8 ms·

Fears over the true state of China's economy

93 points by tokenadult 11y ago

golergka 11y ago
And that's why you can't have truly capitalist systems with authoritarian, corrupt government. China and Russia both learning this lessons the hard ways as we speak. The core requirement for "free markets" to work is to have transparent, leveled playing field. And while a lot of criticism against US financial system is completely valid (of course HN is bashing US first — because HN readers live there and it makes more sense to criticize something that you're more familiar with), it's 10s, 100s times healthier, just because the political competition between a multitude of actors guarantees that power will not be centralized in single hands. My (completely idiotic and unprofessional) prognosis for the next decade: global financial system will repeat the same mistakes with India boom.
- tomp 11y ago
  > it's 10s, 100s times healthier You mean, except in 2008?!
  - golergka 11y ago
    No, exactly _including_ 2008. Of course, you think that 2008 was BAD. But this is not usable data. Compare how BAD was it compared to 1998 in Russia, for example.
    - _yosefk 11y ago
      Not that I believe the Russian economy to be better-run than the American, but right now the US does have the big advantage over just about everyone else of being able to print the world's reserve currency, which makes it easier to make the rest of the world pay to solve its problems, and I think the US did use that trick a lot after 2008 (QE being debt monetization, and the Fed's balance sheet having grown with no clear date when it'll shrink back.) So it's a bit hard to compare the US to others. As to how well markets functioned wrt the 2008 crisis - one question concerns credit rating agencies. If you believe that they didn't do their jobs well, then it should be troubling that they didn't go out of business, quite the contrary, it's the same small number of firms which still operate in this business. If you believe that they did do their jobs well, because the government bail-out resulted in most junk debt being repaid to creditors, then you essentially don't believe that markets function very well, as they seem to have made a correct calculation that they can extract money out of taxpayers through this junk paper, and that is not what any economist would praise as markets functioning for the benefit of society. (Two counterarguments to the above that I heard are, the government caused the housing bubble in the first place, or alternatively the government helped smooth/stabilize asset prices, including housing prices, which is a proper use of monetary policy, and the paper was never "really" junk since housing prices rebounded later. Dean Baker argues against the latter based essentially on buying homes getting costlier relatively to renting them in bubble years. The former counterargument is voiced more rarely which is perhaps why I haven't heard a counter-counterargument. Anyway, I think this whole thing is a bit muddy...)
      - golergka 11y ago
        My original comment: > a lot of criticism against US financial system is completely valid
      - arielb1 11y ago
        > as they seem to have made a correct calculation that they can extract money out of taxpayers through this junk paper, and that is not what any economist would praise as markets functioning for the benefit of society. Well, it's not like the credit agencies bailed out the banks themselves. The version of the criticism I have heard was that the banks (and credit agencies) knew that the taxpayers will bail them out if they fail, and therefore they took unnecessary risk - making investments just as useless as the nails made by Soviet nail factories.
    - 1stop 11y ago
      Compare a US problem that caused global recession, to a single countries recession!? Or even better compare to china that might have to down grade its growth to "normal"... I forgot what your point was...
      - golergka 11y ago
        > Compare a US problem that caused global recession, to a single countries recession!? It wasn't a single country's recession, it was connected to the Asia's earlier crisis and oil price plummeting. > I forgot what your point was... You can read it above.
        1stop 11y ago
        2008 was connected to 97? How? Last I checked it had nothing to do with oil, so please explain.
        golergka 11y ago
        1998
        AnimalMuppet 11y ago
        1stop asked for an explanation. You corrected the year, but that doesn't actually explain how you think the two are connected.
      - kasey_junk 11y ago
        >Compare a US problem that caused global recession Its an extreme oversimplification to say that 2008 was a US problem. It was a problem of international finance, the bulk of which (maybe unwisely) is done via US financial institutions and with US financial products. That a problem with international finance was linked to recessions globally is not surprising. Similarly, if some systematic problem in international manufacturing appeared, the bulk of which (perhaps unwisely) is done in China, we would expect it to also have global ramifications. It turns out that a financial problem in China is currently contained because it is not a major player in international finance (yet).
