Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Beijing’s Three Options: Unemployment, Debt, or Wealth Transfers

carnegieendowment.org

Post reply on HN
Print view View original

21–30 of 121 posts

Re: Beijing’s Three Options: Unemployment, Debt, or Wealth Transfers

#21

Post by andygoo »

baybal2 wrote: post #18
andygoo wrote: post #12

Earlier quoted context omitted.

If they are more elastic it means that demand is more responsive to price hikes. This is opposite to your conclusion

I mean that Chinese manufactures have an option just to do a slight downgrade of their undifferentiated mass consumption goods that were previously sold to America, and sell them to poorer countries, as well as domestic consumer. This is what happened in 2008. To Chinese electronics industry the crisis was a blessing in disguise. It saw an unprecedented expansion after it reoriented from OEM for "rich American co." t…

Fair as long as demand is as elastic as it used to be. Like if everyone has a phone now it will be harder to sell new phones. And good for pointing out a critical assumption behind the article - that CA surplus will actually fall as a result of tariffs, as you showed there is a fifth solution - sell to other countries, EU for example, US is not the whole world

Re: Beijing’s Three Options: Unemployment, Debt, or Wealth Transfers

#22

Post by cinquemb »

baybal2 wrote: post #18
andygoo wrote: post #12

Earlier quoted context omitted.

If they are more elastic it means that demand is more responsive to price hikes. This is opposite to your conclusion

I mean that Chinese manufactures have an option just to do a slight downgrade of their undifferentiated mass consumption goods that were previously sold to America, and sell them to poorer countries, as well as domestic consumer. This is what happened in 2008. To Chinese electronics industry the crisis was a blessing in disguise. It saw an unprecedented expansion after it reoriented from OEM for "rich American co." t…

They can try that, but I don't think they'll have much success this time around. At least In Indonesia, the government here just hiked rates on imports, as well as implementing a whole bunch of other policies in order to defend the IDR. I can only assume this is going on as well in other non developed markets.

Re: Beijing’s Three Options: Unemployment, Debt, or Wealth Transfers

#23

Post by crwalker »

Nokinside wrote: post #10

Unlike liberal democracies, Beijing has more room to act in crisis. China has extractive institutions that will ultimately be a growth limiting factor, but I don't see it limiting their crisis responses. * There will be no political gridlock between left and right that can be solved only with half measures. Decisions are done in small groups of 30 people at most, with several hundred people having some influence. * T…

"...they can take as big hammer as needed to fix it."

If you believe complex economic systems follow simple, well-known control laws, then yes. But I haven't seen much evidence for this.

Re: Beijing’s Three Options: Unemployment, Debt, or Wealth Transfers

#24

Post by pas »

Nokinside wrote: post #17
yxhuvud wrote: post #15

Earlier quoted context omitted.

The problem for China won't be dealing with private property, it will be dealing with government owned property. Just because the average Joe doesn't get to vote doesn't mean the system isn't geared to preserve the status quo. I think you are quite naive if you think vested interests and political corruption is a smaller problem than having to respect private property.

The political elite is relatively small number of people. When the political power is not widely distributed, you can take care of the elites without hurting the economy. If the top 100,000 power players and their families are shielded from the fallout, how much will that cost? Few $100 billions or so?

Decision-making processes, especially in times of crises are rarely presenting themselves so supra-rationally.

Meaning, that usually internal struggles will prevent the participants to be so generous, cool headed and foreward thinking.

Sure, the Politburo / Central Committee is small, but they still represent hundreds of millions of people, many different regions, cities, to a degree even many ethnic groups.

Usually shielding the elites does not show up as a goal, and differing circumstances of those can easily lead to serious opposition against the generally useful solutions.

We shall see how the current regime handles whatever history throws at them.

Re: Beijing’s Three Options: Unemployment, Debt, or Wealth Transfers

#25

Post by tsuabing2 »

Nokinside wrote: post #17
yxhuvud wrote: post #15

Earlier quoted context omitted.

The problem for China won't be dealing with private property, it will be dealing with government owned property. Just because the average Joe doesn't get to vote doesn't mean the system isn't geared to preserve the status quo. I think you are quite naive if you think vested interests and political corruption is a smaller problem than having to respect private property.

The political elite is relatively small number of people. When the political power is not widely distributed, you can take care of the elites without hurting the economy. If the top 100,000 power players and their families are shielded from the fallout, how much will that cost? Few $100 billions or so?

That’s naive and uninformed. Many Chinese political elites not on the side of Xin jing ping have been jailed and killed in recent years under the guise of corruption. Many corporate elites have been quarantined, jailed or killed, such as head of HNA and Wanda.

