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China's Zombie Economy

newleftreview.org

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Re: China's Zombie Economy

#41

Post by duxup »

Vt71fcAqt7 wrote: post #38
duxup wrote: post #35

Earlier quoted context omitted.

I don’t think this article is saying “China is dying”.

How do you interpret "Zombie Economy?" > a corpse said to be revived by witchcraft, especially in certain African and Caribbean religions. Edit: I admit that I used the wrong word. I would correct it to: I'm still not sold on the "China is Japanifying" theory.

I believe you're misunderstanding and taking that term too literally.

The term has an established economic meaning that applied to Japan long before China, and Japan didn't "die":

https://en.wikipedia.org/wiki/Zombie_company

The article also describes that process.

Re: China's Zombie Economy

#42

Post by worrycue »

fuoqi wrote: post #32

>But many enterprises simply took advantage of easy bank loans to refinance their existing debt without adding new spending or investment to the economy. These companies eventually became loan addicts; and as with any addiction, increasing doses were needed to generate diminishing effects. Sounds like a description of the Western economic situation to me.

> Sounds like a description of the Western economic situation to me.

How so?

Re: China's Zombie Economy

#43

Post by adaml_623 »

SkyMarshal wrote: post #15
FrustratedMonky wrote: post #9

Question. For 20 years I've been hearing China will takeover, and also that it is about to collapse. It seems like daily there is some story about how China will collapse, and then also stories of how it will still takeover. I did read it, but not seeing what this article brings new. What is the point being made here? Except, things are bad, and nobody realizes it. The term Zombie Economy has been used for a lot of y…

You can safely ignore any story that includes “collapse” in its title when referring to a G-20 country. They’re all just clickbait.

What about Argentina? 100% inflation!?

Re: China's Zombie Economy

#44

Post by JumpCrisscross »

fuoqi wrote: post #32

>But many enterprises simply took advantage of easy bank loans to refinance their existing debt without adding new spending or investment to the economy. These companies eventually became loan addicts; and as with any addiction, increasing doses were needed to generate diminishing effects. Sounds like a description of the Western economic situation to me.

The American economy is growing in real terms, with inflation a continuing risk. Beijing is “putting pressure on prominent local economists to avoid discussing negative trends such as deflation” [1]. These are opposite problems.

We are also in a high-rate environment that is leading to defaults in the property sector [2]. Again, the opposite of extend and pretend.

[1] https://www.ft.com/content/b2e0ad77-3521-4da9-8120-1f0c1fdd9...

[2] https://commercialobserver.com/2023/03/default-floor-brookfi...

Re: China's Zombie Economy

#45

Post by p_j_w »

satvikpendem wrote: post #39
zukzuk wrote: post #34

Earlier quoted context omitted.

Yup! Complete with the inevitable government bailout that socializes failure while privatizing profits.

Not sure why people point to bailouts as some sort of gotcha, they're loans, not free money. The US government made a profit from the 2008 bailouts: > Early estimates for the bailout's risk cost were as much as $700 billion; however, TARP recovered $441.7 billion from $426.4 billion invested, earning a $15.3 billion profit or an annualized rate of return of 0.6%, and perhaps a loss when adjusted for inflation. https:…

Where can I go to get such favorable loan terms from the government? Oh, I can’t? I have to get monumentally wealthy by wrecking the economy and driving our society into its biggest financial crisis in 80 years first?

Re: China's Zombie Economy

#46

Post by have_faith »

derstander wrote: post #22
have_faith wrote: post #17

Earlier quoted context omitted.

Banks don't generally lend out deposits.

> Banks don't generally lend out deposits. Do you mean in China or generally? I’m not a finance person but my understanding is that fractional reserve banking is fairly common. https://en.m.wikipedia.org/wiki/Fractional-reserve_banking

I mean generally. This is a pervasively common myth (the Talk section of the wiki article alludes to this). Read about the money multiplier myth, or, a direct source from a central bank about how loans are created by creating new deposits at the point of loan creation: https://www.bankofengland.co.uk/explainers/how-is-money-crea...