    - tomp 11y ago
      Well, even if that's true, we can't pretend that 2008 wasn't caused by unlevel playing field, intransparent markets, faulty regulation, corruption and great concentration of power (in the hands of banks and rating agencies).
      - rayiner 11y ago
        Was it caused by those things? Or was it just a speculative bubble popping, which has happened countless times in the history of the republic, long before the modern regulatory state and modern banks ever existed?
        addicted 11y ago
        The Market cannot fail. It can only be failed.
        EGreg 11y ago
        Poe's law applies here
        TeMPOraL 11y ago
        Started Googling about markets being treated as religion, found this 1999 article from the Atlantic: http://www.theatlantic.com/past/issues/99mar/marketgod.htm http://www.theatlantic.com/past/issues/99mar/marketgod.htm "The East Asians' troubles, votaries argue, derive from their heretical deviation from free-market orthodoxy -- they were practitioners of "crony capitalism," of "ethnocapitalism," of "statist capitalism," not of the one true faith." Interesting reading.
        ra1n85 11y ago
        Very much speculative bubbles being popped. One of the most interesting things was what Dr. Michael Burry (one of the main characters in Michael Lewis' The Big Short) noted in a recent interview: "The biggest hope I had was that we would enter a new era of personal responsibility. Instead, we doubled down on blaming others, and this is long-term tragic." http://nymag.com/daily/intelligencer/2015/12/big-short-genius-says-another-crisis-is-coming.html# http://nymag.com/daily/intelligencer/2015/12/big-short-geniu... And having seen that things like interest only loans are still a thing, and very much still offered and applied for, I would tend to agree.
  - brc 11y ago
    It's my hypothesis that the authoritarian actions leading to 2008 and the authoritarian responses to 2008 made it worse than it should have been. A better structured economy would have more competition and more bankruptcies. And fewer bailouts and government-arranged mergers. The capitalist system must be able to purge bad decisions and investments naturally or it will eventually calcify like a centrally planned economy.
    - cconcepts 11y ago
      Totally agree. The idea that the laws of gravity shouldn't apply if you're "big enough" seems like it could throw the planets out of alignment.
      - AnimalMuppet 11y ago
        It's not quite that simple. The law of gravity will not be permitted to apply to you if doing so will cause too much damage to too many people. But several times the "bailout" kept the institution alive, but wiped out the shareholders. I thought that was at least somewhat reasonable. Wipe out the senior management too (which I don't recall whether that was done), and that might be about as good as can be achieved.
  - tonyedgecombe 11y ago
    Just read https://en.wikipedia.org/wiki/Great_Chinese_Famine https://en.wikipedia.org/wiki/Great_Chinese_Famine and consider that the US didn't have anything like this even in the depths of the depression.
- yyyuuu 11y ago
  The one difference between China and India is that of Democracy. Even though both the nations boast of a corrupt governance system, yet the fact that in India, a non functioning government is more likely to get kicked out by an increasingly well aware population, makes it a safer bet in the long term I guess. To Quote Thomas Friedman[0]: "If India and China were both highways, the Chinese highway would be a six-lane, perfectly paved road, but with a huge speed bump off in the distance labeled "Political reform: how in the world do we get from Communism to a more open society?" When 1.3 billion people going 80 miles an hour hit a speed bump, one of two things happens: Either the car flies into the air and slams down, and all the parts hold together and it keeps on moving -- or the car flies into the air, slams down and all the wheels fall off. Which it will be with China, I don't know. India, by contrast, is like a highway full of potholes, with no sidewalks and half the streetlamps broken. But off in the distance, the road seems to smooth out, and if it does, this country will be a dynamo. The question is: Is that smoother road in the distance a mirage or the real thing?" [0] http://www.nytimes.com/2005/06/08/opinion/bangalore-hot-and-hotter.html http://www.nytimes.com/2005/06/08/opinion/bangalore-hot-and-...
  - golergka 11y ago
    I agree completely. Personally, I'm really optimistic about India and excited to see the progress that they had lately. But at the same time, investor's optimism has a positive feedback right until the crash, so investors will inevitably get _more_ optimistic about India than they should.
  - anon8418 11y ago
