is a mind boggling huge bureaucracy with a lot of vested interests. Implementation isn't easy in China. What could happen is that relatively advanced provinces, Shanghai, Jiangsu, Zhejiang, Beijing, Tianjin and Guangdong could implement some measures with the result being that the differences between the rich provinces and poor provinces would be even larger with all of the problems that brings with it.

 

On the other hand, maybe I am giving China too little credit, after all they've so far managed to deal with the Tiananmen backlash, Asian Financial Crisis and the Global Financial Crisis so far.

9 years 24 weeks ago
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9 years 24 weeks ago
 
Posts: 2

General

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this is a really tough question and i think everyone in this forum has very good points. I feel the real problem in China is finding accurate and believable information. A case in point is the recent situation with commodities and the unwinding of fake collateral deals with banks. I would be interested to know anyone who has any other information on this. They found one pile of iron ore at a port in China that had over 20 claims against it as collaterall for loans (From Banks in HK) this whole ponzi scheme amounted to 20 billion!!!

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9 years 24 weeks ago
 
Posts: 2

General

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this is a really tough question and i think everyone in this forum has very good points. I feel the real problem in China is finding accurate and believable information. A case in point is the recent situation with commodities and the unwinding of fake collateral deals with banks. I would be interested to know anyone who has any other information on this. They found one pile of iron ore at a port in China that had over 20 claims against it as collaterall for loans (From Banks in HK) this whole ponzi scheme amounted to 20 billion!!!

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9 years 24 weeks ago
 
Posts: 860

Shifu

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I never understand how the economy works in china. Shops employ more people than they need. There are more shops than customers. Newly built shopping malls are empty. Construction of apartment blocks far outpace the rate they are bought at. Everybody where I  used to live has a brand new imported car. Corruption is widespread from top to bottom. Taxes are low. No respect of copyright and little money spent on research and development. Any other country could not grow like this and would eventually crash. But china keeps getting richer.

Eorthisio:

Tell me about it, there are some shops in a mall near my place that are always empty when I walk past them, still they have been here for years, the same people working in and the same (now dusty) products on the shelves. How can they stay in business? No one knows.

9 years 23 weeks ago
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dongbeiren:

The empty stores at luxury shopping malls fascinate me too. I wonder how they stay in business seeing as  the rent must be high. Perhaps they make bank during holidays when people buy gifts? Do a few elites come and buy up the whole place when no one's looking? It's weird and they keep building more of these malls.

9 years 23 weeks ago
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9 years 23 weeks ago
 
Posts: 5156

Emperor

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Yeah China is a rich country that can't pay it's workers, has to  shake down foreign companies because they are too successful and is trying to reduce the number and salaries of foreign teachers all because China is a rich country.

dongbeiren:

Your criticisms are true but really have nothing to do with whether or not China is a rich country. Yes, a lot of (rich) employers don't pay their workers because they are assholes and the legal system does not offer the workers adequate protection.

 

The bullying of foreign companies is a reflection of short sighted nationalistic thinking and again has nothing to do with whether China is rich or not.

 

The pay of foreign teachers has more to do with supply and demand  than China's wealth as a nation. More foreigners are willing to come to China now than say 10 years ago because of China's development and the economic problems in the west.  So why raise their salaries when people are willing to take the jobs at lower salaries? Now as the number of teachers decreases the salaries should start to increase (they have in my city) which is again a reflection of supply and demand.

 

Let's make an analogy to Walmart, which no one would deny is a rich company. Walmart pays its workers like shit and bullies the competition too, this doesn't mean Walmart is poor. It means Walmart is ruthlessly efficient, good at business, greedy, immoral, whatever you want to call it.

 

China is a rich country because it has the 2nd highest gdp in the world, trillions in foreign currency reserves, a huge stockpile of gold, massive infrastructure projects, and well..... a shitload of money. This doesn't mean China is a good country or a fair country, but it is a rich country and by these metrics it's getting richer.

9 years 23 weeks ago
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Englteachted:

Companies have trouble making payroll. Low salary is not the same as not paying what you agreed to pay.

There is a high demand for FTs  but the government is trying to make it more expensive to hire FTs legally in order to keep salaries low. 

The truth is money is leaving China. China is not as rich as they're trying to portray.

9 years 23 weeks ago
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dongbeiren:

I certainly agree that not paying what one agrees to pay is infinitely worse than paying a low salary. My point was that in some cases employers do this because they are dicks and bullies, not necessarily because they can't afford it. As for the FT's, the amount of regulation is pretty insane, I"ll give you that. I'm not really sure why the government would care about keeping FT salaries low though. Not sure what's in it for them.  

9 years 23 weeks ago
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9 years 23 weeks ago
 
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This is today's topic on CCteli niouzzz dialogue, right now.

Eorthisio:

With our favorite racist, mister Yang Rui.

9 years 23 weeks ago
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9 years 23 weeks ago
 
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