China's Zombie Economy
newleftreview.org
newleftreview.org
The only rationalization that withstands any cursory scrutiny is to think that those towers are the seeds of, say, another Zhengzhou, which more than doubled in population (1.1 to 2.3m people) from 1990 to 2000, then added another 1.2m people from 2000-2010, then added another 1.7m people from 2010-2020 [0].
But then: who will work the 10% of China's land that's arable to feed 1.4B people? And what kind of family will those who came of age during the 1 child policy have in a cramped city? Finally, how the hell is China paying for any of this?
Add it all up, and you get what this article is talking about: a zombie economy, dependent on a crumbling world order, surrounded by countries that hold millennia-old grudges against it. Plus Russia.
Yikes.
[0]https://worldpopulationreview.com/world-cities/zhengzhou-pop...
The Chinese population already in rapid decline, but not fast enough.
According to the US Department of Agriculture [1], in the US
"Direct on-farm employment accounted for about 2.6 million of these jobs, or 1.3 percent of U.S. employment"
[1] https://www.ers.usda.gov/data-products/ag-and-food-statistic...
I mean yeah, that's the rationalisation, that useful idiots deliberately try not to see. PRC currently @65% urbanzation, with goal of 75-80% by 2035, aka 140-200M people. PRC "only" has 50M empty flats. Having excess housing inventory is fine, it's inefficient, but no more inefficient that US health sector at 20% GDP with medicore life expectancy. Which is only a light dig as US, but mostly to show that it's not big deal in the grand scheme of things.
>who will work the 10% of China's land that's arable to feed 1.4B people
PRC has 200M farming housholds when it really only needs 10M farmers using advanced ag equipment. There's stupid oversupply of agriculture labour, by design because it's a nice make job program for rural poor and consolidating agriculture is touchy subject because land reforms central to CCP founding mythos. Like out of all the concerns, lack of ag labour is most trivial.
>paying for any of this
With modest debt. PRC national debt is ~75% of GDP vs US ~120%, total aggregate debt PRC ~270% vs US ~760%. Basically +40-50% in the last 10 years to fund the largest infra expansion in human history. Pretty cheap all things considered.
>a zombie economy
1. @5% growth, if PRC is where JP is in 80s, that's 500% larger economy by 00s. If PRC is zombie economy, everyone else is stone dead.
> dependent on a crumbling world order,
2. PRC's is globalizing, see PRC increasing trade by 1T in last 4 years, more than previous 10, greatest increase in globalism in human history.
> surrounded by countries that hold millennia-old grudges against it.
3. Small countries where even with US basing, military force balance is trending towards PRC favor with each passing year.
>Plus Russia.
4. Guaranteed cheap gas and agri.
TLDR if PRC last few years is zombie, than momentum of PRC zombie horde will win like in most zombie media.
zombie economy based on cheap debt?
good thing the US doesn't have any of that.
China on the other hand, always squeeze and bit off wealth from it's private sector, sometimes not even by using the power of market force. China instead just issues laws and regulations until private business lights out.
For example, it is completely illegal for an individual entrepreneur to start up video sharing service (like YouTube), because hosting video sharing service require special license. And one of the condition is that the owner entity must be state-owned or state-majority. Without the license, the operator can be fined a huge sum of money and/or be jailed.
On the similar faction, there are also license requirements for operating service like news, BBS/forums/guestbook etc. Not all of them require a state-owned or state-majority owner, but still, enough to drive business ideas out of the window.
So that's a little background information I thought you should know.
Of course, not all laws and regulations issued by China was unreasonable and designed to drive out private business, and IMO state-owned company can operate many fields better than private ones (like running your water, gas, bus, hospital etc). But "letting good people do good things" is just not how things work in China.
China is more than 100% self sufficient on essential food (rice and other grains). China does import a large amount of soybean for fodder. If anything, I think Chinese eat too much nowadys and become as wasteful in food as Americans. When I visit China, I don't like the fact that many families have pets (dog, cat, and etc) just like here in US.
[0]https://www.fao.org/china/fao-in-china/china-at-a-glance/en
Can anyone explain this to me? My interpretation is the central bank exchanges exporter’s foreign currency for RMB. How does it become bank loans?
Do you mean in China or generally?