    India has a long ways to go before it catches up to China. Have you ever been? The differences in development are pretty stark.... even more so when you compare secondary cities. It's really night and day... not at all even comparable. Many Indian cities still lack decent plumbing. Westerners seem to equate India with China, some even seem to think that India is more developed on account of the english language skills and the growth of their services based economy. Couldn't be further from the truth. Indians I know that have been to both are always surprised by how developed China is. Westerners should travel more. It'll really open your eyes...
- deleted 11y ago
  [deleted]
- LoSboccacc 11y ago
  > just because the political competition between a multitude of actors http://www.reuters.com/article/us-usa-politics-dynasties-idUSN0332238720070304 http://www.reuters.com/article/us-usa-politics-dynasties-idU... In the west we're just better at faking being transparent, having been in the game for longer.
- Shivetya 11y ago
  Well it has been proven over and over, government managed economies are not a good idea. You can hide problems longer by working the numbers but eventually it catches up with them. China likely has earned itself a buffer because of its growth and development of many good businesses but the danger is all the propped up businesses that are state owned or owned by cronies
  - TheOtherHobbes 11y ago
    Which is nothing like the US, where Congress and the Senate are giant pork distribution machines? There hasn't been a single period anywhere in the world in the last few centuries where markets haven't imploded cyclically. In this, China is just aping business-as-usual on Wall St.
- rorykoehler 11y ago
  You have a very optimistic view on the US. Not one I can share unfortunately. The system is broken everywhere. The sooner we can accept that the better for everyone but if nothing changed after 2008 there is little hope.
  - rubberstamp 11y ago
    I think the right thing to do is to discuss the issues with system(applies for all countries) with your peers on a regular basis. It will increase awareness about the problems and things will eventually get better. Taking it silently will only cause things to get worse.
    - Grishnakh 11y ago
      The problem with that is that Americans are so irrational and polarized that you can't discuss anything with anyone. If you try discussing issues with one person, they'll start ranting about FEMA concentration camps and mass graves and how Obama is going to declare martial law any day now, but with another person they'll rant about microagressions and safe spaces.
  - lintiness 11y ago
    a lot changed since 2008. fixing the last problem doesn't prevent the next one.
  - golergka 11y ago
    It is broken indeed. It's just less broken than almost any other.
- x5n1 11y ago
  Let me know when China prints a few trillion dollars in currency and does not have to pay a dime for doing so and we'll discuss free markets and leveled playing fields... and corruption.
jstaffans 11y ago
China has a history of inflating economic performance indicators. Massive overestimation of grain yields was one of the key factors contributing to the Great Chinese Famine [0] [1]. It wouldn't be surprising if this would still be the case. [0]: https://en.wikipedia.org/wiki/Great_Chinese_Famine https://en.wikipedia.org/wiki/Great_Chinese_Famine [1]: http://www.missedinhistory.com/blog/missed-in-history-the-great-famine/ http://www.missedinhistory.com/blog/missed-in-history-the-gr...
- toxik 11y ago
  I think comparing the state of China during and after Maoism, especially after the advent of Deng Xiaoping as head of state during the 70s, is a completely unfair comparison. It really speaks a lot to the understanding us westerners have of actual Chinese politics.
anon8418 11y ago
Naysayers have been predicting the demise of China for the past thirty years. See Gordon Chang, idiot extraordinaire. The reality is that growth, in the long-run, is now in Asia (think of the hundreds of millions of Chinese still living in the countryside...). This round of modernization (the third wave, after England, America+Western Europe) involves 4BN people led by India and China and they're just getting started. Take a pause and think of what that means. Four billion. BILLION. We're entering the age of Asia. Just wait and see. I think the bigger fear in China (at least amongst the leadership) is some crazy environmental disaster. Think of the hundreds of millions that live on the Yangtze... a massive flooding event that wipes up power/clean water is much more likely cause of revolution than an economic meltdown. The US can barely handle Katrina... China is 10x more dense. Something like that would be death knell for CCP control.
- EGreg 11y ago
  Why are s-curves so hard for people to understand? Growth can slow. This addiction to perpetual exponential growth worldwide is unsustainable!
  - wcummings 11y ago
    http://freakonomics.com/2014/01/24/can-economic-growth-continue-forever-of-course/ http://freakonomics.com/2014/01/24/can-economic-growth-conti...
    - marcosdumay 11y ago
      Well, 1999 just called, and wants its New Economy religion back. Most economists have never placed a foot inside a datacenter. It's easy to understand how they imagine music (or books, software, etc) does not involve a physical process.
