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China’s dodgy-debt double act

economist.com

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Re: China’s dodgy-debt double act

#41

Post by dragonelite »

starfallg wrote: post #21
throwaway4good wrote: post #14

Earlier quoted context omitted.

You (and most other western commentators) underestimate just how long the road is.

China is rapidly heading towards the middle-income trap. All of the positioning in the past decade is in the hope of avoiding it. This is a massive challenge as the prosperity of the upper classes is based on cheap labour. All of the advanced economies overcame this by moving jobs up the value chain. China can't easily to do this due to its massive population, a large part of not very well educated. There is a real r…

I 100% believe that the main reason a country stays stuck in the middle income trap is its capability to create high tech IP which the nation can use to suck up what I would a global rent for lending out its IP.

That why the patent system is so toxic for the global south its like cutting off the steps on the value chain stair.

Re: China’s dodgy-debt double act

#42

Post by throwaway4good »

dragonelite wrote: post #41
starfallg wrote: post #21

Earlier quoted context omitted.

China is rapidly heading towards the middle-income trap. All of the positioning in the past decade is in the hope of avoiding it. This is a massive challenge as the prosperity of the upper classes is based on cheap labour. All of the advanced economies overcame this by moving jobs up the value chain. China can't easily to do this due to its massive population, a large part of not very well educated. There is a real r…

I 100% believe that the main reason a country stays stuck in the middle income trap is its capability to create high tech IP which the nation can use to suck up what I would a global rent for lending out its IP. That why the patent system is so toxic for the global south its like cutting off the steps on the value chain stair.

10 years ago people were also chatting about China being caught in the middle income trap because China was unable to create its own global brands and original products, and was destined to be a cheap factory for western brands forever, never would be rich enough to have an internal market.

Today we have global brands like Xiaomi, Huawei, Tiktok in every corner of the planet.

And there is just going to be more of it.

Re: China’s dodgy-debt double act

#43

Post by OneTimePetes »

dmix wrote: post #30
roenxi wrote: post #13

We live in very exciting times. The question isn't "Is China's economy good?" or "Is China's economy bad?". The question is "How will it perform relative to Europe and America?". The US's economic fundementals aren't great. I'm expecting to see US government spending be the majority of GDP in my lifetime. That sort of centralised planning doesn't bode well for the West.

Why does every single conversation about China have to devolve into a contest with America? This is usually a way to distract from problems in China with whataboutisms. The soviets did this obsessively too the minute anyone critiqued them. It is in fact possible to evaluate a countries economy in isolation as well as comparatively globally … and America (and the rare EU anecdote) is not the only economy to compare to…

All ex-empires (Iran, Turkey, Great-Britain, France, Spain, China) when talking about a topic compare themselves with the current rooster on the heap.

Re: China’s dodgy-debt double act

#44

Post by throwaway4good »

pjc50 wrote: post #35
throwaway4good wrote: post #17

Earlier quoted context omitted.

So why were you wrong, 10 years ago, when you assumed that the debt burdens were unsustainable?

Parent didn't use the word unsustainable, merely "large". And remember "Market can remain irrational longer than you can remain solvent"? There's no particular reason why it should "correct" on any particular timescale. Kick the can hard enough and the problem is solved for your lifetime.

What baybal2 writes, he could have written 10 years ago, heck even 20 years ago. And it would a common view on the state of Chinese economy. Yet through this period China has grown 5-10% pa.

"A sign of things soon to come, I believe." it says.

Nah. The debt will be restructured in some backroom deal. Maybe the central bank lending rates will be lowered a bit. And in ten years the GDP per person in China will have doubled again and all those high rise buildings will be full with people.

Re: China’s dodgy-debt double act

#45

Post by dmix »

OneTimePetes wrote: post #43
dmix wrote: post #30

Earlier quoted context omitted.

Why does every single conversation about China have to devolve into a contest with America? This is usually a way to distract from problems in China with whataboutisms. The soviets did this obsessively too the minute anyone critiqued them. It is in fact possible to evaluate a countries economy in isolation as well as comparatively globally … and America (and the rare EU anecdote) is not the only economy to compare to…

All ex-empires (Iran, Turkey, Great-Britain, France, Spain, China) when talking about a topic compare themselves with the current rooster on the heap.

Every time there’s a China article on HN at least half the comments are about America, or more. Why can’t we just talk about the issues China is having?

Wanting to compare them isn’t the problem here by itself. It’s how every conversation gets derailed with “but America does x”. They both have their own problems.

Re: China’s dodgy-debt double act

#46

Post by starfallg »

throwaway4good wrote: post #42
dragonelite wrote: post #41

Earlier quoted context omitted.

I 100% believe that the main reason a country stays stuck in the middle income trap is its capability to create high tech IP which the nation can use to suck up what I would a global rent for lending out its IP. That why the patent system is so toxic for the global south its like cutting off the steps on the value chain stair.

10 years ago people were also chatting about China being caught in the middle income trap because China was unable to create its own global brands and original products, and was destined to be a cheap factory for western brands forever, never would be rich enough to have an internal market. Today we have global brands like Xiaomi, Huawei, Tiktok in every corner of the planet. And there is just going to be more of it.

