8 ms·

China’s Consumption Downgrade: Skip Avocados, Cocktails and Kids

79 points by petethomas 8y ago

r00fus 8y ago
Is this a real problem or just a tempest in a teapot? Many anecdotes != data. About the only thing that popped out at me is the line "She makes about $1,400 a month after taxes, but nearly half of it goes to the rent on her one-bedroom apartment." Maybe housing costs are what's causing the slump (if there is one)? Around where I live I see stores closing all the time and I'd bet the #1 reason is that rent is too damn expensive.
- BadassFractal 8y ago
  Sounds like a very common story of people living in SF, NY, LA, Seattle, Portland etc. unless they're very successful, even by the standards of that city. I hear the same can be said of Paris, London, Berlin, Moscow, Tokyo, Hong Kong etc. Shoot, having a place all to yourself is one heck of a luxury in those cities. Plenty of people there are having to skip nice things if they want to live in a place like that. All while paying off student loans, while their careers are still in the early stages.
  - jacobolus 8y ago
    One reason that property values have gone up in these places is that property in world cities is now often used as an investment vehicle for foreigners who made fortunes in politically unstable places, and want to park their money somewhere safe, or at least diversified. This kind of investment is problematic even when the money’s source is legitimate. Having housing owned by absentee landlords who live halfway around the world is mostly negative for a city’s residents (though might benefit some local property owners whose property values are thereby inflated). Remote owners for the most part don’t care about maintaining their property, improving the local neighborhood or city, forming relationships with tenants, etc., and sometimes even leave units unoccupied for extended periods of time, taking housing stock off the market. I hope governments figure out some way to impose substantial additional taxes on non-owner-occupied housing, especially when it gets to large scale, or when units are kept unoccupied. The purpose of housing is to provide a place for people to live, not to build a fortune for a few capitalists, especially ones who are not local and are therefore largely unaccountable for bad behavior.
    - ggm 8y ago
      One reason that property values have gone up in these places is that property in world cities is now often used as an investment vehicle for foreigners who made fortunes in politically unstable places, and want to park their money somewhere safe, or at least diversified. Often those fortunes were embezzled from public coffers or built on criminal enterprises, and real estate is a magnet for money laundering. But this kind of investment is problematic even when the money’s source is legitimate. Sure, if you want to talk about Colombian narco-dollars, or Russian keptocracy. China has a huge middle class, who worked all their life and had mandated government savings, with a pension for women at age 55. Please, do not write down all foreign investment in property to stolen money: Chinese purchasors in the west of small to medium size flats, and houses are buying for three reasons 1) the cost of property in Beijing is too high 2) their children are doing masters or phd programmes in the economy and its sensible to invest and save the kid rental 3) they want an exit strategy for their life savings if things go bad in the home country They are not kleptocrats. This is not stolen money. This is 30 or 40 years of savings, coupled to insane property bubbles. [Edit] I know some of them. I talk to them about this. I am not reporting from things I read, this is what I know from my neighbours in my apartment complex.
      - jacobolus 8y ago
        By no means is all (or even most) foreign investment stolen money (though there is a lot of corrupt money sloshing around, including a lot from China). However, even just “middle class” millionaire foreign investors parking money in international real estate is highly problematic for the places where the houses are. As an example, my parents live in a quiet suburb of Los Angeles, and recently a few of the neighboring houses were bought by foreign investors. Maintenance has all but stopped. One house was rented long-term to a group of college students who used it as a party house. Tenants move in and out of those houses within a year or two instead of staying long term. Any communication goes through a scummy property management company. If a critical mass of houses get like that, the neighborhood becomes a much different place. Everything becomes transactional and low-trust. The only way to get stuff fixed is by filing formal complaints or threatening legal action. Minor problems just pile up because it’s not worth the trouble. People stop caring about making things pleasant, or even making them work. Remote owners and management companies are just there to make a buck, and tenants are just temporarily stopping through for a place to sleep while they work out something more permanent elsewhere.