The only elite safe is xinjingping. Because he is the dictator

Re: Beijing’s Three Options: Unemployment, Debt, or Wealth Transfers

#26

Post by ekianjo »

Nokinside wrote: post #10

Unlike liberal democracies, Beijing has more room to act in crisis. China has extractive institutions that will ultimately be a growth limiting factor, but I don't see it limiting their crisis responses. * There will be no political gridlock between left and right that can be solved only with half measures. Decisions are done in small groups of 30 people at most, with several hundred people having some influence. * T…

> It's all about being practical.

The soviets and Mao's regimes had ample powers to do what they wanted, yet it resulted in mass murder and complete catastrophe at unprecedented scale because they made very, very poor decisions. Having leverage does not mean it fits prosperity nor crisis. Look at how soviets encouraged the killing of Kulaks which led to the great starvation (dozens of millions of deaths) in Ukraine in the following years.

Re: Beijing’s Three Options: Unemployment, Debt, or Wealth Transfers

#27

Post by ajross »

Nokinside wrote: post #10

Unlike liberal democracies, Beijing has more room to act in crisis. China has extractive institutions that will ultimately be a growth limiting factor, but I don't see it limiting their crisis responses. * There will be no political gridlock between left and right that can be solved only with half measures. Decisions are done in small groups of 30 people at most, with several hundred people having some influence. * T…

> There will be no political gridlock

That's true at the micro scale, not the macro. Tienanmen may be fading from memory, but it happened before and it'll happen again. Those 30-person decisions have winners and losers, and the losers not being in the room doesn't mean they'll just shut up and go quietly. Nor does it mean that those 30 people are going to be insensitive to or unwilling to accommodate their needs in all cases. They know what the stakes are if they mess up, and it goes farther than poverty.

Basically: "political gridlock" looks bad, but it's a safety valve that democracies use to avoid unrest, which is a far worse problem in the long run than a debt crisis.

Re: Beijing’s Three Options: Unemployment, Debt, or Wealth Transfers

#28

Post by ebikelaw »

tsuabing2 wrote: post #14
eksemplar wrote: post #4

I don’t get this article. China exceeded their economic growth target for 2018 in April when their economy hit 6.8% growth. Their wages are steadily increasing. Their internal market is the healthiest of any g20 economy. Investments both internally and internationally are up and their population has little dept. On top of that they haven’t touched retirement age, so they have a lot of leverage there.

> China exceeded their economic growth target for 2018 in April when their economy hit 6.8% growth Wrong. Fake GDP. It's estimated that 1/3 of their GDP is wasteful government spending. Many of their provinces also have confessed to 20-30% fake GDP, thus another 1/3 of their gdp is fake. https://www.bloomberg.com/news/articles/2018-01-19/this-is-h... https://www.investors.com/politics/editorials/new-study-shin... so…

Following this line of thinking, all or even more than all US GDP "growth" is attributable to wasteful medical and educational inflation.

Re: Beijing’s Three Options: Unemployment, Debt, or Wealth Transfers

#29

Post by doombolt »

Nokinside wrote: post #10

Unlike liberal democracies, Beijing has more room to act in crisis. China has extractive institutions that will ultimately be a growth limiting factor, but I don't see it limiting their crisis responses. * There will be no political gridlock between left and right that can be solved only with half measures. Decisions are done in small groups of 30 people at most, with several hundred people having some influence. * T…

Maybe they have more room but then they have catastrophic failure scenario like USSR and unlike liberal economies.

Think Greece vs. Venezuela.

Re: Beijing’s Three Options: Unemployment, Debt, or Wealth Transfers

#30

Post by ryandamm »

nkurz wrote: post #9

I've tried reading this piece a couple times, but despite the bullet points and numbered lists, I can't make any sense out of it. I presume this is because I lack essential background knowledge. Can someone please help explain the context? When he says "China's debt problems", what exactly is he referring to? When he says "there are also only four ways that Beijing can respond", what are they responding to and what i…

Pettis writes extensively about China and its internal debt problem. The best primer, though lengthy, is to slog through his posts dating back to the mid-2000s.

Briefly, though: China has had artificially cheap credit in its corporate sector due to explicit government policies restricting the growth of household spending. This cheap credit caused a lot of malinvestment ("bridges to nowhere"), and there hasn't been an accounting reckoning yet.

To continue to grow, China needs its household sector to grow, both in consumption and share of the economy. This is a classic shift from middle-income to developed economy. Because right now continued growth from the corporate (generally export-driven) sector has topped out, and getting more growth out of it is costly in terms of debt.

I think those are the broad strokes. To summarize: the Beijing is responding to the explosive growth of internal debt in the economy, and the goal is to continue growing. That growth must come from the household sector, but must also include dealing with the massive debt overhang. (I suppose you could also say that Beijing's goal is to stay in power, which requires economic growth to keep the populace happy.)

Post reply on HN