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Comment by Vt71fcAqt7 | Hacker News Reader

Clickbaity title. The article is not bad, but he doesn't explain why the declining growth rate is "the logical outcome of China’s uneven development and capital accumulation over the last four decades."

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...

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> I'm still not sold on the "China is dying" theory.

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).

> 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.

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.

> unmet expectations

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.

> TBH PRC "growth rate" is roughly in line with expectations

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.

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. Why is infra and manufacturing over invested? Except some western analysis state it is so. PRC per capita infra is still not advanced economy levels - PRC still has infra shortage. Meanwhile manufacturing is why PRC is moving up various value chains. Past 4 years, PRC export increased by 1T predominantly in global south, and holding onto most of gains - by all metrics of current export slump across export dependent economies (which PRC is not @20% export GDP), PRC export is doing near top in terms of capturing/retaining market share. This is not 1 step forward 2 steps back in market downturn, this is sustainable 3 step forward, 1 steps back.

>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.

I don’t think this article is saying “China is dying”.

How do you interpret "Zombie Economy?"

>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.

I believe you're misunderstanding and taking that term too literally.

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.

Maybe you are taking "China is dying" too literally, although I see that I should have used a different phrase, as it clearly took away from my actual point which was a data-based claim. I think it is fair though to say the people who think that China will see "Japanification" while still at ~13k GDP per capita are essentially saying that China is dying — and people actually were saying that China was collapsing after Evergrande; it is a real claim. I didn't mean to say that the linked aritcle meant this, only that people do say it, and the arricle feeds into with the title, which admitedly I did not articulate well. And as I said my main point wasn't even about the name of China's decline (dying, zombifying, ageing) but a comment about what analogous phase China's economy is in within Japan's timeline, which is a topic of the article as well as a common point discussed by economists.

The point though, is that China isn't going to have a revolution, or dramatic collapse.

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.

I don’t know. That property bubble, they are still trying to inflate it even more. When it pops, I’m not sure what will happen: will it just be Japan bad and they stagnate for a couple of decades, or will it be much worse?

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.

>it is going to have a long and slow stagnation.

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

Sure, stagnate at 1 or 2% for a couple decades.

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.

Sorry, a decade of 1-2% growth is just not happening. There is still so much low hanging fruit in the Chinese economy and plenty of talented (perhaps overqualified) workers to pick them. I suppose this is where we disagree. Thier automobile industry is just begining in earnest, for example. They are in 1965-1970 era Japan, not 1990.

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.

Growth isn't just determined by some video game tech tree. It is determined by a large number of other factors.

> 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?

Dying implies China will not exist. Zombie economy could mean stagnation or decline. We’ve already seen that with Japans Zombie companies. It doesnt mean the end of China.

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