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China's Zombie Economy

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Re: China's Zombie Economy

#71

Post by Vt71fcAqt7 »

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 governemnt forced banks to give out loans to people who couldn't pay them in the name of euqality. These banks sold the risk to investors as Mortgage-backed securities because banks aren't in the risk business but risk management: creating the Great Recession.

...

Trillions of dollars are given away to the poor every year in the US, with no expectation of getting it back.[0] Adding "favorable loan terms" on top of this will literally lead to the exact outcome you are describing in 2008. We can debate the bank bailouts, which I think is worthwhile, but comparing them to personal loans is naive.

[0]https://fiscaldata.treasury.gov/americas-finance-guide/feder...

Re: China's Zombie Economy

#72

Post by makotech221 »

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…

[dead]

Re: China's Zombie Economy

#73

Post by johnnyworker »

satvikpendem wrote: post #54
johnnyworker wrote: post #47

Earlier quoted context omitted.

> 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.

So, a a small loss, profit if you don't count inflation, and giant profit if you count it in 1950 money, got it.

Re: China's Zombie Economy

#74

Post by JumpCrisscross »

avidiax wrote: post #66
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

>> 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, l…

> 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)

This is not how it works. You deposit $1 with the bank and create a liability. The same day, another branch makes a loan and creates new deposits from thin air. At the end of the day, the bank figures out its reserve position. If it is short, it borrows reserves from other banks.

Loans precede deposits. Always.

Re: China's Zombie Economy

#75

Post by nonethewiser »

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.

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

Japan’s economy arguably collapsed in the 90s. Perhaps burst and stagnated is more accurate ever but its a semantic game at that point. No one knows if China’s economy will collapse but there are lots a serious and unique risks.

Re: China's Zombie Economy

#76

Post by peterfirefly »

anovikov wrote: post #25
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…

Well there is GDP PPP and nominal and metrics never changed. China has surpassed U.S. in PPP GDP around 2017 and might at some far away future point around it's historical peak (10-20 years away), get up to 2x the U.S. level, but it might never reach U.S. nominal level (currently 67% of it), or if it does, only briefly and marginally so. None of those metrics has "changed". It's just two different ways of measuring i…

If you trust the official Chinese GDP figures. Big if. Very big if.

(All countries seem to do some overcounting but not by 100-400%.)

Re: China's Zombie Economy

#77

Post by satvikpendem »

johnnyworker wrote: post #73
satvikpendem wrote: post #54

Earlier quoted context omitted.

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

So, a a small loss, profit if you don't count inflation, and giant profit if you count it in 1950 money, got it.

Well you can choose to understand it however you want, including comparing it to 1950s money for some reason, but that's on you.

Re: China's Zombie Economy

#78

Post by seanmcdirmid »

Aunche wrote: post #67
seanmcdirmid wrote: post #52

Earlier quoted context omitted.

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

Buying a house is more expensive even if rents are cheaper (well, they are still in a big property bubble). Service in general are cheaper, but anything imported will be same or more expensive (obviously, since USD is being used to buy those). Cars were generally more expensive, and luxury cars still are, but low to mid end cars are about the same now.

China has high taxes on luxury goods, and what is considered a luxury good is pretty strange (eg Levi jeans for 800RMB).

Re: China's Zombie Economy

#79

Post by ianai »

The Economist recently did some interesting rethinking of the unstoppable power of the Chinese economy in their May "Peak China?" edition. Some links (sorry for paywall, but I do find them worth it.) https://www.economist.com/weeklyedition/2023-05-13

Is Chinese power about to peak? : https://www.economist.com/leaders/2023/05/11/is-chinese-powe...

How soon and at what height will China’s economy peak? : https://www.economist.com/briefing/2023/05/11/how-soon-and-a...

How China measures national power : https://www.economist.com/briefing/2023/05/11/how-china-meas...

The fall of empires preys on Xi Jinping’s mind : https://www.economist.com/briefing/2023/05/11/the-fall-of-em...

In short, they do have a number of functional problems keeping them from further growth. Chief among them is a lack of local resources. They must rely on importing base materials in order to have value added goods to export. Plus some indications that just because their government wants to grow their people may not have such a strong desire. They have something like 34 million more males than females. Also growing signs of toxic financial conditions in their real estate markets including fraud and abuse ("How to escape China's property crisis" https://www.economist.com/finance-and-economics/2023/06/28/h... and "China’s economic recovery is spluttering. The prognosis is not good" https://www.economist.com/leaders/2023/06/22/chinas-economic... , etc)

Re: China's Zombie Economy

#80

Post by nonethewiser »

ivalm wrote: post #65
worrycue wrote: post #48

Earlier quoted context omitted.

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.

Real estate is largely what funds local governments. Collapse is possible.
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