Middle income trap doesn't have much to do with global brands. It has to do with whether there is enough capacity to absorb excess labour when economic growth necessitates transition away from agriculture and manufacturing to service and information industries.

Export driven growth is also very risky as geopolitical issues (as we can see now with Huawei) can happen on a dime. In order to develop China up to western standards, the world needs to supply resources for a population well over all the western countries (EU+US+CANZUK+Asian Tigers) combined. All of the countries that have achieved had good relationships with their importing trading partners, China on the other hand is moving in the opposite direction due to political reasons.

Re: China’s dodgy-debt double act

#47

Post by throwaway4good »

starfallg wrote: post #46
throwaway4good wrote: post #42

Earlier quoted context omitted.

10 years ago people were also chatting about China being caught in the middle income trap because China was unable to create its own global brands and original products, and was destined to be a cheap factory for western brands forever, never would be rich enough to have an internal market. Today we have global brands like Xiaomi, Huawei, Tiktok in every corner of the planet. And there is just going to be more of it.

Middle income trap doesn't have much to do with global brands. It has to do with whether there is enough capacity to absorb excess labour when economic growth necessitates transition away from agriculture and manufacturing to service and information industries. Export driven growth is also very risky as geopolitical issues (as we can see now with Huawei) can happen on a dime. In order to develop China up to western s…

The point is it hasn’t happened and it doesn’t happen. Employment is high, internal consumption is growing, companies climb up the value chain etc.

Instead predicting that it is going to end abruptly tomorrow, the intellectual powers of commentators would be better spent on explaining why it continues and why it has continued for so long.

Re: China’s dodgy-debt double act

#48

Post by starfallg »

dragonelite wrote: post #41
starfallg wrote: post #21

Earlier quoted context omitted.

China is rapidly heading towards the middle-income trap. All of the positioning in the past decade is in the hope of avoiding it. This is a massive challenge as the prosperity of the upper classes is based on cheap labour. All of the advanced economies overcame this by moving jobs up the value chain. China can't easily to do this due to its massive population, a large part of not very well educated. There is a real r…

I 100% believe that the main reason a country stays stuck in the middle income trap is its capability to create high tech IP which the nation can use to suck up what I would a global rent for lending out its IP. That why the patent system is so toxic for the global south its like cutting off the steps on the value chain stair.

What's important is high-value jobs. You need these to transition excess labour away from unskilled and semi-skilled jobs. The key is creating and sustaining these jobs.

Obviously tech is a part of this, but also financial services as well as resource/energy industries. IP is less of an issue than it first seems, it's the ability to execute in a market that is more important.

Re: China’s dodgy-debt double act

#49

Post by voisin »

throwaway4good wrote: post #34
guerby wrote: post #27

Perspectives : "The level of debt is jaw-dropping. The private non-financial sector owed the equivalent of 222% of GDP at the end of 2020. Most of that sits with companies. By comparison, private non-financial debt in America is 164% of GDP." GDP per capita China : https://data.worldbank.org/indicator/NY.GDP.PCAP.CD?location... 2010 4550 USD (current) 2020 10500 USD (current) USA GDP per capita https://data.worldbank…

Another perspective - central bank lending rates: China: 3.875% ECB and FED: about 0.25%

I think you are implying that China has room to drop rates to stimulate the economy, but the rates you quote are nominal rather than real. I.e. they don’t subtract off inflation. China May be less capable of dropping rates without stoking greater inflation and massively upsetting social order.

I may be misinterpreting your point though.

Re: China’s dodgy-debt double act

#50

Post by starfallg »

throwaway4good wrote: post #47
starfallg wrote: post #46

Earlier quoted context omitted.

Middle income trap doesn't have much to do with global brands. It has to do with whether there is enough capacity to absorb excess labour when economic growth necessitates transition away from agriculture and manufacturing to service and information industries. Export driven growth is also very risky as geopolitical issues (as we can see now with Huawei) can happen on a dime. In order to develop China up to western s…

The point is it hasn’t happened and it doesn’t happen. Employment is high, internal consumption is growing, companies climb up the value chain etc. Instead predicting that it is going to end abruptly tomorrow, the intellectual powers of commentators would be better spent on explaining why it continues and why it has continued for so long.

> The point is it hasn’t happened and it doesn’t happen. Employment is high, internal consumption is growing, companies climb up the value chain etc.

All of which are beside the point. It is the type of jobs that are available and their relative value. Internal consumption needs to effect a shift in the economy towards services, which isn't happening. Off-shored high-tech manufacturing is moving away to more political acceptable countries.

>Instead predicting that it is going to end abruptly tomorrow, the intellectual powers of commentators would be better spent on explaining why it continues and why it has continued for so long.

Mainly because they created an unequal system with capital controls and ownership rules to siphon foreign capital and IP. This is supercharged by an hyper aggressive business environment and in general large appetite for risk, leading to sky-high asset prices, which is a concern for advanced economies, but much more of a concern for a developing one.

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