Comment by friedman23 | Hacker News Reader

Comment by friedman23 | Hacker News Reader

Parent Full thread

Absolutely no leader welcomes an economic slowdown. Especially not the leader of an authoritarian government.

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.

FDI is one thing, but remember China, before the trade war even starts, has began to remove benefits from the foreign companies and replace them with domestic companies.

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.

They would rather have a slowdown than run into a crisis.....

Sure but that is not the actual trade off. You don't prevent an economic crisis by allowing foreign investment to slow down.

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.

There's so-called economic reform, such as moving up in supply chain, cutting debts, and reducing reliance on foreign investment.

No sane people would believe indefinite high growth is maintainable, and slowdown is of course welcome if that helps avoid bigger problems down the road.

>No sane people would believe indefinite high growth is maintainable

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.

Reply on news.ycombinator.com