https://carnegieendowment.org/2018/07/27/china-s-best-option...
Make no mistake though, the national and Party leadership is deathly afraid of low growth and it is exactly what they seek to avoid. The leadership knows they must create domestic consumer demand and that this must happen through an increase in household spending or, as Michael Pettis notes, in spending on behalf of households. Low auto sales seems like evidence that this isn't happening quickly enough.
They can use the threat of trade war to convince others of the need for this shift, but actual trade war, or actual low growth? No thanks. When you are riding a tiger, you don't want it getting too hungry.
China has a long history of civil unrest, the Taiping Rebellion being a good example. Twenty to thirty million people were killed, and economic depression following a trade war was the impetus. The result of this horror was China on her knees, and is precisely what the leadership seeks to avoid. https://www.facinghistory.org/nanjing-atrocities/nation-buil...
The return to authoritarianism can be seen as battening down the hatches before the storm. Shifting spending to household income goes against powerful interests. A large national health program and social security could help, but debt funding is not an option now, and the alternative is taxing wealthy individuals and wealthy local governments. This also creates unrest.
> The return to authoritarianism can be seen as battening down the hatches
Obligatory not a "China expert" but I think you're very much correct. A lot of people don't seem to understand how different, and explosive, the political situation is in China. There is very little social trust, certainly little trust in government, and things could fly apart quickly and violently. The CCP is in a very difficult situation, trapped between fragmented and competing power bases, from a gigantic and angry rural underclass to godlike and kleptocratic SOEs to the tier-1 (and even 2) cities who by this point are practically mini-states with a law unto themselves. It is no surprise they have pulled every trick in the book to try to keep the music playing.
I totally agree that there needs to be a proper national health and social security system; this will be on the same magnitude as the "New Deal" the US had after the great depression. This could only be accomplished by a massive tax, and even more importantly power, overhaul. Xi Jinping is totally unreadable to me and I have no idea whether he is consolidating power just because that's what "strongmen" do or because he understands he needs it to execute on the desperately needed reforms. I doubt anyone not literally in the Politburo could say for sure. I hope it's the latter.
I keep saying this every year but the stakes just keep getting higher - things in China will come to a head sooner rather than later. And when they do, I want to be very far away, because it is a whole lot of shit, and a very big fan...
https://www.economist.com/china/2018/12/01/why-only-2-of-chi...
Wages for manufacturing workers have been rising steadily as a result though and low value manufacturing that relies on the lowest wages is moving on to places like Vietnam. It’s still pretty rough out in the countryside, my wife is Chinese and I’ve been out in the countryside, but it is getting better.
oh come on... China has a long history. (period)
within that is periods of civil unrest and various degrees of prosperity and peace.
Its a bit unfair to paint them as a chaotic state... they're far from that.
I believe it has a long history of unrest in the modern era compared to all large countries (measured by population) out there. The Chinese government knows their own history and people well, and I believe they are managing the risk with a serious mindset. Their methods may be up for debate, but they're not of the mindset that there's no risk.
China is virtually a continent unto itself. It's a huge and fractous territory. It is little surprise that when the empire fell at the beginning of the 20th century after 4000 years, in the most tumultuous period of world history, that it went through a long phase of war and revolution. It was divided among the West's great powers, repeatedly invaded by a rising Japan, hit by successive ideological waves of nationalism and communism - and had to navigate being the third cog of the Cold War. I don't it's helpful to chalk up the instability of China during this period to some 'essential' characteristic of China; it is not naturally unstable or violent - any country that endured what it has would be unstable and violent.
At the start of the 20th century the UK controlled so much of the world they said the sun never sets on the British Empire. It led the industrialisation of the planet, lost millions of men to the trenches of the first world war, then was nearly wiped out and turned into a slave state by Hitler before successfully liberating Europe with its allies. It went through enormous social turmoil in the middle of the 20th century: socialist governments and ultra-militant unions repeatedly damaged its economy so badly that by the end of the 1970s it was significantly worse off economically than Germany - a country it had flattened in world war just 40 years earlier, and which had then been split in half by the Soviets. Professional and well armed terrorists repeatedly attacked the government, in one case almost managing to assassinate the Prime Minister [1].
That all sounds like a much more traumatic modern history than China's. Despite that there has never been a revolution in the UK. The closest you can find is probably the English Civil War in the mid 1600s, which ended with the king being invited back to become King again after the revolutionaries turned out to suck more than he did.
So I don't think we can just write off China's history or concerns of its leadership by saying it's merely large, and not naturally unstable or violent. For whatever reason China does seem to have gone through far more revolutions than other countries have done despite the apparent lack of external events that could have triggered such instability.
That is so far off the mark.