I’m not a finance person but my understanding is that fractional reserve banking is fairly common.
There is a concept of reserve in the system. That is: banks must keep a reserve with the central bank relative to the amount of new money they are creating through loans. At the moment though, that reserve ratio is 0 (zero) for the UK and the US, rendering it meaningless.
Say the banks are creating new money through these loans. And then enough of the original depositors plus some of the people that have been lent money want their money out that the bank can’t give it to all of them. From a layperson’s perspective (like mine) this seems like the bank has loaned out their deposits — it seems like a distinction without a difference to me.
What am I missing?
When you deposit money into a bank a few things happen:
- The money is no longer yours, it's the banks, you have no ownership of it anymore
- The bank creates an IOU (a deposit) in your account to say that you may request money equalling this value at any time. You can spend this IOU in various places, it is widely accepted as money. This "bank money" is confusingly referred to as dollars (or whatever your currency is), just like actual cash is.
- Completely separated from handling deposits, another arm of the bank creates loans, which also creates IOU's (deposits) in their respective account.
- Someone given a loan may request to withdraw cash (or a transfer), which may force the bank to reach into it's reserves, which is partly made up of customer cash deposits. These reserves are owned by the bank, not depositors. Banks are not holding onto depositors money in a strict sense, it's the banks money until an IOU is called in.
I think the last bit might be where the question about the "distinction without a difference" might be coming from? when the borrower requests cash, they are not "withdrawing" their loan, they are cashing in their deposit of "bank money". Because the percentage of reserves is always vastly smaller than all deposits they hold, bank runs are always destructive on the system. The whole system is a massive plate spinning act that works fine if the plates keep spinning.
I think this is one of those "technically true" things, but it works out very similarly.
You deposit $1 with the bank. The bank now has a liability to you of $1, and deposits the $1 with the bank's bank (often the central bank).
hand waving
Separately, the bank is able to negotiate for loans from the central bank. This is on the basis of its demonstrated capital controls, liabilities, deposits (with the central bank, including your $1), business plan, etc.
When the bank receives a loan from the central bank, there isn't necessarily any cash moving around. It's literally just numbers in a ledger, and a system of governance where eventually guys with guns will liquidate the bank's property if they don't handle things properly.
The central bank wants a cut of the action in terms of the prime rate. Whether the local bank can lend directly from deposits depends on how much control the central bank wants to exert, since this is an end-run around the monetary policy and oversight.
This is not how it works. You deposit $1 with the bank and create a liability. The same day, another branch makes a loan and creates new deposits from thin air. At the end of the day, the bank figures out its reserve position. If it is short, it borrows reserves from other banks.
Loans precede deposits. Always.
Banks are subject to capital requirements, and are concerned about profitability and loan losses, so they don't make an unlimited number of loans.
This might seem like semantics but someone who believes reserve requirements and deposits are the limits on lending would find it tough to explain why banks aren't lending huge amounts after the reserve requirement in the US was cut to zero.
Arguably the most important constraint on a bank's ability to create new loans (and hence new deposits) is its core tier one capital ratio: that is, its total liabilities divided by its shareholders' equity.
Customer wires USD 1,000 to bank B to the account of business A as payment for the goods.
This money does not go directly to the account of business A.
Bank B sends USD 1,000 to Central bank and gets RMB 7,000 (or whatever the exchange rate is) which go to the account of business A.
Bank B ends up with deposits almost entirely in RMB to loan out. Few customers outside China really want those.
Compare with a situation in which bank B kept its USD on the books as customer deposits. Then it would have USD to loan out, and the market for such loans is much bigger.
Hence probably why China is pushing other countries to use Yuan as an exchange currency?
When an exporter in China gets foreign currency for their export, it goes to the exporters bank. The exporters bank "sells" the foreign currency to the central bank. In this sale, the central bank usually "prints" the yuan to exchange for the foreign currency.
When a trader in China imports goods, it asks their bank for foreign currency. They give the bank yuan. The bank sells the yuan for the foreign currency with the central bank. The central bank sells it's foreign currency assets and "extinguishers" the yuan they received.
It's not as simple as this but this is the theory.