- redahs 8y ago
  > Maybe housing costs are what's causing the slump (if there is one)? Yes, that's how the business cycle has worked in western countries since the classical antiquity. The largest component of urban housing costs is the price for access to land, and payments for access to land are surplus payments beyond what is necessary for land to be supplied, because land is a fixed a natural resource with no labor cost of production. An increase in land banking and the holding of real estate for investment purposes decreases the supply of land available, increases payments for access to it. This increases the market valuations for real estate value based on the increase in the capitalized value of future rent payments. This increases the opportunity cost of investing money in productive businesses which employ labor to produce goods and services relative to putting money into land. This decreases investment in production of non-land goods and services which have a labor cost of production, which decreases the demand for labor, which decreases wages. Decreased wages then lead to decreased consumption which leads to decreased ability to pay rent, which then results in a drop in property valuations based upon capitalized rent payments. After a sustained period of rents increasing faster than wages, the property bubble usually pops and results in an economic depression. One solution to avoid this problem is through taxing and redistributing surplus land rents through a land value tax, which countries such as Taiwan have implemented. China has people smart enough to clear this hurdle and find creative solutions to continue rapid growth, but since Xi has consolidated power and gone back to heavily promoting Marxism as the economic model for China's future, the current political situation makes it seem unlikely that they will actually do so.
- baybal2 8y ago
  FYI, netting $1400 a month in China is freaking a lot for somebody who is not an engineer or a communist. An average fancy lunch costs CNY25 in the most expensive part of the town. Living a careless life on $700 per month can be done effortlessly. To note, China is a freaking HIGH tax country. Earning $1400 post tax means her gross income must be around CNY25000 with freebies and perks, which makes her into top 5% of the workforce. She earns almost as much as engineers do.
  - contingencies 8y ago
    Your numbers are out of date. In 2002 I recall eating a huge bowl of noodles in rural Yunnan for CNY1. Today an average "fancy lunch" costs at least CNY60 in a Tier 1 city. Hell, even one beer usually costs that. That's USD$10. In Shenzhen, an average bowl of noodles is CNY20+. (The cheapest of the cheap, if you can find it and are willing to eat it, is about CNY8-16.) In the airports it's CNY60+ nationally. In high speed trains nationally a central kitchen produced low quality mass-meal in a thermoform container is CNY45, and perhaps purchased by 1/3 of travelers. For more reference prices take a look at http://ele.me/ http://ele.me/ delivery service. The delivery fees alone are around CNY7 (USD$1+). This is not "fancy lunch in the most expensive part of town" but "the stuff the average white collar worker eats daily".
    - baybal2 8y ago
      No... These are prices in an award winning place in downtown Shenzhen https://imgur.com/a/XqTC9zE https://imgur.com/a/XqTC9zE For a snob, one can go to Michelin rated Putien where you can get few very satiating dishes under CNY40
      - contingencies 8y ago
        A few places is not the same as the market as a whole. Regarding your example: yes, you can order some tofu for 23元 but you will need three such dishes for one person to feel sated and such places have minimum order sizes for delivery that typically exceed 2 dishes. (So at your example place, 3 x 25元 average dish price = 75元 per head, plus delivery fee) PS. Downtown Shenzhen is called Futian (福田; "abundant fields") not Putien (which is not even Pinyin, suggesting you are an overseas Chinese person or foreigner with little mainland exposure). I have been based here for most of the last 18 years.
pjc50 8y ago
Sounds like they've completed the upgrade to Western status.
- JKCalhoun 8y ago
  Or Japanese.
thatfrenchguy 8y ago
Less consumption -> Less CO2 emissions, so that’s awesome I guess ?
- BadassFractal 8y ago
  Or skipping children altogether: https://www.independent.co.uk/environment/children-carbon-footprint-climate-change-damage-having-kids-research-a7837961.html https://www.independent.co.uk/environment/children-carbon-fo...
