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China's Zombie Economy

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Re: China's Zombie Economy

#51

Post by seanmcdirmid »

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.

On the other hand, recessions and even depressions are possible. Just don’t invest in Chinese real estate (not that you can without residency), and it won’t affect you.

Re: China's Zombie Economy

#52

Post by seanmcdirmid »

anovikov wrote: post #26
gruez wrote: post #24

Earlier quoted context omitted.

>In many respects, if you use the older metrics China has long surpassed America on its GDP output but with the constant revision America still is "number 1". Can you elaborate on this? What are the "older metrics" in question? >Same goes for unemployment. You can compare these metrics when you change how they're calculated. Is the 20% figure cited in the article somehow not comparable to other figures in the G-7?

Simply PPP vs nominal.

PPP is a weird measure since a lot of things are even more expensive in China than the USA. Unless you are just eating out and taking taxis, your higher PPP isn’t going to help you much.

Re: China's Zombie Economy

#53

Post by jandrese »

eatonphil wrote: post #8
freitzkriesler2 wrote: post #6

Earlier quoted context omitted.

When I say economists I mean the professionals, not the publication. Apologies if that wasn't clear.

Sure, but it's The Economist saying this in the article as well: > The Economist now claims that China might never catch up with the US

Fundamentally China’s huge population means they will overtake the US. Government mismanagement, corruption, and capital imbalances can slow it down but the march of progress is inevitable.

Re: China's Zombie Economy

#54

Post by satvikpendem »

johnnyworker wrote: post #47
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:…

> perhaps a loss when adjusted for inflation How is that profit?

It's a profit if you don't count inflation, if you do it's a small loss, just as the article says.

Re: China's Zombie Economy

#55

Post by satvikpendem »

JumpCrisscross wrote: post #50
p_j_w wrote: post #45

Earlier quoted context omitted.

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.

Indeed, too big to fail is not seen as viable anymore, which should make the parent happy, but I'm guessing they have more ideological issues with these sorts of loans and of capitalism itself, unfortunately.

Re: China's Zombie Economy

#56

Post by seanmcdirmid »

throwaway2990 wrote: post #12
freitzkriesler2 wrote: post #3

>The Economist projected that China would become the world’s biggest economy by 2018, surpassing the United States. What annoys me about economists is how often they redefine how they calculate things like "GDP" and "unemployment" and then try to compare their new oranges to their old data apples. In many respects, if you use the older metrics China has long surpassed America on its GDP output but with the constant r…

We don’t have real numbers from China to know what their GDP is. There’s theories it could be negative right now which coincides with their housing crisis, huge local debts due to covid, huge cost of living and due to covid less spending which results in less jobs, the world pulling out of China. Etc. any positive numbers would surely be made up, one CCP official already admitted to the numbers being fudged.

Surely you mean GDP growth could be negative, not GDP. How would negative GDP even work?

That being said, I highly doubt their GDP growth is negative, you just have to build something to record positive GDP, not necessarily sell it. Whatever target the central government sets the provinces will meet on paper, and probably in reality (even if the activity used to generate GDP isn’t useful).

I would say look at the Li Keqiang index, but Li was recently fired, so I’m not sure what they are going by now for real numbers.

Re: China's Zombie Economy

#57

Post by Vt71fcAqt7 »

duxup wrote: post #41
Vt71fcAqt7 wrote: post #38

Earlier quoted context omitted.

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.

Maybe you are taking "China is dying" too literally, although I see that I should have used a different phrase, as it clearly took away from my actual point which was a data-based claim. I think it is fair though to say the people who think that China will see "Japanification" while still at ~13k GDP per capita are essentially saying that China is dying — and people actually were saying that China was collapsing after Evergrande; it is a real claim. I didn't mean to say that the linked aritcle meant this, only that people do say it, and the arricle feeds into with the title, which admitedly I did not articulate well. And as I said my main point wasn't even about the name of China's decline (dying, zombifying, ageing) but a comment about what analogous phase China's economy is in within Japan's timeline, which is a topic of the article as well as a common point discussed by economists.

Re: China's Zombie Economy

#58

Post by JumpCrisscross »

jandrese wrote: post #53
eatonphil wrote: post #8

Earlier quoted context omitted.

Sure, but it's The Economist saying this in the article as well: > The Economist now claims that China might never catch up with the US

Fundamentally China’s huge population means they will overtake the US. Government mismanagement, corruption, and capital imbalances can slow it down but the march of progress is inevitable.

> Fundamentally China’s huge population means they will overtake the US

On one hand, we have reversion to the mean in terms of productivity per capita. On the other hand, we have (a) empirical evidence of the middle-income trap [1] and (b) theoretical underpinning for compounding economic gains as a corollary of economies of scale. In essence, China's dominance is inevitable only if they've solved the middle-income trap problem and either (x) economies of scale cease to matter or (y) the U.S. is destined to failing to capitalize on its own economies of scale. In summary, it's far from certain (though also far from impossible).

Also, China's population is shrinking [2]. It's forecasted to drop from over a 4x population advantage over America to less than 2x by 2100 [3]. By that point, Nigeria, Pakistan and the Democratic Republic of the Congo are forecasted to have larger populations than America. Any theory of population determinism must explain how Pakistan will come to dominate America while India dominates China.

[1] https://en.wikipedia.org/wiki/Middle_income_trap

[2] https://www.reuters.com/world/china/chinas-population-shrink...

[3] https://en.wikipedia.org/wiki/Projections_of_population_grow...

Re: China's Zombie Economy

#59

Post by throwaway290 »

fuoqi wrote: post #27
throwaway290 wrote: post #13

Earlier quoted context omitted.

If it's like Russia, maybe you get paid in bucks but you pretty much must convert them all to RMB immediately. So the bank needs to create all that RMB for all the exporters. Part of it circles back in taxes and stuff. Assuming exporters can't or don't want to spend all that RMB immediately there's now a bunch of RMB in country in some shape or form. A lot probably in banks.

In Russia you have to convert 25-30% of your earnings nominated in foreign currencies (it was 50-80% in 2022, but got relaxed since then) and you do it on a somewhat open market. IIUC in China the requirement is much stricter and the exchange rate is effectively pegged against USD.

Well when back there as a freelancer I know first hand that accepting, legalizing and keeping hard earned foreign dollars was difficult enough that I couldn't justify the effort... and this was even before the war, now that dollars cannot be even bought freely in an open market it's probably worse and more paperwork and roadblocks

Re: China's Zombie Economy

#60

Post by ang_cire »

satvikpendem wrote: post #49
p_j_w wrote: post #45

Earlier quoted context omitted.

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.

And PPP loans were not available (legally) to individual workers, only to the Business Owner class. Sure, it was expanding the criteria of bailout from "superwealthy business owners" to "average business owners" and "politicians playing at business owners who set up a shell company", but that's not really refuting their point that the government only cares about protecting capital.

"Here's $600 to live on for 6 months, poors. How much could a banana cost? Oh, also here's $600,000 if you own a small business!"

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