The tie to RMB is critical for the Chinese economy because of its dependence on foreign investment
Since they’re the entity that makes the RMB, and a lot of people want to buy stuff from them in dollars, they collect a lot of dollars and print a lot of RMB.
The flip side of that is because they don’t have a big consumer economy, not as many people want to buy things in USD by converting their RMB (especially since the exchange rate is fixed at an unfavorable level).
So net net they have more dollars becoming RMB than vice versa. Those RMB become worth less anytime anyone exchanges them into another currency (because the fixed exchange rate), so they need to spend them in ways that don’t require an exchange.
Then domestic investors way over-invest in domestic projects, which leads to inefficient cities in the countryside.
Because the banking system is tightly controlled by the party-state – with state-owned or state-connected enterprises serving as the fiefdoms and cash cows of elite families – the state sector enjoyed privileged access to state bank loans, which were used to fuel an investment spree. The result was rising employment, a temporary and localized economic boom, and a windfall for the elite. But this dynamic also left behind redundant and unprofitable construction projects: empty apartments, underused airports, excessive coal plants and steel mills. That, in turn, resulted in falling profits, slowing growth and worsening indebtedness across the main sectors of the economy.
Which looks eerily similar to the influx of outside capital in cities like mine, which are experiencing unprecedented growth as huge apartment complexes are built for millions of dollars, while the average person can't afford a $500,000 home that was just $150,000 a decade ago. Because access to capital has been ..corrupted? I don't know the right word.
So we have all of these people working as hard as they can to build nonproductive infrastructure. A healthier investment might look like NOT paving farms. Or expanding mass transit. Or funding education. Or stimulating the commercial and industrial sectors. Or doing anything else at all really.
We already went down this road in the 2000s, when the Dot Bomb strategically crashed the economy to give Bush the win in the Bush v. Gore decision, so that attention could be distracted away from sustainability investments like electric cars and solar, towards militarism and a buildout of the housing market which led to the housing bubble popping in 2008. IMHO the US never recovered from that, so now it's all these shell games designed to keep capital out of the hands of everyday working people, who will be left behind as we transition to a rent-based economy of global neofeudalism.
Beneficiaries are not the ones paying in with their time and effort, which creates low morale in the economy and causes the 20% unemployment in youth who have rightfully spotted that the economy is rigged. I think this will become more prevalent as authoritarianism rises and AI eventually takes an oversight role while having no accountability.
BTW this is all fixed through tax policy. We simply tax the wealthy at post-WWII levels until the national debt is paid and workers return to a livable wage as the middle class grows. Note that that's the only thing we haven't tried, which is why no progress is being made.
I also visited China fairly recently, China in 1983 and other culturally Chinese places like HK, Singapore, Taiwan and western areas. My take is the Chinese are a generally a hard working educated people who will do well given the chance. In 1983 the place was reduced to 1$ a day type poverty by Mao style communism. When Deng Xiaoping dropped that and allowed normally capitalism and trade the place boomed as the population started catching up with their cousins abroad.
Now Xi who is a Mao fan is rolling back some of the economic freedom such as arresting the AliBaba guy, and threatening the neighbours militarily which is causing the rest of the world to cut back on trade such as the US moving chip production away. I hope Xi doesn't go too nuts politically and start WW3 or something but otherwise I think China will do ok but not boom quite like the pre Xi period.
"Big data and AI are integrated in everyday life" should make it clear that author is either naive or shilling. Of course there's big data, with social karma and total surveillance you just must, but if you mean something people actually interact with daily... saw enough sham around it in China that without evidence I will just laugh at this. As soon as tech sector caught on that party wants AI everything instantly is labeled "AI".
but I suppose the perpetual condescending and underestimating is preferable to the typical violent modus operandi
"Information is antifragile; it feeds more on attempts to harm it than it does on efforts to promote it."[1]
[0] https://www.ft.com/content/b2e0ad77-3521-4da9-8120-1f0c1fdd9...
[1] https://libquotes.com/nassim-nicholas-taleb/works/antifragil...
I did read it, but not seeing what this article brings new.
What is the point being made here? Except, things are bad, and nobody realizes it.
The term Zombie Economy has been used for a lot of years, when will it actually manifest?