There is a concept of reserve in the system. That is: banks must keep a reserve with the central bank relative to the amount of new money they are creating through loans. At the moment though, that reserve ratio is 0 (zero) for the UK and the US, rendering it meaningless.

Re: China's Zombie Economy

#47

Post by johnnyworker »

satvikpendem wrote: post #39
zukzuk wrote: post #34

Earlier quoted context omitted.

Yup! Complete with the inevitable government bailout that socializes failure while privatizing profits.

Not sure why people point to bailouts as some sort of gotcha, they're loans, not free money. The US government made a profit from the 2008 bailouts: > Early estimates for the bailout's risk cost were as much as $700 billion; however, TARP recovered $441.7 billion from $426.4 billion invested, earning a $15.3 billion profit or an annualized rate of return of 0.6%, and perhaps a loss when adjusted for inflation. https:…

> perhaps a loss when adjusted for inflation

How is that profit?

Re: China's Zombie Economy

#48

Post by worrycue »

adventured wrote: post #16
FrustratedMonky wrote: post #9

Question. For 20 years I've been hearing China will takeover, and also that it is about to collapse. It seems like daily there is some story about how China will collapse, and then also stories of how it will still takeover. I did read it, but not seeing what this article brings new. What is the point being made here? Except, things are bad, and nobody realizes it. The term Zombie Economy has been used for a lot of y…

Both ends (takeover / collapse) are exaggerations for the benefit (attention) of the person making the claim. The US and EU/Eurozone/Western Europe are not going away. Their significant allies are not going away (eg Japan, South Korea, Australia, New Zealand, India, etc.). China isn't taking over, they're becoming (have become) a peer global power. China has accumulated vast wealth, infrastructure, manufacturing, kno…

China is having quite a few problems on their hands though like the implosion of their real estate market that is tied to nearly everything else due its size. Their exports are down from companies decoupling somewhat with “China + 1”.

In the long term, they have a bit of a population problem as their demographic dividend ends and their birth rate remains low.

Re: China's Zombie Economy

#49

Post by satvikpendem »

p_j_w wrote: post #45
satvikpendem wrote: post #39

Earlier quoted context omitted.

Not sure why people point to bailouts as some sort of gotcha, they're loans, not free money. The US government made a profit from the 2008 bailouts: > Early estimates for the bailout's risk cost were as much as $700 billion; however, TARP recovered $441.7 billion from $426.4 billion invested, earning a $15.3 billion profit or an annualized rate of return of 0.6%, and perhaps a loss when adjusted for inflation. https:…

Where can I go to get such favorable loan terms from the government? Oh, I can’t? I have to get monumentally wealthy by wrecking the economy and driving our society into its biggest financial crisis in 80 years first?

The PPP loans were literally this. They were even more favorable since most were forgiven.

Re: China's Zombie Economy

#50

Post by JumpCrisscross »

p_j_w wrote: post #45
satvikpendem wrote: post #39

Earlier quoted context omitted.

Not sure why people point to bailouts as some sort of gotcha, they're loans, not free money. The US government made a profit from the 2008 bailouts: > Early estimates for the bailout's risk cost were as much as $700 billion; however, TARP recovered $441.7 billion from $426.4 billion invested, earning a $15.3 billion profit or an annualized rate of return of 0.6%, and perhaps a loss when adjusted for inflation. https:…

Where can I go to get such favorable loan terms from the government? Oh, I can’t? I have to get monumentally wealthy by wrecking the economy and driving our society into its biggest financial crisis in 80 years first?

> Where can I go to get such favorable loan terms from the government? Oh, I can’t?

Subsidised student loans, SBA loans, et cetera. It’s also noteworthy that TARP-like bailouts are no longer the precedent: guaranteeing deposits while letting the bank fail is.

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