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Comment by pragmomm | Hacker News Reader

China's debt is mostly internal, not external. It doesn't need a war to restructure debt. However, it does need to pay out an increasing amount of social pensions to its aging population, maintain its increasingly expensive and decreasingly utilized rail infrastructure, fund its growing state enterprises, and maintain its increasing military endeavors, etc. In other words, China's debt is owed to the citizens, but it now lacks the ability to pay them due to collapsing revenue from real estate.

It could try to print massively, but then its cash will be toilet paper, and for a country that mainly imports its resources, that would be devastating. So right now it's just printing quietly and in small doses.

War would make yuan worthless overnight.

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> for a country that mainly imports its resources

A 2024 paper says:

> China’s relevance as a manufacturing hub has risen from about 5% of global manufacturing production in 1995 to about 35% in 2020. Its production share was higher in 2022 than that of the next nine largest manufacturing countries in the world combined, including the US, Japan and Germany

> Jean et al. (2023) look at global dominance from another perspective. The authors identify product-level dominant positions in world trade, defined as a share of more than 50% of worldwide exports. Based on this measure, they find that out of a total of about 5,000 products, China held a dominant position in almost 600 products in 2019. This is outstanding and atypical when comparing this result to other countries and over time since 1970. For example, China holds a dominant position in at least six times as many products as the United States, Japan or any other country and twice as many products as the European Union considered as a whole

https://www.intereconomics.eu/contents/year/2024/number/2/ar...

Every (sane) company now has a China+1 strategy, mainly manufacturing for Chinese audience in China, and elsewhere for other audiences. It's easier to decouple from China now, much easier than 3 years ago.

And the +1 could never scale to the same capacity as China. Especially not at the same time. You can’t decouple from China, the global economy barely decoupled from Russia and even then it’s questionable how much decoupling actually occurred

China is losing a million workers a year and accelerating.

It just takes time. China took a while to get to the efficient process as well. So will Vietnam, and India, and Philippines.

As I quoted, China went from 5% of global production to 35% in just. It's literally never been more difficult to decouple from China

Your data point ends at 2020. Hmm.. what could have happened that year that would have spurred businesses to decouple from China. Hmmm… cough

WTO, IMF have yearly reports and IIRC one of U.S. Central bank branch have published report about this. TL;DR version is there's a trade flow reshuffle but China's trade percentage barely changed. As most traditional economic theories suggested and predicted, China sells more to ASEAN, South America and they sell more to U.S.

That’s all measured as “value-add” manufacturing - that is, the value of the manufactured good minus the value of the raw materials. It still has to import the majority of its resources to support not only for exports but also for its growing middle class.

> It could try to print massively, but then its cash will be toilet paper, and for a country that mainly imports its resources, that would be devastating

China is currently running a massive trade surplus, they could print a ton and still be fine.

Not enough, especially with the increasing trade sanctions and tariffs coming from every other country against China. There's a reason why there are Chinese state employees not having been paid for 8 months, or Chinese citizens unable to withdraw a few hundred dollars from state banks.

There was some talk of Shanghai proposing a new rejuvenation tax for residential buildings this summer. The backlash was so great, that the government quietly backtracked.

How do you know they can't print enough when they haven't tried printing money? They could print and thus increase internal consumption until they have a zero trade balance, which would help a lot of their issues, it is unclear how much but it would help.

China has been printing money since 2009. thus the 11 trillion off the book debts for local governments.

That’s 15 years. Why not for another 15 years? I mean eventually things might crash, but as the saying goes, “economists have predicted 9 out of last 5 recessions”.

based on the lack of big policy move from Chinese government this year, many thinks China has now run out of powder.

> Chinese state employees not having been paid for 8 months

I haven't heard of this before. Do you have a source (pref. one that doesn't start with "radio free" haha)? China's a massive country and "Chinese state employees" can mean all sorts of things

Localities are having cashflow issues, since all the VAT basically goes to the central government and without property taxes they rely on land transfer taxes. That could be playing out harshly in lower tiered cities, but I honestly have no idea what is going on ATM.

Any claim about china has to be prefixed with some at least, since there are lots and lots of people.

There's a liquidity issue for some heavily in debt local governments. It's also much complex because central government is taking this as a chance to pushing unwelcome structural changes. There's a quick fix have been done before - central government can simply swap local with central government debt and they still have a lot of fiscal room to do so. But many economists are against the approach this time because there's a issue long aware that central government doesn't actually able to control local government's budget but their debt considered backed by central government's unlimited credit.

What make things worse is the political incentive is local government has to grow economy and they can achieve that by borrowing money for investment. Even if the investment return is almost 0 there's a short term GDP boost (just think it as giving money to local workers, similar to Civilian Conservation Corps).

So now what they are pushing is force local government sell unused state assets they owned, cutting civil servant (hurting local consumption and local GDP), limiting their borrowing capacity and all other government reforms. Most importantly they want to break the expectations that local government debts are back by central government which distorted the market a lot in past decades.

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