But less tongue in cheek, this value destruction will end someday. With every cyclic crisis, a ~10% of our population falls into poverty. Maybe the percentages will become smaller every decade, but theres a feudal 99% poverty rock bottom, you can't really go deeper than that.
Japan’s economy arguably collapsed in the 90s. Perhaps burst and stagnated is more accurate ever but its a semantic game at that point. No one knows if China’s economy will collapse but there are lots a serious and unique risks.
Japan is a mild example, but I bet you have much fewer "Made in Japan" things in your house than you would in 1985. Argentina is a much more painful example, with no recovery in sight. Wait what's going to happen when Russia loses the war.
“Collapse” would be Great Depression, or unbailed-out Global Financial Crisis. The GFC (rightly) spooked everyone, but now we’ve got millions of wanna-be prophets in the media trying to predict the next “collapse” and take credit for being a modern day Nostradamus. But it’s all just clickbait.
The US and EU/Eurozone/Western Europe are not going away. Their significant allies are not going away (eg Japan, South Korea, Australia, New Zealand, India, etc.). China isn't taking over, they're becoming (have become) a peer global power.
China has accumulated vast wealth, infrastructure, manufacturing, know-how, and so on. It's not going to reverse backwards in the sense of collapse. Things aren't going back to the way they were 30-40 years ago. China is - at least for our relevant time - permanently established as a free-standing power (ie even if the West wanted to, that genie can't be put back). They will likely continue to progress, even if at a slower pace.
Stagnation brought on by hyper rigid authoritarianism is most likely. At least during the Xi era. Perhaps there will be a Deng Xiaoping like loosening again afterward, who knows (maybe someone far worse will use Xi's levers of power to implement even stricter authoritarianism).
In the long term, they have a bit of a population problem as their demographic dividend ends and their birth rate remains low.
It is gonna be real rough soon.
Both are fairly low.
So then after a while if the things keep going on North Korea stops being "that isolated contry"?
The article is saying 'China peaked in 2021 and the past two years have been a zombie economy'. It's not talking about what might happen, but about what has already happened and why the state has been hyper-focusing on security and military competition with the west for the last couple of years.
Good luck running long term businesses (but some people seem to manage pretty well - survivor bias?) and long term personal or family investments (scary just a bit? - I mean beyond US-style investing?)
Around 30% of the economy is linked to real estate, seems pretty zombified. Export economy is being strangled by increased labour costs/shortages and carefully rolled sanctions. Consumption economy has difficulties to grow due to a lack of "hope in better times" from consumers. But the elephant in the room is the CCP, which is looking more concerned with "political stability" at the expense of everything else.
Things are bad since Xi Jimping first years with first wave of delocalization of (textile) industries, politicization of society, political infightings that target the economy, etc...
I'm still not sold on the "China is dying" theory. China's GDP per capita is the same as Japan's when it entered single digit growth in 1970.[0][1] Those numbers surprised me, though, and may be too low wrt Japan. I think the aging demographic is a greater issue than the ones listed in the OP; economic activity can always be restarted given the underlying conditions are there, which is the case for China in general in my opinion. Demography is destiny, however, and cannot be escaped. The One Child Policy was a mistake for the economy.
[0]https://data.worldbank.org/indicator/NY.GDP.PCAP.KD.ZG?locat...
[1]https://data.worldbank.org/indicator/NY.GDP.PCAP.KD?location...
I don't know if it's as much a story of decline as it is one of unmet expectations.
China has a declining (and likely overstated) population. They have a very heterogeneous population. They also have an unsustainable growth model and an unwillingness to 'pull the plug', stop manufacturer subsidies, and tackle local governance issues.
In other words, China looks a lot like many other East Asian countries in the past that have pursued an export-led growth model with a de-facto single party government.
The difference between China and Korea, Japan, and Taiwan is that the country is - much - larger. Modernization is almost always city-first. It's possible to gloss over a significant rural-urban divide when you have a high population density and a relatively homogeneous population.
For comparison, Taiwan's population density is three times larger than China, and that's before you account for the fact that much of the island is essentially inhabitable.
All of the infrastructure China has built exists. From what I've been told, the east and south coast cities are the most modern in the world. It's hard to imagine - decline.