      - wcummings 11y ago
        Do you think its more likely that all economists are shills who don't understand that datacenters consume power, or that economists model things on a shorter time scale than physicists?
zcbenz 11y ago
Economists have been saying the same thing for almost 10 years, I didn't see anything new in this article.
johnchristopher 11y ago
I thought the true state of any economic agent didn't matter, that what matters is the perceived trust you can leverage to borrow or lend credit.
kushti 11y ago
What is the true state of US economy? Could it be viable without the government debt growing at a crazy fast pace?
- rm_-rf_slash 11y ago
  Debt is actually growing at a moderate rate, as it tends to do in most growing economies. The United States took on enormous amounts of debt leading up to and following World War II, but the postwar economic boom and ensuing inflation (which is fine in a healthy and growing economy) reduced the unprecedented debt "crisis" to barely a footnote in American financial history.
  - kushti 11y ago
    I pretty in doubt the American economy will be booming in an observable future. And debt is growing faster than GDP: http://www.wolframalpha.com/input/?i=us+government+debt+vs+us+gdp http://www.wolframalpha.com/input/?i=us+government+debt+vs+u... , so I'm still in question how economy will survive without debt money supply.
    - theklub 11y ago
      I wonder what GDP in China will look like in 3 years when they have a huge baby boom.
      - rm_-rf_slash 11y ago
        Huge baby boom? From where? Just because they've relaxed the one child policy doesn't mean everyone is in a rush to have kids. A more common phenomenon is men saving every penny to someday afford a house, because the few single women refuse to date a man with anything less. Every single economy that transitions from agriculture to industry experiences the same fall in birth rates. Having a lot of kids goes from being an insurance against elderly poverty to an insurmountable burden on your focus and finance. Most of the Chinese couples who have one child are happy to leave it from that. How will China experience a baby boom any time soon? Why 3 years? Where's your evidence?
codeshaman 11y ago
The system (capitalist or communist) determines to a great extent all kinds of curious behavior in people. Like reporting numbers. In communism, people are incentivized to inflate the positive numbers and deflate the negative numbers, because the primary goal is to maintain a good and submissive relationship with the higher-up party chief. The higher-up has the same incentive before his higher-up. If you fall from grace with your higher-up (by not being able to achieve the numbers planned by the party), then your career is over (and possibly that of your family and business partners too). So you have to give him those numbers. If you do, he will take care of you and with time, you will grow. Then there's another property of communism: people steal. Not only you have to report higher productivity than the set goal, you also have to cover up for all the stealing that took place below you and the "favors" you make to the higher-ups. Of course this is illegal, but when people start doing this, they become partners in crime and now it's about life an death. Falling from grace can actually mean doing hard time in jail or even getting the capital punishment. This system works well when the economy grows - the pressure to perform beyond expectations is increased with each layer of bureaucracy and is more than just about "job security" - it's about survival - so people have to produce those numbers.. even if it means lying. Of course the hard work is done by the same oppressed "working class" that the system was supposed to help in the first place. Now, I have no idea what's going on in China and if these properties apply to their particular flavor of communism, but I suspect they do, because this is how human beings have to behave in that game to win. And that means that the numbers reported by the government are probably off by quite a bit and it's possible that even they have no idea what the real situation is.
- toxik 11y ago
  I don't quite follow, why would a communist society have more incentive to lie about statistics? This seems like quite a big leap. As somebody else noted, during the beginning of great leap forward, there were huge misrepresentations about crop yields and similar things -- but this was _not_ due to a one-party system per se, it was because the farmers had promised bigger yields due to the now "modern" communist methods of planting crops and similar things. Everybody bought into the idea, and when it failed to come through, nobody wanted to take blame.
ramshanker 11y ago
Whatever be such commentaries, just look at their Forex reserve, don't think it can be forged.
dibujante 11y ago
Here's a related and fairly contemporary piece by a China economist I read sometimes: http://www.bloombergview.com/articles/2016-01-10/china-isn-t-headed-for-a-financial-crisis http://www.bloombergview.com/articles/2016-01-10/china-isn-t...

