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I’ve been hearing this since 2011. The Chinese government seems to have an amazing ability to get control over the situation as it always seems to be teetering

I’ve been hearing this since 2011. The Chinese government seems to have an amazing ability to get control over the situation as it always seems to be teetering on the brink.

duxup 8y ago
Yeah China either has a situation where they're good at managing it / it is manageable.... or as soon as they can't it will be hyper ugly.
adventured 8y ago
That's pretending nothing has changed since 2011. It's interesting you pick that year, because that's not long after China's former approach collapsed with the global consumer in the great recession, and they had to switch to gorging on debt to continue faking a high rate of growth. It's also fascinating that China would install a dictatorship right as this switch-over - from organic growth to extreme debt - was occurring. I'd wager the Communist Party is terrified of what's coming socially, and given their overwhelming vote in favor of the dictatorship they think that power is going to be necessary to control the people (they very knowingly voted to clamp down on all human rights in the country by handing Xi that position). Since 2011 they've taken on tens of trillions of dollars in new debt. As recently as 2008 China's debt to GDP ratio was reasonable. Their debt to GDP ratio has drastically worsened since and is very realistically the worst among major economies now (when their immense shadow debt is included it's a certainty). Household debt to income ratios have similarly gotten dramatically worse in the last decade. There are in fact limits to how far a nation can push such things. Somewhere between 1/4 and 1/3 of their new GDP every year is going just to new debt interest payments. When you consider what else needs to come out of that new GDP, that's a very stark debt situation. In 2011 they also weren't seeing record bond defaults. The types that cry wolf are often early or very early in their predictions. One has to ask if there is in fact any truth to what they're saying, instead of only focusing on their regularly saying it. In the end, they may be too early in their speculation, rather than entirely wrong. China should have accepted slower organic growth and maintained their financial health. They chose the Japan approach of levering up massively on debt when the growth dropped off. They're so terrified of their own people about what happens if growth is 2% instead of 6% (being terrified of their own people is also why they installed the dictatorship to control them). It tells you all you really need to know about their system, it's fragile and can't survive a recession or stagnation.
- antt 8y ago
  China has been predicted to collapse any day now since 2001 when I started paying attention in highschool. It hasn't but people always have an explanation on why this time it's different. Dictatorships have a remarkable ability to completely ignore the market and coerce it to do their bidding. You only need so many public executions before people stop doing things you don't like at scale. What they don't have is the ability to indefinitely force hungry soldiers to shoot hungry peasants. China is no where near that level.
  - duxup 8y ago
    They can ignore the market ... for some time. Venezuela hasn't worked out. Turkey seems like they're on the edge of the cliff right now. The lira was already having serious issues due to massive spending before sanctions were announced.
    - antt 8y ago
      You first have to ask the question, can the Chinese government ignore the market longer than the market can ignore the Chinese government. The answer so far is no and not only in China. Once the global market is reconfigured in such a way that it funnels benefits back to China they no longer ignore it. Much the same way the Portuguese reconfigured the Asian spice market in the 16th century to their benefit for the next two centuries.
  - rdlecler1 8y ago
    Agree—things tend to only get really bad when people can eat. In fact I can’t believe that Venezuela is as stable as it is—I would have expected full civil war by now.

I’ve been hearing this since 2011. The Chinese government seems to have an amazing ability to get control over the situation as it always seems to be teetering on the brink.

duxup 8y ago

Yeah China either has a situation where they're good at managing it / it is manageable.... or as soon as they can't it will be hyper ugly.

adventured 8y ago

That's pretending nothing has changed since 2011. It's interesting you pick that year, because that's not long after China's former approach collapsed with the global consumer in the great recession, and they had to switch to gorging on debt to continue faking a high rate of growth. It's also fascinating that China would install a dictatorship right as this switch-over - from organic growth to extreme debt - was occurring. I'd wager the Communist Party is terrified of what's coming socially, and given their overwhelming vote in favor of the dictatorship they think that power is going to be necessary to control the people (they very knowingly voted to clamp down on all human rights in the country by handing Xi that position). Since 2011 they've taken on tens of trillions of dollars in new debt. As recently as 2008 China's debt to GDP ratio was reasonable. Their debt to GDP ratio has drastically worsened since and is very realistically the worst among major economies now (when their immense shadow debt is included it's a certainty). Household debt to income ratios have similarly gotten dramatically worse in the last decade. There are in fact limits to how far a nation can push such things. Somewhere between 1/4 and 1/3 of their new GDP every year is going just to new debt interest payments. When you consider what else needs to come out of that new GDP, that's a very stark debt situation. In 2011 they also weren't seeing record bond defaults. The types that cry wolf are often early or very early in their predictions. One has to ask if there is in fact any truth to what they're saying, instead of only focusing on their regularly saying it. In the end, they may be too early in their speculation, rather than entirely wrong. China should have accepted slower organic growth and maintained their financial health. They chose the Japan approach of levering up massively on debt when the growth dropped off. They're so terrified of their own people about what happens if growth is 2% instead of 6% (being terrified of their own people is also why they installed the dictatorship to control them). It tells you all you really need to know about their system, it's fragile and can't survive a recession or stagnation.

antt 8y ago
China has been predicted to collapse any day now since 2001 when I started paying attention in highschool. It hasn't but people always have an explanation on why this time it's different. Dictatorships have a remarkable ability to completely ignore the market and coerce it to do their bidding. You only need so many public executions before people stop doing things you don't like at scale. What they don't have is the ability to indefinitely force hungry soldiers to shoot hungry peasants. China is no where near that level.
- duxup 8y ago
  They can ignore the market ... for some time. Venezuela hasn't worked out. Turkey seems like they're on the edge of the cliff right now. The lira was already having serious issues due to massive spending before sanctions were announced.
  - antt 8y ago
    You first have to ask the question, can the Chinese government ignore the market longer than the market can ignore the Chinese government. The answer so far is no and not only in China. Once the global market is reconfigured in such a way that it funnels benefits back to China they no longer ignore it. Much the same way the Portuguese reconfigured the Asian spice market in the 16th century to their benefit for the next two centuries.
- rdlecler1 8y ago
  Agree—things tend to only get really bad when people can eat. In fact I can’t believe that Venezuela is as stable as it is—I would have expected full civil war by now.