However, the country has very well known and very large issues that they're unwilling or unable to address. Lower growth and - maybe - some form of stagnation are more likely, (I'm thinking it will be the former after a correction of some kind).
I've been to Shanghai a couple of times, to Hong Kong once... also nearby Singapore... and I can confirm: it looks very much like a futuristic place compared to your average European or American city, though slightly dystopian due to all the surveillance/single-party.
But I think the reason for that is simple: almost all infrastructure you see around has been built in the last few decades, so it's all really modern... you go to London and it's the total opposite... the London Underground is like 150 years old!! It's not gonna look very modern no matter how much you improve it.
But of course, without a thriving economy you wouldn't build such colossal projects like China has been doing... anyway, if we start seeing all this beautiful, modern infrastructure starting to crumble, or places where infrastructure still hasn't been modernized not getting any improvement, then I think we can start to talk about decline - but China seems to be very, very far from that right now.
TBH PRC "growth rate" is roughly in line with expectations, including PRC will overtake US projections from years ago, caveate being many of those projections assumed PRC would strengthen rmb to iirc 4-6 vs 7 to 1 USD to put PRC at ~25T economy. Regardless, GDP not particularly useful for comparisons of comprehensive national power.
> Lower growth and - maybe - some form of stagnation are more likely
The distinction is PRC doomers think PRC has peaked and will be declining soon. PRC collapcists narrative is about wanking at the notion PRC stagnating and never eclipsing US. VS relevant indicators suggest PRC is where JP is in 80s, where JP grew 400-500% until post 00s stagnation. PRC "stagnanting" at 3-4x the size of US is a much different geopolitical scenario than narrativet tha PRC doomers/collapcist want to push. Even PRC @2x larger is TBH in the "unmet expectations" column, but that's still relatively the largest country in the world by 2050 and more than enough to compete against US/west.
TLDR PRC is at 25% skilled workforce, and moving to 60/70/80% of advanced economies by generating 50-100m STEM + other high skilled labour in next 30 years. FOr reference US on trend to add 40m people total. PRC in process of reaping literally the greatest high skill demographic divident in human history, and why other East Asian countries continued to grow with shit TFR - they replaced unproductive talent with skilled talent. Stagnation comes when TFR can't replace productive workforce at parity, PRC has decades of headroom. Past 25 years = 250M births already baked into future workforce with system that disproportionatlly filters talent towards S&E.
The fundmental problem with PRC peak/stagnate narrratives, especially peak/stagnate below US, is deliberately presenting using very questionable suppositions (real estate, demographics, authoritarianism etc) to suggest it will happen soon instead of decades from now, with a PRC larger than it is now, and likely larger than US. Folks over indexing on PRC being good at overbuilding in real estate, tend to a turn a blind eye to that state overcapacity also applying to everything else - like PRC moving up science and innovation indexes, value chain etc - all of which is rapidly building PRC comprehensive national power.
Iirc the expectation in the early teens was a slowdown to 3-5% growth around the middle of the last decade. The argument then was that PRC officials knew they needed to transition to a more balanced growth model.
Instead, they continued over investing in manufacturing and infrastructure. The end result is a sizable amount of debt across the entire economy that is, likely, unsustainable if and when a market downturn occurs.
> TLDR PRC is at 25% skilled workforce
I think there's a bias on here to think that skilled = STEM. There's an argument to be made that what China really needs is skilled service workers.
People also need to realize that, when it comes to demographics and population mobility, China is far more akin to the EU than the US.
If we go by your argument, Europe also has a very large reserve of unskilled or semi-skilled workers. However, moving from Sophia to Frankfurt != moving from Boise to San Fransisco. I'll even argue that it's much easier to move from Bulgaria to Germany than it is to move from Sannxi to Beijing.
>think that skilled = STEM.
No I'm just highlighting out of 250m bodies entering workforce, at current rate about 50-100m will be STEM. 50-100m will be other high skill either skilled vocational or skilled services. The point is PRC transitioning from 25% skilled to 60-80% is basically piling up multiple current PRC worth of competitive talent into the mix.
> easier to move from Bulgaria to Germany than it is to move from Sannxi to Beijing
PRC tertiary enrollment is more or less correlated to urban migration and urban workforce. The youth unemployment stat for example was about urban youth unemployment where 2/3 youth cohorts are - mostly for education. Skilled talent are naturally concentrated in productive centres in tier 1/2 cities (and increasingly growing interior 3/4 industrializing clusters) just by virtue of where tertiary networks are located.