  - thatfrenchguy 8y ago
    The paper (https://www.biologicaldiversity.org/programs/population_and_sustainability/pdfs/OSUCarbonStudy.pdf https://www.biologicaldiversity.org/programs/population_and_... ) cited by the paper (http://iopscience.iop.org/article/10.1088/1748-9326/aa7541/meta http://iopscience.iop.org/article/10.1088/1748-9326/aa7541/m...) cited by the article says an interestingly different story: lifetime emissions of CO2 that are saved by different actions (US) Increase car’s fuel economy from 20 to 30 mpg 148 Reduce miles driven from 231 to 155 per week 147 Reduce number of children by one: Constant-emission scenario 9,441 Optimistic scenario 562 Pessimistic scenario 12,730 So basically fighting climate change, or having kids who consume less, has a much greater impact.
- graeme 8y ago
  That's just an individual. If consumption for an individual is down due to price, that's consistent with risin carbon demand. (Global carbon use is up)
  - quadrangle 8y ago
    um, if people are being priced out, that could come from either supply or demand (or both or other factors). But I think the core point is that if individuals drop out of a market, that relieves demand which can keep prices down and thus allow others to keep consuming! In other words, if many of us do the environmental thing and drive less, that just enables wasteful irresponsible others to more cheaply use up all the same gasoline in the end. Or because LED lights got so efficient, places (in China incidentally) can plaster them over most of the surface of a building for no reason other than showing off, thus using up all the efficiency gains. To actually reduce overall consumption and pollution, we need widespread social changes that make such consumption and pollution seem shameful (and/or illegal) even though the market price isn't itself discouraging. The only market solution would involve effectively internalizing the now-externalized costs of pollution.
samschooler 8y ago
This may be bad for the economy, but to me this sounds like a good thing? People are lowering their spending and carbon footprint. Now if this is because they legitimately can't afford it, that's different; but cutting consumption is generally good.
- opportune 8y ago
  Cutting unnecessary consumption is good, but generally in market-oriented / capitalist economies you need consumption in some form to drive the economy. Cutting consumption can result in pretty big ripple effects as not only retailers and physical good extractors/manufacturers get hurt, but all the businesses servicing them get hurt too. Lowering consumption in the US, for example, would hurt Google and Microsoft a lot. In addition to the imports, it sounds like a lot of the problem is due to rising rents and housing prices. I’m basically a broken clock on this, but a “strong” housing market is not necessarily good for the economy. Increasing home prices and rents can wipe out real growth the same way inflation can
  - BadassFractal 8y ago
    That's interesting. My econ understanding is pretty wimpy, so excuse the basic question here: is the broader theory here that "rising rents + increasing housing prices" = some sort of rent-seeking capitalism, whereas consumption of the not-real-estate kind is actually sustainable, desirable and beneficial long term?
    - opportune 8y ago
      I’m no economist either, but it’s not rocket science to figure out that when rents increase on housing without improvements, you are losing quality of life (if we account for inflation) - though theoretically the rent increase could actually reflect the area becoming nicer / more convenient. Consumption of real estate is fine when it means building real estate that will actually be used (which China is doing a lot of, even though some is unused). It’s bad when it essentially becomes speculation on property values, and I would argue that it’s also bad when property values rise and that wealth creation is only captured by incumbents / people that got in the market at the right time. Other consumption can be non sustainable, but at least it often directly leads to some quality of life improvement that a rent hike may not.
opportune 8y ago
Sounds like the Chinese can finally enjoy all the wonderful side effects of a mature economy
lxe 8y ago
I wonder, if true, how this trend will affect China's insane property market.