93 points by tokenadult 11y ago

And that's why you can't have truly capitalist systems with authoritarian, corrupt government. China and Russia both learning this lessons the hard ways as we speak. The core requirement for "free markets" to work is to have transparent, leveled playing field. And while a lot of criticism against US financial system is completely valid (of course HN is bashing US first — because HN readers live there and it makes more sense to criticize something that you're more familiar with), it's 10s, 100s times healthier, just because the political competition between a multitude of actors guarantees that power will not be centralized in single hands. My (completely idiotic and unprofessional) prognosis for the next decade: global financial system will repeat the same mistakes with India boom.

tomp 11y ago
> it's 10s, 100s times healthier You mean, except in 2008?!
- golergka 11y ago
  No, exactly _including_ 2008. Of course, you think that 2008 was BAD. But this is not usable data. Compare how BAD was it compared to 1998 in Russia, for example.
  - _yosefk 11y ago
    Not that I believe the Russian economy to be better-run than the American, but right now the US does have the big advantage over just about everyone else of being able to print the world's reserve currency, which makes it easier to make the rest of the world pay to solve its problems, and I think the US did use that trick a lot after 2008 (QE being debt monetization, and the Fed's balance sheet having grown with no clear date when it'll shrink back.) So it's a bit hard to compare the US to others. As to how well markets functioned wrt the 2008 crisis - one question concerns credit rating agencies. If you believe that they didn't do their jobs well, then it should be troubling that they didn't go out of business, quite the contrary, it's the same small number of firms which still operate in this business. If you believe that they did do their jobs well, because the government bail-out resulted in most junk debt being repaid to creditors, then you essentially don't believe that markets function very well, as they seem to have made a correct calculation that they can extract money out of taxpayers through this junk paper, and that is not what any economist would praise as markets functioning for the benefit of society. (Two counterarguments to the above that I heard are, the government caused the housing bubble in the first place, or alternatively the government helped smooth/stabilize asset prices, including housing prices, which is a proper use of monetary policy, and the paper was never "really" junk since housing prices rebounded later. Dean Baker argues against the latter based essentially on buying homes getting costlier relatively to renting them in bubble years. The former counterargument is voiced more rarely which is perhaps why I haven't heard a counter-counterargument. Anyway, I think this whole thing is a bit muddy...)
    - golergka 11y ago
      My original comment: > a lot of criticism against US financial system is completely valid
    - arielb1 11y ago
      > as they seem to have made a correct calculation that they can extract money out of taxpayers through this junk paper, and that is not what any economist would praise as markets functioning for the benefit of society. Well, it's not like the credit agencies bailed out the banks themselves. The version of the criticism I have heard was that the banks (and credit agencies) knew that the taxpayers will bail them out if they fail, and therefore they took unnecessary risk - making investments just as useless as the nails made by Soviet nail factories.
  - 1stop 11y ago
    Compare a US problem that caused global recession, to a single countries recession!? Or even better compare to china that might have to down grade its growth to "normal"... I forgot what your point was...
    - golergka 11y ago
      > Compare a US problem that caused global recession, to a single countries recession!? It wasn't a single country's recession, it was connected to the Asia's earlier crisis and oil price plummeting. > I forgot what your point was... You can read it above.
      - 1stop 11y ago
        2008 was connected to 97? How? Last I checked it had nothing to do with oil, so please explain.
        golergka 11y ago
        1998
        AnimalMuppet 11y ago
        1stop asked for an explanation. You corrected the year, but that doesn't actually explain how you think the two are connected.
    - kasey_junk 11y ago
      >Compare a US problem that caused global recession Its an extreme oversimplification to say that 2008 was a US problem. It was a problem of international finance, the bulk of which (maybe unwisely) is done via US financial institutions and with US financial products. That a problem with international finance was linked to recessions globally is not surprising. Similarly, if some systematic problem in international manufacturing appeared, the bulk of which (perhaps unwisely) is done in China, we would expect it to also have global ramifications. It turns out that a financial problem in China is currently contained because it is not a major player in international finance (yet).
  - tomp 11y ago
    Well, even if that's true, we can't pretend that 2008 wasn't caused by unlevel playing field, intransparent markets, faulty regulation, corruption and great concentration of power (in the hands of banks and rating agencies).
    - rayiner 11y ago
      Was it caused by those things? Or was it just a speculative bubble popping, which has happened countless times in the history of the republic, long before the modern regulatory state and modern banks ever existed?
      - addicted 11y ago
        The Market cannot fail. It can only be failed.
        EGreg 11y ago
        Poe's law applies here
        TeMPOraL 11y ago
        Started Googling about markets being treated as religion, found this 1999 article from the Atlantic: http://www.theatlantic.com/past/issues/99mar/marketgod.htm http://www.theatlantic.com/past/issues/99mar/marketgod.htm "The East Asians' troubles, votaries argue, derive from their heretical deviation from free-market orthodoxy -- they were practitioners of "crony capitalism," of "ethnocapitalism," of "statist capitalism," not of the one true faith." Interesting reading.
      - ra1n85 11y ago