Yes unskilled / semiskilled have limited migration optionsin PRC via Hukao, but it's not causing a labour shortage problem since that cohort is 200m+ trapped in informal economy. Most of them are basically so underskilled and undereducated that they can't even be trained for assembly line jobs (hence blue collar / manufacturing shortage). They're not the reserve you're looking for.
The actual reserve are basically overeducated kids still too proud to take factory/vocational job because it's beneath them. They're already where the jobs are, but won't make the jump until sufficient stress. It's akin to US (well also EU), which has skilled/semiskilled blue collar shortage because people don't want to do those jobs even if they're well compensated. Difference is US/EU also has broad labour shortage, they simply don't have the bodies. Especially in high skill / STEM. Hard to get that literature major to engineer or other shortage jobs US needs filling. Opposite is true for PRC who has broad skilled labour surplus who can be retrained to work lower skilled jobs if desperate. That compsci graduate can assemble widgets if his life depends on it. Problem is of course is credentialled kids want to paper push. Will take few years for active cultural change to drive people into blue collar.
>a corpse said to be revived by witchcraft, especially in certain African and Caribbean religions.
Edit: I admit that I used the wrong word. I would correct it to:
I'm still not sold on the "China is Japanifying" theory.
The term has an established economic meaning that applied to Japan long before China, and Japan didn't "die":
https://en.wikipedia.org/wiki/Zombie_company
The article also describes that process.
Instead, it is going to have a long and slow stagnation.
Therefore, the people saying "well, people have been talking about a China collapse for a decade but I haven't seen anything dramatic happen!!" Are wrong and missing the point.
Because a decade of stagnate growth for China is still a big deal, while not being dramatic in a way that obviously "proves" the China doomsayers correct.
Anyways, I wouldn’t predict a collapse (that probably won’t happen), but I wouldn’t rule one out either. I’m just glad I’m not exposed to either anymore.
How slow? "Japanification" is 1% growth.[0] That's ridiculus for a growing economy. I can't take the claim that China will have 1% growth seriously. If you mean "stagnate at 6%," my claim is that 6% is "enough" for a low middle imcome economy, Cf. Japan in 1970. So your claim in that case is wrong that it will be "a big deal." At most we can say that China will reach a mid-1980 Japan level economy more slowly than Japan and Korea. However this is very different from the claim that China is 1990 Japan, or that "China might never catch up with the US," implying that China will always be third world (although we can debate the meaning of that sentence).
[0]https://link.springer.com/chapter/10.1057/9780230512283_2
That's both bad for china, while also not a literal revolution.
> That's ridiculous for a growing economy.
It is low for a normal growing economy, sure. But China has a lot of problems, which is the entire point.
If you want to call low and stagnate growth as something that is very bad, sure.
But most people, when they are objecting" to the term "dying" are simply objecting to the idea of a sudden collapse, which is it not likely to happen.
Instead was is likely is very low growth for a long time.
Which you are free to call very bad if you want, but that's not the same definition as what other people are referring to.
This was Japan's economy:
Junk -> steel -> automobiles -> computers/chemicals
China is only now geting to automobiles. They are making good progress on electronics as well. Thinking they will suddenly go to 1% is just ridiculus in my view when they have so much left. They also aren't strictly speaking as dependent on exports as Japan was considering the size of their domestic market. To me all of this signals that China will stay in the 6-7% range and will reach 40k GDP per ca in 15-20 years or so.
> Thinking they will suddenly go to 1% is just ridiculus in my view when they have so much left.
One way that "growth" can go down is by simply marking down the value of existing capital projects.
In China's case, this would be all the debt and real estate that they have, which is overvalued.
You can borrow lots of money over the short and medium term, to create fake growth, but eventually there is a limit to debt fueled projects. And china is starting to hit that limit of an overleveraged economy.
IE, that powerplant, that was previously "included" in previous growth rate metrics as being "worth" 1 billion dollars, is actually only worth 500 million dollars, even if "the books" say otherwise right now.
