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China's Zombie Economy

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Re: China's Zombie Economy

#91

Post by MayeulC »

yafbum wrote: post #18
jimbursch1 wrote: post #5

“ In its closed financial system, exporters must surrender their foreign earnings to the central bank, which creates equivalent RMB to mop up the foreign currencies. This led to the rapid expansion of RMB liquidity in the economy, mostly in the form of bank loans. ” Can anyone explain this to me? My interpretation is the central bank exchanges exporter’s foreign currency for RMB. How does it become bank loans?

My understanding: business A sells USD 1,000 worth of goods abroad. Customer wires USD 1,000 to bank B to the account of business A as payment for the goods. This money does not go directly to the account of business A. Bank B sends USD 1,000 to Central bank and gets RMB 7,000 (or whatever the exchange rate is) which go to the account of business A. Bank B ends up with deposits almost entirely in RMB to loan out. Few…

> Few customers outside China really want those.

Hence probably why China is pushing other countries to use Yuan as an exchange currency?

Re: China's Zombie Economy

#92

Post by daneel_w »

have_faith wrote: post #17
givemeethekeys wrote: post #10

Earlier quoted context omitted.

Your deposits are lent out by the bank.

Banks don't generally lend out deposits.

Their whole business is lending other people's deposits. For the most part they have no money of their own. They use your money lend and speculate with.

Re: China's Zombie Economy

#93

Post by ajot »

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!?

We can always get the IMF to handle us some big ol' sum of DEGs, not comply with their requisites and ask for some more. I believe we're "too big to fail" for the IMF.

But less tongue in cheek, this value destruction will end someday. With every cyclic crisis, a ~10% of our population falls into poverty. Maybe the percentages will become smaller every decade, but theres a feudal 99% poverty rock bottom, you can't really go deeper than that.

Re: China's Zombie Economy

#94

Post by Vt71fcAqt7 »

stale2002 wrote: post #81
Vt71fcAqt7 wrote: post #57

Earlier quoted context omitted.

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 afte…

The point though, is that China isn't going to have a revolution, or dramatic collapse. Instead, it is going to have a long and slow stagnation. Therefore, the people saying "well, people have been talking about a China collapse for a decade but I haven't seen anything dramatic happen!!" Are wrong and missing the point. Because a decade of stagnate growth for China is still a big deal, while not being dramatic in a w…

>it is going to have a long and slow stagnation.

How slow? "Japanification" is 1% growth.[0] That's ridiculus for a growing economy. I can't take the claim that China will have 1% growth seriously. If you mean "stagnate at 6%," my claim is that 6% is "enough" for a low middle imcome economy, Cf. Japan in 1970. So your claim in that case is wrong that it will be "a big deal." At most we can say that China will reach a mid-1980 Japan level economy more slowly than Japan and Korea. However this is very different from the claim that China is 1990 Japan, or that "China might never catch up with the US," implying that China will always be third world (although we can debate the meaning of that sentence).

[0]https://link.springer.com/chapter/10.1057/9780230512283_2

Re: China's Zombie Economy

#95

Post by johnnyworker »

satvikpendem wrote: post #77
johnnyworker wrote: post #73

Earlier quoted context omitted.

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.

Well, if you "don't count inflation", why stop there? Might as well count it in even more favorable ways.

I wondered if there might be a good reason for it, but you just snarkily rephrasing what I quoted tells me there probably isn't -- so it's a loss. Because inflation is not something you can just ignore, when I buy something with money I don't get asked if I want the money to be counted as 1980 money or whatever, it's always "now" money. If by the time the loans get paid back inflation ate up the profit, there is no profit, and the criticism of it socializing loss while keeping profits private remains valid.

Re: China's Zombie Economy

#96

Post by bllguo »

you'd think Western economists and enlightened HN readers might have even a single moment of introspection after being consistently wrong about China for years

but I suppose the perpetual condescending and underestimating is preferable to the typical violent modus operandi

Re: China's Zombie Economy

#97

Post by nonethewiser »

bllguo wrote: post #96

you'd think Western economists and enlightened HN readers might have even a single moment of introspection after being consistently wrong about China for years but I suppose the perpetual condescending and underestimating is preferable to the typical violent modus operandi

Wrong about what? The claim im familiar with is that there is systemic risk. That hasn’t been disproven.

Re: China's Zombie Economy

#98

Post by christkv »

ianai wrote: post #79

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.ec…

The worry is that internal conflict will lead to external wars as a distraction of the populace.

Re: China's Zombie Economy

#99

Post by satvikpendem »

johnnyworker wrote: post #95
satvikpendem wrote: post #77

Earlier quoted context omitted.

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

Well, if you "don't count inflation", why stop there? Might as well count it in even more favorable ways. I wondered if there might be a good reason for it, but you just snarkily rephrasing what I quoted tells me there probably isn't -- so it's a loss. Because inflation is not something you can just ignore, when I buy something with money I don't get asked if I want the money to be counted as 1980 money or whatever,…

My point is that it doesn't matter if it's a profit or a small loss, because people think companies were simply given billions of dollars of free money. The fact that the US government was close to or did break even from bailouts dispels this notion. So there is no socialization of loss while keeping profits private, as the companies had to pay out what they took.

Re: China's Zombie Economy

#100

Post by isykt »

Anyone who took a high-speed train from Beijing to Shanghai over the past decade might have caught on to this phenomenon. The number of cities built in the middle of nowhere, with concrete skyscrapers standing empty, is stark and staggering. Seeing them is not only surreal, but gives one the sense of seeing something they ought not to, despite it being right outside the window.

The only rationalization that withstands any cursory scrutiny is to think that those towers are the seeds of, say, another Zhengzhou, which more than doubled in population (1.1 to 2.3m people) from 1990 to 2000, then added another 1.2m people from 2000-2010, then added another 1.7m people from 2010-2020 [0].

But then: who will work the 10% of China's land that's arable to feed 1.4B people? And what kind of family will those who came of age during the 1 child policy have in a cramped city? Finally, how the hell is China paying for any of this?

Add it all up, and you get what this article is talking about: a zombie economy, dependent on a crumbling world order, surrounded by countries that hold millennia-old grudges against it. Plus Russia.

Yikes.

[0]https://worldpopulationreview.com/world-cities/zhengzhou-pop...

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