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China's Zombie Economy

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Re: China's Zombie Economy

#61

Post by kaashif »

satvikpendem wrote: post #40
have_faith wrote: post #17

Earlier quoted context omitted.

Banks don't generally lend out deposits.

Yes they do? That's what fractional reserve banking is about.

When a bank makes a loan, they create a loan and a deposit from nothing, they don't need deposits to create loans.

Banks are subject to capital requirements, and are concerned about profitability and loan losses, so they don't make an unlimited number of loans.

This might seem like semantics but someone who believes reserve requirements and deposits are the limits on lending would find it tough to explain why banks aren't lending huge amounts after the reserve requirement in the US was cut to zero.

Re: China's Zombie Economy

#62

Post by eclipticplane »

adaml_623 wrote: post #43
SkyMarshal wrote: post #15

Earlier quoted context omitted.

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!?

Charts go up and to the right!

Re: China's Zombie Economy

#63

Post by soligern »

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.

If you use PPP that would make India the 3rd largest economy and they have a ways to go before they can be considered developed.

Re: China's Zombie Economy

#64

Post by steve76 »

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.

[dead]

Re: China's Zombie Economy

#65

Post by ivalm »

worrycue wrote: post #48
adventured wrote: post #16

Earlier quoted context omitted.

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.

These are things that can lead to stagnation, not really collapse. Even in the worst case of real estate bubble pop + massive unwind. Real estate loans and ownership are almost entirely domestic, and ccp has a lot of power to reshuffle however is advantageous to them.

Re: China's Zombie Economy

#66

Post by avidiax »

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

>> Banks don't generally lend out deposits.

I think this is one of those "technically true" things, but it works out very similarly.

You deposit $1 with the bank. The bank now has a liability to you of $1, and deposits the $1 with the bank's bank (often the central bank).

hand waving

Separately, the bank is able to negotiate for loans from the central bank. This is on the basis of its demonstrated capital controls, liabilities, deposits (with the central bank, including your $1), business plan, etc.

When the bank receives a loan from the central bank, there isn't necessarily any cash moving around. It's literally just numbers in a ledger, and a system of governance where eventually guys with guns will liquidate the bank's property if they don't handle things properly.

The central bank wants a cut of the action in terms of the prime rate. Whether the local bank can lend directly from deposits depends on how much control the central bank wants to exert, since this is an end-run around the monetary policy and oversight.

Re: China's Zombie Economy

#67

Post by Aunche »

seanmcdirmid wrote: post #52
anovikov wrote: post #26

Earlier quoted context omitted.

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.

Rent helps a lot when it comes to PPP. Also, services like healthcare, plumbing, education, etc

Re: China's Zombie Economy

#68

Post by derstander »

have_faith wrote: post #46
derstander wrote: post #22

Earlier quoted context omitted.

> 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 t…

I guess I still don’t understand your original point in the context of your reply.

Say the banks are creating new money through these loans. And then enough of the original depositors plus some of the people that have been lent money want their money out that the bank can’t give it to all of them. From a layperson’s perspective (like mine) this seems like the bank has loaned out their deposits — it seems like a distinction without a difference to me.

What am I missing?

Re: China's Zombie Economy

#70

Post by anovikov »

soligern wrote: post #63
anovikov wrote: post #26

Earlier quoted context omitted.

Simply PPP vs nominal.

If you use PPP that would make India the 3rd largest economy and they have a ways to go before they can be considered developed.

Yet it is 3rd largest indeed, if you want to compare per capita levels just divide by population but then completely unexpected countries (as well as a few expected like Switzerland), come out on top.
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