If all those capital intensive to create buildings that they have are actually worth half as much as they are incorrect marked on the books right now, that would account for the "apparent" decrease in growth that will happen over the next decades, even though technically it would just be revealing past fake/debt fueled growth.
Does that make sense how if they lose X trillion dollars (but over time!) because of overvalued real estate/capital projects, that this would account for an apparent decrease in growth, even if china still has gains from other parts of the economy?
Is Chinese power about to peak? : https://www.economist.com/leaders/2023/05/11/is-chinese-powe...
How soon and at what height will China’s economy peak? : https://www.economist.com/briefing/2023/05/11/how-soon-and-a...
How China measures national power : https://www.economist.com/briefing/2023/05/11/how-china-meas...
The fall of empires preys on Xi Jinping’s mind : https://www.economist.com/briefing/2023/05/11/the-fall-of-em...
In short, they do have a number of functional problems keeping them from further growth. Chief among them is a lack of local resources. They must rely on importing base materials in order to have value added goods to export. Plus some indications that just because their government wants to grow their people may not have such a strong desire. They have something like 34 million more males than females. Also growing signs of toxic financial conditions in their real estate markets including fraud and abuse ("How to escape China's property crisis" https://www.economist.com/finance-and-economics/2023/06/28/h... and "China’s economic recovery is spluttering. The prognosis is not good" https://www.economist.com/leaders/2023/06/22/chinas-economic... , etc)
That's considered to be low.
Predictions for the US's 2023 GDP growth is 1.6%
They seem to think a pandemic where Chinas response was total lockdown is indictive of the future.
> The Economist now claims that China might never catch up with the US
That's not how The Economist works
Sounds like a description of the Western economic situation to me.
> Early estimates for the bailout's risk cost were as much as $700 billion; however, TARP recovered $441.7 billion from $426.4 billion invested, earning a $15.3 billion profit or an annualized rate of return of 0.6%, and perhaps a loss when adjusted for inflation.
https://en.wikipedia.org/wiki/Emergency_Economic_Stabilizati...
"Here's $600 to live on for 6 months, poors. How much could a banana cost? Oh, also here's $600,000 if you own a small business!"
They were available to contractors. Workers got extended unemployment and forebearance benefits. If you have an actual solution to propose, go for it. But complaining with misaligned facts isn’t particularly productive.
Subsidised student loans, SBA loans, et cetera. It’s also noteworthy that TARP-like bailouts are no longer the precedent: guaranteeing deposits while letting the bank fail is.
...
Trillions of dollars are given away to the poor every year in the US, with no expectation of getting it back.[0] Adding "favorable loan terms" on top of this will literally lead to the exact outcome you are describing in 2008. We can debate the bank bailouts, which I think is worthwhile, but comparing them to personal loans is naive.
[0]https://fiscaldata.treasury.gov/americas-finance-guide/feder...
How is that profit?
I wondered if there might be a good reason for it, but you just snarkily rephrasing what I quoted tells me there probably isn't -- so it's a loss. Because inflation is not something you can just ignore, when I buy something with money I don't get asked if I want the money to be counted as 1980 money or whatever, it's always "now" money. If by the time the loans get paid back inflation ate up the profit, there is no profit, and the criticism of it socializing loss while keeping profits private remains valid.
You stated "The US government made a profit". You claimed that, in direct contradiction to what you quoted. Now you're shifting goalposts.
How so?
We are also in a high-rate environment that is leading to defaults in the property sector [2]. Again, the opposite of extend and pretend.
[1] https://www.ft.com/content/b2e0ad77-3521-4da9-8120-1f0c1fdd9...
[2] https://commercialobserver.com/2023/03/default-floor-brookfi...
Growth went from 10% to 5%, therefore it is basically 0% if not negative.
Birthrates are down, therefore total demographic collapse is imminent.
Some real estate projects failed, therefore all real estate is about to crash.
So much noise. But hey, the Strategic Competition Act of 2021 earmarked hundreds of millions of dollars for producing such nonsense.
What annoys me about economists is how often they redefine how they calculate things like "GDP" and "unemployment" and then try to compare their new oranges to their old data apples.
In many respects, if you use the older metrics China has long surpassed America on its GDP output but with the constant revision America still is "number 1".