- baybal2 8y ago
  Everything can be. Biggest thing to carry out of that is all press coverage in the West of Chinese economy goes through a lot of "broken phones." You have to do your own first hand research to get an idea of anything. Example: the headline says "Shenzhen's property prices beat that of Manhattans" , but that only a half truth - average still climbs up, but median were going down for close to 3 years. Yes, the 400sqm mansion apartments did probably beat NYC long time ago, but who cares about them? In overall, SZ market got push not due to demographics as popular narrative says, bur thanks to their (failed) universiade. A giant amount of property speculators, top tier ones at that, bought into the idea that universiade, just like the Olympics, will magically push property prices and Shenzhen will see its own share of Pangu plazas (the once most expensive apartment building in China). Well it just became the self fulfilling prophecy, but only for the top of the market. Another thing few people know - Shenzhen spend more money on the universiade than most countries spent on the Olympics. To their disappointment, the event did not even sell half of all tickets, and went completely invisible to the outside world.
redahs 8y ago
They could clear up rents rising faster than savings and consumption by copying Taiwan and implementing a land value tax as Sun Yat Sen and Henry George originally recommended. However Xi has consolidated power, begun promoting Marx more heavily, and claims Marxism is still totally correct for the future of China, so they probably won't. With a greater push for Marxism, if the economy begins to slow we should expect greater nationalization of Chinese industry. Hopefully investors realize that Taiwan is the more sustainable political-economic system in light of current conditions.
- deleted 8y ago
  [deleted]
- prolikewh0a 8y ago
  While China may be a Communist Dictatorship, the economy is extremely capitalistic with no aspects of Marxism. Do the workers own the means of production? No, not Marxist. Privatization also is not Marxism.
erulabs 8y ago
This idea of consumption being the indicator of health for an economy is troubling to me. Less consumption certainly appears troubling to shareholders, and as some have pointed it should be viewed as a positive thing re: environmentalism - less consumption means less resource utilization. But from a purely economic standpoint - saving is not a bad thing. Murray Rothbard wrote the following (fairly obvious statement): "To increase production, man must form capital. To create it, he must restrict his consumption and transfer his labor for that period to producing immediately-satisfying consumers’ goods." The article explicitly mentions the -goals- of those who are saving - to buy homes or raise children. Henry Hazlitt writes: "But when money is invested it is used to buy capital goods–houses or office buildings or factories or ships or motor trucks or machines. Any one of these projects puts as much money into circulation and gives as much employment as the same amount of money spent directly on consumption. “Saving,” in short, in the modern world, is only another form of spending." In other words - Why would it ever be bad that people are -expanding- the time horizon of their goals (favoring long term investments over short term ones - ie: houses instead of lattes)? If anything, this ought to be an indicator of a strengthening economy, even if it means "slumping" share prices in the meantime.
- hendzen 8y ago
  Where does the capital come from that flows in to savings? - From wages, which are paid by enterprises that create the goods that are consumed - From investment gains in enterprises that create the goods that are consumed Its consumption all the way down.
  - quadrangle 8y ago
    Nonsense. Capital is ownership of raw materials and means of production, even if we use money to track that effectively. Capital comes from natural resources more than anything else. Consuming those resources destroys capital rather than generating it — except when the consumption is an investment that increases our access to more resources (i.e. using oil to run equipment to get more oil as well as examples that aren't the same resource). If we live more consuming lifestyles, we drive up the demand for resources which could increase the motivation of people to get them and thus drive economic growth short-term, until/unless we use up the resources entirely. And that all still ignores externalized costs (pollution and other harms) that can come from the extra consumption.
calimac 8y ago
Each story cited the high housing expense to income ratio. Focus on problem not symptoms.
mattmanser 8y ago
I've been reading articles like this on HN for the last 10 years. I no longer know what to make of them. Ideologically, I'm opposed to the Chinese government and always felt they deserved to fall, a little like the USSR. The idea of political incarceration sickens me to the soul. So the articles delighted me, a shameful delight in another's misfortune. But these articles come out promising a herald of an imminent decline and they still climb. Now I have a grudging respect for their emergence, and a less rosy view of the virtues of Democracy, after it did little but cause misery in much of Iraq, Afghanistan and Russia. Perhaps this time China will finally succumb to its prophecised doom. More likely, I suspect, I will be reading on HN about another compelling portent of China's imminent decline in a year's time.