China was turned into a tributary state by the Western powers. It was repeatedly - successfully - invaded by Japan. Tens of millions died in the fires of civil war and revolution. It industrialised within a span of 50 years. It was hit successively by waves of nationalism, communism, and capitalism in a single century. Nothing compares to ANY of that in the UK's recent history.
The UK was one of the world's great powers at the start of the twentieth century. It drew men, wealth and geopolitical advantage from its empire. It enjoyed the sympathy of Canada and the United States - already far and away the most powerful state in the world. It fought into two world wars, yes, but that did not tear at the fabric of Britain - it never suffered a land invasion, or the realistic prospect of one. Even if Germany had won the air-battle, Britain's navy would always have precluded the possibility of a German armada crossing the channel.
It was not turned into a vassal state by a strange and more powerful civilization. It did not undergo revolution. There were not major ideological explosions. The same political system and governing class stayed in place. Britain had the advantage of industrialising first, in the late eighteenth and early nineteenth century.
The modern history of the UK is exceptional for being so stable.
"Socialist governments and ultra-militant unions". The Labour Party was Keynesian in economics, social democratic in politics, supported NATO and trident and yoked itself to America in the Cold War, and was hardly the direct cause of the crisis of the 1970s - a crisis, by the way, that was general to the West. Unions are, almost by definition, on the soft side of the socialist spectrum - certainly in the context of socialism in the 20th century - hence Lenin's quip about 'trade union consciousness'.
With respect to which country has had more drama in the 20th century, I'm not sure there's a scale that can be applied to compare them - to me it seems both countries have been through a lot. And that's what I'm getting at. Clearly, experiencing war, invasion or very real threat of invasion (Hitler was trying his best to destroy the navy!) and rapid industrialisation is not by itself sufficient to lead to revolution. There may be something else at work beyond mere events, perhaps a cultural aspect.
The British political parties of the 50s and 60s were hardly Keynesian except in the sense that they liked spending money, and no the crisis of the 1970s wasn't "general to the west". The USA was busy putting a man on the moon in this era, the German economy was outstripping the UK's quite significantly. The UK had to go to the IMF for a bailout its economy was so sick. The cause was pretty clearly and directly militant socialism - once Thatcher got the unions under control and liberalised the economy, the UK caught up with its erstwhile foe and was no longer the 'sick man of Europe'. There was a lot for Thatcher to do because at the time she came to power the British government owned huge quantities of ailing industries, including things like hotel chains and removal companies. Not so dissimilar to China's model where so much industry is state owned.
This argument is obviously fallacious.
It does not follow from the fact that lots of societies (L) have had X happen to them that no number or combination or tempo of X's can have an effect that was not present in L.
I'm not sure if the proposition that we can't ascribe China's revolutionary past to 'anything in particular that happened to it' is even coherent. How else do you think historical change takes place? From nothing?
"The UK had to go to the IMF for a bailout."
It's now historical consensus that the UK didn't have to do this at all. It was based on a miscalculation of the UK account (not that the economy wasn't in dire straits).
"The crisis of the 1970s wasn't "general to the west".
It was, for at least three reasons: (i) the collapse of the Bretton Woods system and the beginning of dollar seigniorage; (ii) the OPEC crisis in 1973; (iii) and the emergence of widespread stagflation in 1973-1975.
"The cause was pretty clearly and directly militant socialism - once Thatcher got the unions under control and liberalised the economy, the UK caught up with its erstwhile foe and was no longer the 'sick man of Europe'."
I'm not going to get into this, because it's a rabbit hole. But that is clearly a highly simplified and ideologically charged perspective. I would mention that the rate of growth under post-war social democratic Keynesianism was higher than under Thatcherism and her epigones. I would recommend the work of David Edgerton, probably the foremost scholar of British economic history in the twentieth century - whose work reveals a quite different story to your own.
But just as they are worried about the threats from without, they are also worried about the threats from within. This is what I see in their domestic policies.
No one analyzes Brexit as a return to literal western European warfare, at most as an analogy of interests.
The last century featured advances in weaponry that changed the cost benefit of armed conflict in a way to make some types of historically prevalent warfare much more rare.
You could argue that the difference with China is the fear that information control and the other authoritarian elements of the communist party are masking significant internal discontent, making the political situation more volatile than can be reliably observed.
And... that civil wars aren't the type of warfare that technology has made more rare. (Really just limiting superpower territorial invasions of other superpowers?).
But who knows. China is such an enormous complicated country that there are basically no parallel examples to help us predict its future... Even China's past is limited help. China of the Tang dynasty was more similar in population to present day Myanmar. Its problems and issues and politics might have basically no discernable relationship to China's real issues today.
China always had a requirement to grow 6% for every city. So I believe some numbers are inflated ( mostly about real estate eg. Ghost cities, ..). This doesn't give many issues, because there is actual growth.
The reasoning goes that when the growth slows, the entire pyramid goes crumbling down ( debts).
