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Chinese economy overtakes the U.S.’s to become the largest

marketwatch.com

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Re: Chinese economy overtakes the U.S.’s to become the largest

#71

Post by vorg »

crdoconnor wrote: post #50
yarou wrote: post #31

>Yes, when you look at mere international exchange rates, the U.S. economy remains bigger than that of China, allegedly by almost 70%. The irony is that the US has been running up debt for decades upon decades. The US economy is equivalent to someone that has an unlimited credit line, who pays absolutely nothing while continuing to spend lavishly. This article does not bring any new information or shed any light on t…

>The irony is that the US has been running up debt for decades upon decades. The US economy is equivalent to someone that has an unlimited credit line, who pays absolutely nothing while continuing to spend lavishly. There is no sensible equivalence or even comparison to be made at all since insolvency is impossible for the US government. Government debt is simply a different thing to consumer debt. Period. >GDP, PPP,…

> insolvency is impossible for the US government

But the exchange rate for the US dollar crashing by 50% against the pound, euro, rmb, and yen in a single day is possible for the US government's federal reserve.

Re: Chinese economy overtakes the U.S.’s to become the largest

#72

Post by vorg »

davidw wrote: post #27
kokey wrote: post #22

Earlier quoted context omitted.

The same was said about Japan when it was on the up.

China is 1 billion plus people. They have a large role to play in the world economy unless they do something really stupid or terrible. They were the largest economy in the world throughout much of history, if I recall correctly.

From the Sui (late 500's) to the mid-Qing (around 1750) most historians seem to say they were, though it's hard to say whether the Han (220bc-220ad) or the Roman Empire was "larger".

Re: Chinese economy overtakes the U.S.’s to become the largest

#73

Post by vince_refiti »

Tyrannosaurs wrote: post #42
pmontra wrote: post #17

This is a ranking about PPP. There are about five Chinese persons for every American. The sum of their income will keep getting larger and so will their economy. GDP and economic output don't automatically relate to how well people live but they do relate to the influence a country has over the world. If we care about how happy people are in their country then maybe we should look at http://www.oecdbetterlifeindex.or…

Interestingly if you put in the cliche American free market priorities (jobs, income high, safety, work life balance, environment low, everything else in the middle) the US does come out top (as opposed to high but not top on a more even measure). The same things seems to happen if you put in the sort of priorities other countries are generally believed to hold (so put in the environment, satisfaction, work life bala…

The deadly animals in Australia are the same everywhere - people. The wildlife does far, far less damage.

Re: Chinese economy overtakes the U.S.’s to become the largest

#74

Post by simonh »

crdoconnor wrote: post #59
simonh wrote: post #32

Earlier quoted context omitted.

It's not at all about real global power, it's about domestic economic capacity. As soon as China tries to start exerting it's economic muscle abroad, it has to compete on international terms which means adjusting costs to take advantage of domestic costs doesn't matter anymore. For example, does China's GDP at PPP 'equality' with the US mean it can fford as many nuclear submarines as the US, as many aircraft carriers…

>It's not at all about real global power, it's about domestic economic capacity. As soon as China tries to start exerting it's economic muscle abroad, it has to compete on international terms which means adjusting costs to take advantage of domestic costs doesn't matter anymore. The entire reason the GDP and PPP GDP is so out of whack in China is because it intentionally suppresses the value of its currency to subsid…

> Yes it does because all of these things require domestic manufacturing capacity.

But that's manufacturing capacity it doesn't have for technology is also doesn't have. To get it will either take buying it in at international prices (in $), or take take world class investment in technology, training, manufacturing capacity etc. Having cheap rice and roads will help a bit, but it won't come close to closing the gap with the US. To do that they would need to effectively become the US, or something like it and as a result their domestic cost advantage would evaporate. You don't get to move from being a third world country with a third world cost base to being a first world country and keep your third world cost base. The two go hand in hand. That's why Chinese manufacturing is beginning to lose it's price advantages over places like Vietnam and Mexico.

> China is becoming international standard technology. Its mercantilist strategy has paid off since it has become the manufacturing hub of the world.

China has a very long way to go before it becomes a technological rather than manufacturing powerhouse. Assembling high tech iPhone components made in the USA, Japan, Taiwan and South Korea will only get you so far. The value added to an iPhone from assembly in China is only about $10. The same goes for many other high tech goods 'manufactured' in China.

They are moving up the value chain of course, that's why their cost base is rising and hence actualy their PPP advantage is beginning to erode. Japan, South Korea and Taiwan did the same thing, but China are still a very long way from the top.

> China just started buying $400 billion in gas from Russia in RMB though

Russia is desperate. They gave in to humiliating terms from China because the post-Crimea sanctions are bleeding their economy out.

Re: Chinese economy overtakes the U.S.’s to become the largest

#75

Post by coob »

simonh wrote: post #60
tomp wrote: post #13

Earlier quoted context omitted.

What about compared to NY? Also, it might make sense to compare Starbucks in China to a non-us company in the US. Midn you, I understand that PPP does matter (e.g. products imported to both China and USA, such as German cars, will probably be priced lower in China than in USA precisely because of PPP difference), but nonetheless it's just one way of measuring the size of economy, not necessarily the right one.