- truedatone 8y ago
  10 years ago.... debt to GDP https://www.bloomberg.com/news/articles/2018-02-08/sizing-up-china-s-debt-bubble-bloomberg-economics https://www.bloomberg.com/news/articles/2018-02-08/sizing-up... 2008 - 150% 2018 - 350% (official figure) 450% (official figure plus shadow debt) gdp growth https://tradingeconomics.com/china/gdp-growth-annual https://tradingeconomics.com/china/gdp-growth-annual 2008 - 12% 2018 - 6% children per women http://www.china-profile.com/data/fig_WPP2010_TFR_1.htm http://www.china-profile.com/data/fig_WPP2010_TFR_1.htm 2008 - 1.75 2018 - 1.5 China lost 4 trillion wealth to migration https://www.forbes.com/sites/insideasia/2017/02/22/china-capital-flight-migration/ https://www.forbes.com/sites/insideasia/2017/02/22/china-cap... Nothing goes up forever. Eventually they come crashing down to earth. Noone escapes economics fundamentals.
- adventured 8y ago
  Oh it was Democracy that caused misery in Russia, not the hang-over and cultural destruction of 70 years of party dictatorship and failed experiments with various degrees of Communism? Not to mention mass genocide, starvation, poverty and oppression on a scale of which humanity has rarely seen. Meanwhile Czech, Romania, Slovakia, Poland, Estonia, Latvia, Lithuania - all of which are Democratic, and all of which have had superior economic outcomes to Russia - haven't had that problem. Turns out when you forcibly hold a giant land mass together that shouldn't be together, there is a high cost. Was Russia expected to snap instantly into a perfect Democratic model from that? How many elections did they hold that were Democratic before returning to a dictatorship? Not a very long experiment as it turns out. When did Iraq get Democracy? Was that before or after the vast civil war that killed hundreds of thousands of people and demolished its cities; or was it before or after ISIS ripped the country in half? Immediately after leaving a brutal dictatorship that had tortured the nation for decades? Another mass of land arbitrarily forced together by a great power, with horrible consequences. Afghanistan got its Democracy with a helping of decades of religious civil war that decimated the country and continues to this day with everything persistently under attack by the Taliban. They're expected to accomplish what beautiful form of Democracy in that atmosphere of on-going civil war? Using those three as examples of Democracy causing misery, is plainly absurd.
rahimnathwani 8y ago
The phenomena described are not new; this article could have been written 2, 3 or 5 years ago, when property values had already risen to levels that meant most couples have no hope of ever buying a basic apartment in the city where they work. The title is a little strange: avocados have been a luxury item for as long as I've been in China. A single, medium-sized avocado usually costs between US$1.50 and $2.00. Avocado toast isn't a staple like it is in SF. And, anecdotally, I've seen more cocktail bars and craft beer places open than I've seen close.
- wrong_variable 8y ago
  Meh, Up until the 17th and early 18th Century most of global wealth was located in China and India. Its what made them prime target for the militarily strong Europeans. I have been to Europe, Asia and the Middle East and people are almost the same. So how can I explain the widely different living standards ? The only answer that ever made sense to me was colonization. You can see the equalization happening with Britain and US having third world style politics, corruption, etc due to having to learn to live in world without their hegemony. As for democracy, do you think China could have survived democracy ? It would have ended up like Iran. Democracy only works if the country has strong institutions which China doesn't have, they still send their best and brightest to US universities.
  - unmole 8y ago
    So, how come India survived democracy?
    - newyork 8y ago
      India has survived democracy completely due to its massive diversity; it's linguistic, religious, racial and social diversity make it almost impossible for any leader/concept to wow an entire nation. It maybe a surprise that its a single country but not really a surprise that it is still democratic
  - deleted 8y ago
    [deleted]
Animats 8y ago
This is really important, but too anecdotal. The story was written before Alibaba's Q2 results were out, and says that if Alibaba is down, there's real trouble. Those results are out now, and Alibaba does not seem to have had a bad quarter.