        Very much speculative bubbles being popped. One of the most interesting things was what Dr. Michael Burry (one of the main characters in Michael Lewis' The Big Short) noted in a recent interview: "The biggest hope I had was that we would enter a new era of personal responsibility. Instead, we doubled down on blaming others, and this is long-term tragic." http://nymag.com/daily/intelligencer/2015/12/big-short-genius-says-another-crisis-is-coming.html# http://nymag.com/daily/intelligencer/2015/12/big-short-geniu... And having seen that things like interest only loans are still a thing, and very much still offered and applied for, I would tend to agree.
- brc 11y ago
  It's my hypothesis that the authoritarian actions leading to 2008 and the authoritarian responses to 2008 made it worse than it should have been. A better structured economy would have more competition and more bankruptcies. And fewer bailouts and government-arranged mergers. The capitalist system must be able to purge bad decisions and investments naturally or it will eventually calcify like a centrally planned economy.
  - cconcepts 11y ago
    Totally agree. The idea that the laws of gravity shouldn't apply if you're "big enough" seems like it could throw the planets out of alignment.
    - AnimalMuppet 11y ago
      It's not quite that simple. The law of gravity will not be permitted to apply to you if doing so will cause too much damage to too many people. But several times the "bailout" kept the institution alive, but wiped out the shareholders. I thought that was at least somewhat reasonable. Wipe out the senior management too (which I don't recall whether that was done), and that might be about as good as can be achieved.
- tonyedgecombe 11y ago
  Just read https://en.wikipedia.org/wiki/Great_Chinese_Famine https://en.wikipedia.org/wiki/Great_Chinese_Famine and consider that the US didn't have anything like this even in the depths of the depression.
yyyuuu 11y ago
The one difference between China and India is that of Democracy. Even though both the nations boast of a corrupt governance system, yet the fact that in India, a non functioning government is more likely to get kicked out by an increasingly well aware population, makes it a safer bet in the long term I guess. To Quote Thomas Friedman[0]: "If India and China were both highways, the Chinese highway would be a six-lane, perfectly paved road, but with a huge speed bump off in the distance labeled "Political reform: how in the world do we get from Communism to a more open society?" When 1.3 billion people going 80 miles an hour hit a speed bump, one of two things happens: Either the car flies into the air and slams down, and all the parts hold together and it keeps on moving -- or the car flies into the air, slams down and all the wheels fall off. Which it will be with China, I don't know. India, by contrast, is like a highway full of potholes, with no sidewalks and half the streetlamps broken. But off in the distance, the road seems to smooth out, and if it does, this country will be a dynamo. The question is: Is that smoother road in the distance a mirage or the real thing?" [0] http://www.nytimes.com/2005/06/08/opinion/bangalore-hot-and-hotter.html http://www.nytimes.com/2005/06/08/opinion/bangalore-hot-and-...
- golergka 11y ago
  I agree completely. Personally, I'm really optimistic about India and excited to see the progress that they had lately. But at the same time, investor's optimism has a positive feedback right until the crash, so investors will inevitably get _more_ optimistic about India than they should.
- anon8418 11y ago
  India has a long ways to go before it catches up to China. Have you ever been? The differences in development are pretty stark.... even more so when you compare secondary cities. It's really night and day... not at all even comparable. Many Indian cities still lack decent plumbing. Westerners seem to equate India with China, some even seem to think that India is more developed on account of the english language skills and the growth of their services based economy. Couldn't be further from the truth. Indians I know that have been to both are always surprised by how developed China is. Westerners should travel more. It'll really open your eyes...
deleted 11y ago
[deleted]
LoSboccacc 11y ago
> just because the political competition between a multitude of actors http://www.reuters.com/article/us-usa-politics-dynasties-idUSN0332238720070304 http://www.reuters.com/article/us-usa-politics-dynasties-idU... In the west we're just better at faking being transparent, having been in the game for longer.
Shivetya 11y ago
Well it has been proven over and over, government managed economies are not a good idea. You can hide problems longer by working the numbers but eventually it catches up with them. China likely has earned itself a buffer because of its growth and development of many good businesses but the danger is all the propped up businesses that are state owned or owned by cronies
- TheOtherHobbes 11y ago
  Which is nothing like the US, where Congress and the Senate are giant pork distribution machines? There hasn't been a single period anywhere in the world in the last few centuries where markets haven't imploded cyclically. In this, China is just aping business-as-usual on Wall St.
rorykoehler 11y ago
You have a very optimistic view on the US. Not one I can share unfortunately. The system is broken everywhere. The sooner we can accept that the better for everyone but if nothing changed after 2008 there is little hope.
- rubberstamp 11y ago
  I think the right thing to do is to discuss the issues with system(applies for all countries) with your peers on a regular basis. It will increase awareness about the problems and things will eventually get better. Taking it silently will only cause things to get worse.
  - Grishnakh 11y ago
    The problem with that is that Americans are so irrational and polarized that you can't discuss anything with anyone. If you try discussing issues with one person, they'll start ranting about FEMA concentration camps and mass graves and how Obama is going to declare martial law any day now, but with another person they'll rant about microagressions and safe spaces.
- lintiness 11y ago
  a lot changed since 2008. fixing the last problem doesn't prevent the next one.
- golergka 11y ago
  It is broken indeed. It's just less broken than almost any other.
x5n1 11y ago
Let me know when China prints a few trillion dollars in currency and does not have to pay a dime for doing so and we'll discuss free markets and leveled playing fields... and corruption.