As weird as it is, I think it's an objective overview of everything China related. It's a personal hunch of all the FOMO I read about China and can't support it with links.
The reasoning I follow is: expansion internally (China), expansion externally ( requirement) with Africa / one road one belt, knocking down on bank fraud, no export of money internationally, ... In the process, trying to become too big too fail.
We'll see if I'm right about this.
Ps. I could be wrong, so comments are appreciated
The "Chinese government" is not a singular, monolithic entity in the same way the "US Government" is actually a bunch of departments, branches and jurisdiction levels each with competing and sometimes differing interests and goals. (but yes, it is more unified in China in the sticking to party line).
The Chinese federal government has been wanting to make this re-balancing for a long time (a shift away from exports towards domestic consumption, and shifts from inefficient state owned enterprises to companies that can operate more efficiently and are "market oriented").
Where you are also correct is that many of the inflated GDP numbers and "inefficient" investments / capital towards things like ghost cities are mostly driven by state governments, in their attempt to meet the "goals" as stated by the federal government.
Do you have evidence of this? Isn't one of the biggest US complaints that many Chinese businesses are indistinguishable from the government?
You are also right - yes one of the biggest complains IS that many Chinese businesses are "owned" by the government with lots of influence there. However, the big resistive force here preventing this further breakup is that they are such huge employers, and it is not politically easy to reduce and remove so many people from the payrolls. So it has been a slow process.
Here is an article roughly related: https://www.forbes.com/sites/kenrapoza/2015/12/30/china-star...
Communist party leaders own huge portions of their state sponsored businesses and directly benefit from their success. Chinese leaders don't want fair competition, they want to be rich.
And that skill seems to help when trying to understand China itself!
If you are talking about "求同存异" that's for agreeing to have disagreement, which is a common cooperation culture around the globe.
If you are talking about "无为而治" from the Taoism philosophy of doing without actually forcing, that's not something relevant here though.
PS: I am often amused by people coming up with obviously-weird/nonsensical claims on Chinese, China or its culture, and the readers seemingly unable to apply common sense to disapprove them. This, to me, is an unconscious (or actually intentional) way of reinforce stereotype on China, which can be useful, for example, in mwny cases when someone in power wants to mobilize the common people, such stereotype really makes things easier to get approved.
The world is not black or white. Enlarging your perspectives always help.
Not quite.
It has side effects of course, but Chinese government have much better control of the macro-economy compared to free markets in most other countries, and that would help a lot in avoiding economical crisis. The debt issue is concerning, but I think Chinese government is much faster in acting on and fixing problems.
Some of the slow down mentioned in the article, such as the fall in housing market, seems to be exactly what the government want, as they've tighten the rules for real estate by a lot earlier this year. There're strict criteria people have to meet to be eligible for purchasing a house. This is a good thing because the current real estate market in China is almost insane.
Since every bank in China is under the direction of the central government it's up to a committee therein to decide which companies end up bankrupt. China might look like it has a modern capital market but it's still centrally controlled for key parts. National banks can and will infinitely extend credit lines to unprofitable companies if it's in the governments interest (for example to prevent public unrest).
Your hypothesis does not explain why the Chinese government is acquiescing to American trade demands. If they welcomed this economic slowdown they would be holding firm in trade negotiations.
What we are actually seeing happen is a rebalancing of foreign investment. American businesses have purchased stock in excess in the previous quarters using existing supply chains and are now moving supply chains out of China. Money that used to flow into China is now flowing into neighboring countries such as Vietnam. Mark my words, if the Chinese government allows this transfer to complete it will never come back to China and China's middle and lower class will be gutted.
Imagine if America's manufacturing economy was outsourced to China in the 60s rather than in the 90s when it already had a thriving service economy. That is what is happening in China.
Many people believe that authoritarian leaders are less beholden to their people than democratic leaders and because of this are able to withstand economic disasters easier. What they fail to realize is that when an authoritarian country fails economically there is only one group of people to blame and when judgement occurs it's not through polls but through violence.
A larger picture here is China is going through its own deleveraging campaign. They can't take more debt to stimulate the economy. Traditionally the government would ramp up massive investments in infrastructure or just remove the control over the overheated housing market. Both of those approaches are now out of the table. The infrastructure result in big debt, while the housing bubble is already the biggest probably in human history. It is unfortunate for the Chinese government to run into the trade war with US now, but it only accelerates the coming of the inevitable, the delayed reckoning.
But China is big enough to make its problem, the world's problem, just like US. It won't be the first to fall in this game, even though it might start it.
To use another medical analogy the idea that you can prevent an economic crisis by slowing growth is like the idea that you can cure diseases by using leeches to suck out them out.
The way to prevent economic crisis is to stamp out fraud and high risk investment practices (curing the actual disease). Encouraging American business to move factories outside of China does neither of those things.