All other things equal, german cars are going to cost as much in China as they do in the USA because China gets no discount because of it's weak currency, in fact when buying abroad it works against them. They still need to pay the germans just as much hard cash as americans do. The advantage PPP gives poorer countries is that goods that depend on domestic labour, which is very cheap, get to be equally cheap. Any goo…

BMW manufacture some cars in China.

Re: Chinese economy overtakes the U.S.’s to become the largest

#76

Post by crdoconnor »

vorg wrote: post #71
crdoconnor wrote: post #50

Earlier quoted context omitted.

>The irony is that the US has been running up debt for decades upon decades. The US economy is equivalent to someone that has an unlimited credit line, who pays absolutely nothing while continuing to spend lavishly. There is no sensible equivalence or even comparison to be made at all since insolvency is impossible for the US government. Government debt is simply a different thing to consumer debt. Period. >GDP, PPP,…

> insolvency is impossible for the US government But the exchange rate for the US dollar crashing by 50% against the pound, euro, rmb, and yen in a single day is possible for the US government's federal reserve.

Yes it is. The exchange rate gradually falling is possible too. Or staying the same.

Also the exchange rate may rise, as actually happened last time US government spending spiked (post crisis).

Re: Chinese economy overtakes the U.S.’s to become the largest

#77

Post by crdoconnor »

simonh wrote: post #74
crdoconnor wrote: post #59

Earlier quoted context omitted.

>It's not at all about real global power, it's about domestic economic capacity. As soon as China tries to start exerting it's economic muscle abroad, it has to compete on international terms which means adjusting costs to take advantage of domestic costs doesn't matter anymore. The entire reason the GDP and PPP GDP is so out of whack in China is because it intentionally suppresses the value of its currency to subsid…

> Yes it does because all of these things require domestic manufacturing capacity. But that's manufacturing capacity it doesn't have for technology is also doesn't have. To get it will either take buying it in at international prices (in $), or take take world class investment in technology, training, manufacturing capacity etc. Having cheap rice and roads will help a bit, but it won't come close to closing the gap w…

>But that's manufacturing capacity it doesn't have for technology is also doesn't have.

Says who? Chinese technology is converging at US levels.

>You don't get to move from being a third world country with a third world cost base to being a first world country and keep your third world cost base. The two go hand in hand. That's why Chinese manufacturing is beginning to lose it's price advantages over places like Vietnam and Mexico.

Chinese manufacturing has been moving up the value chain since it began its mercantile strategy. It isn't particularly concerned about losing, say, shoe or t shirt manufacturing to Vietnam - because they are strategically pretty useless. It is keeping key industries at home and keeping their cost advantage through a combination of subsidies and suppressing the value of the Yuan. There is NO end in sight for this policy.

>China has a very long way to go before it becomes a technological rather than manufacturing powerhouse.

It's already there.

>Assembling high tech iPhone components

My Xiaomi is pretty much every bit as good as an iPhone and 1/4 the cost.

>Russia is desperate.

Russia is not desperate. This is a story spun by the Obama administration to make it look like Obama isn't weak and ineffectual and that his sanctions actually achieved something meaningful (they didn't).

That was at the root of all those silly stories about Putin sitting alone for lunch at those G20 meetings. It's the most ridiculous, transparent PR ploy I've ever seen, and weirdly it's working.

Re: Chinese economy overtakes the U.S.’s to become the largest

#78

Post by crdoconnor »

jvm wrote: post #63
crdoconnor wrote: post #61

Earlier quoted context omitted.

Um, $5 million to dig a ditch still means no value produced even if it was PPP adjusted.

Nominal GDP: $5mil PPP adjusted: $0

PPP simply adjusts for local costs. It does not adjust for the value created during a transaction.

Re: Chinese economy overtakes the U.S.’s to become the largest

#79

Post by vidarh »

AmirS2 wrote: post #69
jvm wrote: post #62

Earlier quoted context omitted.

> In Economy C, the workers who've been paid by the govt can then purchase 5000 Retina Macbook Airs at $1k each You are assuming transaction costs of 0 for international trade. If transaction costs for international trade are zero, then yes, of course the PPP adjustment would be a non-op. In the real world that we live in, equivalent goods often have very different prices in different countries.

Well, in our hyper simplified economy, the macbook airs are produced domestically - it's the only thing produced in fact (apart from ditches I guess)!

They are three separate economies. If they were not, then the GDP examples makes no sense.

Re: Chinese economy overtakes the U.S.’s to become the largest

#80

Post by seanmcdirmid »

coob wrote: post #75
simonh wrote: post #60

Earlier quoted context omitted.

All other things equal, german cars are going to cost as much in China as they do in the USA because China gets no discount because of it's weak currency, in fact when buying abroad it works against them. They still need to pay the germans just as much hard cash as americans do. The advantage PPP gives poorer countries is that goods that depend on domestic labour, which is very cheap, get to be equally cheap. Any goo…

BMW manufacture some cars in China.

And they are about 2x the cost that they are in the states. Most of these things are more expensive, not cheaper, here.
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