jstaffans 11y ago

China has a history of inflating economic performance indicators. Massive overestimation of grain yields was one of the key factors contributing to the Great Chinese Famine [0] [1]. It wouldn't be surprising if this would still be the case. [0]: https://en.wikipedia.org/wiki/Great_Chinese_Famine https://en.wikipedia.org/wiki/Great_Chinese_Famine [1]: http://www.missedinhistory.com/blog/missed-in-history-the-great-famine/ http://www.missedinhistory.com/blog/missed-in-history-the-gr...

toxik 11y ago
I think comparing the state of China during and after Maoism, especially after the advent of Deng Xiaoping as head of state during the 70s, is a completely unfair comparison. It really speaks a lot to the understanding us westerners have of actual Chinese politics.

anon8418 11y ago

Naysayers have been predicting the demise of China for the past thirty years. See Gordon Chang, idiot extraordinaire. The reality is that growth, in the long-run, is now in Asia (think of the hundreds of millions of Chinese still living in the countryside...). This round of modernization (the third wave, after England, America+Western Europe) involves 4BN people led by India and China and they're just getting started. Take a pause and think of what that means. Four billion. BILLION. We're entering the age of Asia. Just wait and see. I think the bigger fear in China (at least amongst the leadership) is some crazy environmental disaster. Think of the hundreds of millions that live on the Yangtze... a massive flooding event that wipes up power/clean water is much more likely cause of revolution than an economic meltdown. The US can barely handle Katrina... China is 10x more dense. Something like that would be death knell for CCP control.