Same goes for unemployment. You can compare these metrics when you change how they're calculated.
As for China, their youth is now experiencing what many in the West and Japan are familiar with: NEETs/hikkimori.
They don't see the point in working because the cost of living is too high and their wages stagnant so they go the opposite route and do just enough to get by and enjoy life.
I don't blame them either.
Maybe, but the Economist is a UK publication. What incentive would they have to prop up the identity of America as number 1?
Apologies if that wasn't clear.
> The Economist now claims that China might never catch up with the US
On one hand, we have reversion to the mean in terms of productivity per capita. On the other hand, we have (a) empirical evidence of the middle-income trap [1] and (b) theoretical underpinning for compounding economic gains as a corollary of economies of scale. In essence, China's dominance is inevitable only if they've solved the middle-income trap problem and either (x) economies of scale cease to matter or (y) the U.S. is destined to failing to capitalize on its own economies of scale. In summary, it's far from certain (though also far from impossible).
Also, China's population is shrinking [2]. It's forecasted to drop from over a 4x population advantage over America to less than 2x by 2100 [3]. By that point, Nigeria, Pakistan and the Democratic Republic of the Congo are forecasted to have larger populations than America. Any theory of population determinism must explain how Pakistan will come to dominate America while India dominates China.
[1] https://en.wikipedia.org/wiki/Middle_income_trap
[2] https://www.reuters.com/world/china/chinas-population-shrink...
[3] https://en.wikipedia.org/wiki/Projections_of_population_grow...
Plus here in the UK we're obsessed/in love with the US.
Endlessly pining for their approval (trade deals, FOM deals, etc), willing to support anything they ask for, invasions, war-mongering, censorship, propaganda, "decoupling", privatization, austerity, etc.
Actually we often do much more than what they presumably are asking for.
It's a sad and deeply abusive relationship.
[0] Whatever the state department decides it wants today.
Well the state department didn't support brexit [0], as one sort-of counterpoint. However, The Economist didn't either [1]. So this doesn't disprove your overall point.
[0] https://carnegieendowment.org/2018/11/28/limitations-of-u.s....
[1] https://www.economist.com/sites/default/files/EconomistBrexi...
Which older metrics are you specifically using to support that claim and can you show me what China's GDP figure looks like compared to the US under that different model?
That being said, I highly doubt their GDP growth is negative, you just have to build something to record positive GDP, not necessarily sell it. Whatever target the central government sets the provinces will meet on paper, and probably in reality (even if the activity used to generate GDP isn’t useful).
I would say look at the Li Keqiang index, but Li was recently fired, so I’m not sure what they are going by now for real numbers.
Can you elaborate on this? What are the "older metrics" in question?
>Same goes for unemployment. You can compare these metrics when you change how they're calculated.
Is the 20% figure cited in the article somehow not comparable to other figures in the G-7?
edit:
I did some searching and found a economist article that claimed china's economy would exceed the US's in 2018: https://www.economist.com/finance-and-economics/2011/12/31/h...
The article very clearly says that 2018 is the date where its GDP at market rates will exceed the US. So at least for this article, there's no mixups here, only a failed prediction.
China has high taxes on luxury goods, and what is considered a luxury good is pretty strange (eg Levi jeans for 800RMB).
Considering a tasty Western meal in Beijing was about 100 RMB, a nice Chinese meal about 50-75 RMB per person, and Peking duck at a fancy place was 250 RMB, I’d say a pair of jeans for 600 RMB is fairly luxury. Especially since Levi’s in the US only cost 1-2 normal meals. (This was about 2012, not sure how inflation has been) But then, I’d also say that a $100 pair of jeans is also luxury in the US. (And a poor deal if they’re already fashionably pre-shredded)
Something being more expensive due to taxes doesn't affect PPP because that money is being used for government services.
That has nothing to do with PPP thought which is a measure of how inexpensive things are in a country relative to one another.
None of those metrics has "changed". It's just two different ways of measuring it: PPP defines intrinsic economic power/amount of goods consumed, nominal defines power on world markets/purchasing ability. We produce and consume in national prices that are different (and PPP factor corrects for that difference), but we trade in nominal dollars.
(All countries seem to do some overcounting but not by 100-400%.)