It might not be but that doesn't mean you don't want it to occur for as long as feasibly possible. Maybe until you even reach parity with the US on a per capita income basis?
> and slowdown is of course welcome if that helps avoid bigger problems down the road
A slowdown is the problem itself, this is like saying you want to die of heart disease now because you might die of cancer later in age.
Economy: Everyone says it's been failing for 10 years -> Chinese leadership is omnipotent regarding economy -> it's just a temporary slowdown, government will print more money -> Chinese leadership planned this slowdown
Human rights: look at US! -> ignore comparisons to other countries other than US -> It's not really a concentration camp, since there's no mass murder -> prisoner organ harvesting isn't bad compared to US separating families at the border, or slavery 300 years ago
I am no apologist for any country, but wouldn't a better point be the very real, widespread, and constitutionally-protected prisoner slavery, which is happening in America today not just 300 years ago?
Without trying to justify anything, no system is perfect but at least we can talk about it. In China even having this conversation might make you liable to a citizenship points penalty that could end up with you being denied basic rights like the ability to book even domestic flights.
The best trolls tell something almost true to get people involved in a fight about details rather than countering the larger misdirection.
The emancipation proclamation was signed January 1, 1863, or 156 years ago.
And the party seems to be pretty weak when the Chinese economy isn't doing swimmingly. If things finally do turn sour, what a convenient time. You can just blame it on someone else.
Think again.
GoPro moving some production out of China to avoid US tariffs: https://www.cnn.com/2018/12/10/tech/gopro-china-tariffs/inde...
It's something that happened recently and was mentioned on HN, that's why I provided the courtesy of posting that for you.
Controlling the Chinese economy is relatively easy with the state corporation machinery through the investment component and brings in robust economic growth in GDP numbers, but consumption really sags.
FWIW the entire western economic system canters around the consumption portions of GDP. That's why everyone loves to export to the US/Europe/Australia. Consumption is resistant to short term economic shocks.
You'll have many around here boasting higher saving rates in Asian nations, but these are the reasons the economies are far behind (inc Japan). Look at the other side of savings, more spending means more is earned as well creating a net social surplus for everyone beyond the private scale of saving. It takes exports to make up for this shortfall.
https://mobile.twitter.com/carlquintanilla/status/1073234887...
US exports to China for 2018 will be around $123-$126 billion.
That compares to $129 billion for 2017, and $115 billion for 2016 and 2015. So US exports will be up vs 2016 & 2015, and down a mere couple billion versus 2017. Meaningless in other words.
Your premise is incorrect. So far China is paying for most of the trade war [1] through its producers slashing prices and by allowing its Yuan to drop in value (which is a wealth transfer from the Chinese people to prop up its exporters so they can hopefully run in place rather than get hit hard). That's why the US isn't seeing any consequential pricing / inflationary pressure at all from the trade war.
[1] https://www.bloomberg.com/news/articles/2018-11-19/china-is-...
https://www.ceicdata.com/en/indicator/china/total-imports-gr...
Both Japan and the EU (Germany with the world's largest trade surplus) have larger export markets in relation to the size of their economies than the US does. That's also one reason the US runs perpetually large trade deficits with Japan and the EU.
US exports to China haven't gone up meaningfully since 2013 (in fact they declined 2013 vs 2015/2016). That's not the case with the EU and Japan. Has nothing to do with the trade war, which didn't exist in 2013-2016, it has to do with what (and where) the US manufactures and exports.
It's also worth noting that Chinese manufacturing is to one extent or another a representation (proxy) for the US consumer economy, since major US corporations utilize China for so much manufacturing (part of the where and why reference in the last paragraph). US companies make products in China and then sell them to US consumers, which complicates the import/export discussion. This is pointed out constantly in critical discussions (eg about the environment or labor & wages), and ignored in discussions like these where it's an inconvenient fact. Over time the EU and Japan have outsourced less of their major manufacturing to China than what the US has.
And that’s from back in October. It’s a loss no matter how you spin it.
China is benefitting from what's called front-loading, which is a temporary bump in exports to beat the implementation of tariffs. It has been widely discussed in dozens of business publications over the last few months (including some breathless articles about ships desperately racing to beat the tariff dates), there's nothing surprising about it.
The fact that China can use its currency to fight this trade war is only more evidence that the US is being outmaneuvered.
You can spin it all day long, but the US soybean farmers and steelworkers are not winning this trade war.
https://www.google.com/amp/s/www.marketwatch.com/amp/story/g...
See the sibling comment for how little the total numbers have declined.
Someone is going to get fucked in a tariff change. Tariff changes area always a question of greater good.
2. I think the trade war is going pretty well for the US. They basically can't lose it this is why I don't understand that Xi did not compromise in the first place.