EGreg 11y ago
Why are s-curves so hard for people to understand? Growth can slow. This addiction to perpetual exponential growth worldwide is unsustainable!
- wcummings 11y ago
  http://freakonomics.com/2014/01/24/can-economic-growth-continue-forever-of-course/ http://freakonomics.com/2014/01/24/can-economic-growth-conti...
  - marcosdumay 11y ago
    Well, 1999 just called, and wants its New Economy religion back. Most economists have never placed a foot inside a datacenter. It's easy to understand how they imagine music (or books, software, etc) does not involve a physical process.
    - wcummings 11y ago
      Do you think its more likely that all economists are shills who don't understand that datacenters consume power, or that economists model things on a shorter time scale than physicists?

zcbenz 11y ago

Economists have been saying the same thing for almost 10 years, I didn't see anything new in this article.

johnchristopher 11y ago

I thought the true state of any economic agent didn't matter, that what matters is the perceived trust you can leverage to borrow or lend credit.

kushti 11y ago

What is the true state of US economy? Could it be viable without the government debt growing at a crazy fast pace?

rm_-rf_slash 11y ago
Debt is actually growing at a moderate rate, as it tends to do in most growing economies. The United States took on enormous amounts of debt leading up to and following World War II, but the postwar economic boom and ensuing inflation (which is fine in a healthy and growing economy) reduced the unprecedented debt "crisis" to barely a footnote in American financial history.
- kushti 11y ago
  I pretty in doubt the American economy will be booming in an observable future. And debt is growing faster than GDP: http://www.wolframalpha.com/input/?i=us+government+debt+vs+us+gdp http://www.wolframalpha.com/input/?i=us+government+debt+vs+u... , so I'm still in question how economy will survive without debt money supply.
  - theklub 11y ago
    I wonder what GDP in China will look like in 3 years when they have a huge baby boom.
    - rm_-rf_slash 11y ago
      Huge baby boom? From where? Just because they've relaxed the one child policy doesn't mean everyone is in a rush to have kids. A more common phenomenon is men saving every penny to someday afford a house, because the few single women refuse to date a man with anything less. Every single economy that transitions from agriculture to industry experiences the same fall in birth rates. Having a lot of kids goes from being an insurance against elderly poverty to an insurmountable burden on your focus and finance. Most of the Chinese couples who have one child are happy to leave it from that. How will China experience a baby boom any time soon? Why 3 years? Where's your evidence?

codeshaman 11y ago

The system (capitalist or communist) determines to a great extent all kinds of curious behavior in people. Like reporting numbers. In communism, people are incentivized to inflate the positive numbers and deflate the negative numbers, because the primary goal is to maintain a good and submissive relationship with the higher-up party chief. The higher-up has the same incentive before his higher-up. If you fall from grace with your higher-up (by not being able to achieve the numbers planned by the party), then your career is over (and possibly that of your family and business partners too). So you have to give him those numbers. If you do, he will take care of you and with time, you will grow. Then there's another property of communism: people steal. Not only you have to report higher productivity than the set goal, you also have to cover up for all the stealing that took place below you and the "favors" you make to the higher-ups. Of course this is illegal, but when people start doing this, they become partners in crime and now it's about life an death. Falling from grace can actually mean doing hard time in jail or even getting the capital punishment. This system works well when the economy grows - the pressure to perform beyond expectations is increased with each layer of bureaucracy and is more than just about "job security" - it's about survival - so people have to produce those numbers.. even if it means lying. Of course the hard work is done by the same oppressed "working class" that the system was supposed to help in the first place. Now, I have no idea what's going on in China and if these properties apply to their particular flavor of communism, but I suspect they do, because this is how human beings have to behave in that game to win. And that means that the numbers reported by the government are probably off by quite a bit and it's possible that even they have no idea what the real situation is.

toxik 11y ago
I don't quite follow, why would a communist society have more incentive to lie about statistics? This seems like quite a big leap. As somebody else noted, during the beginning of great leap forward, there were huge misrepresentations about crop yields and similar things -- but this was _not_ due to a one-party system per se, it was because the farmers had promised bigger yields due to the now "modern" communist methods of planting crops and similar things. Everybody bought into the idea, and when it failed to come through, nobody wanted to take blame.

ramshanker 11y ago

Whatever be such commentaries, just look at their Forex reserve, don't think it can be forged.

dibujante 11y ago

Here's a related and fairly contemporary piece by a China economist I read sometimes: http://www.bloombergview.com/articles/2016-01-10/china-isn-t-headed-for-a-financial-crisis http://www.bloombergview.com/articles/2016-01-10/china-isn-t...