- adventured 8y ago
  Check out Alibaba's rapidly decelerating platform revenue growth (which is where they make all of their profit). Their top line was bolstered by throwing very large sums of money at one business deal after another. Their platform sales growth declined from 36% to 25% from just the prior quarter. Their profitability almost entirely disappeared as well. They're spending large sums of money to buy cheap revenue, and burning up their margin in doing so, swapping high quality sales for low quality sales. That might be ok if they didn't have a $442b market cap to support (which was premised on them generating a large amount of profit from a high margin ad platform). It remains to be seen whether growth at any cost is a smart approach, or whether it's going to result in driving into a jarring brick wall instead. Junk revenue has consequences.
est 8y ago
It seems that the only thing that downgrades is the quality of nyt reporting. 1/10 failing nyt downgraded itself to 朋友圈 level. I had much higher expectations of this reporting. Give me more stats covering more industries. Not some imaginative figure from 1st-tier whining about living in a big city is costy.
throwaway23434 8y ago
> This way, Mr. Wang — who makes about $2,000 a month after taxes — saves $160 a month. This is very surprising to me. This is the typical grad-student salary in the US (in CS), and in places outside of Bay Area, more than sufficient for a very decent QoL.

79 points by petethomas 8y ago

Is this a real problem or just a tempest in a teapot? Many anecdotes != data. About the only thing that popped out at me is the line "She makes about $1,400 a month after taxes, but nearly half of it goes to the rent on her one-bedroom apartment." Maybe housing costs are what's causing the slump (if there is one)? Around where I live I see stores closing all the time and I'd bet the #1 reason is that rent is too damn expensive.

BadassFractal 8y ago
Sounds like a very common story of people living in SF, NY, LA, Seattle, Portland etc. unless they're very successful, even by the standards of that city. I hear the same can be said of Paris, London, Berlin, Moscow, Tokyo, Hong Kong etc. Shoot, having a place all to yourself is one heck of a luxury in those cities. Plenty of people there are having to skip nice things if they want to live in a place like that. All while paying off student loans, while their careers are still in the early stages.
- jacobolus 8y ago
  One reason that property values have gone up in these places is that property in world cities is now often used as an investment vehicle for foreigners who made fortunes in politically unstable places, and want to park their money somewhere safe, or at least diversified. This kind of investment is problematic even when the money’s source is legitimate. Having housing owned by absentee landlords who live halfway around the world is mostly negative for a city’s residents (though might benefit some local property owners whose property values are thereby inflated). Remote owners for the most part don’t care about maintaining their property, improving the local neighborhood or city, forming relationships with tenants, etc., and sometimes even leave units unoccupied for extended periods of time, taking housing stock off the market. I hope governments figure out some way to impose substantial additional taxes on non-owner-occupied housing, especially when it gets to large scale, or when units are kept unoccupied. The purpose of housing is to provide a place for people to live, not to build a fortune for a few capitalists, especially ones who are not local and are therefore largely unaccountable for bad behavior.
  - ggm 8y ago
    One reason that property values have gone up in these places is that property in world cities is now often used as an investment vehicle for foreigners who made fortunes in politically unstable places, and want to park their money somewhere safe, or at least diversified. Often those fortunes were embezzled from public coffers or built on criminal enterprises, and real estate is a magnet for money laundering. But this kind of investment is problematic even when the money’s source is legitimate. Sure, if you want to talk about Colombian narco-dollars, or Russian keptocracy. China has a huge middle class, who worked all their life and had mandated government savings, with a pension for women at age 55. Please, do not write down all foreign investment in property to stolen money: Chinese purchasors in the west of small to medium size flats, and houses are buying for three reasons 1) the cost of property in Beijing is too high 2) their children are doing masters or phd programmes in the economy and its sensible to invest and save the kid rental 3) they want an exit strategy for their life savings if things go bad in the home country They are not kleptocrats. This is not stolen money. This is 30 or 40 years of savings, coupled to insane property bubbles. [Edit] I know some of them. I talk to them about this. I am not reporting from things I read, this is what I know from my neighbours in my apartment complex.
    - jacobolus 8y ago
      By no means is all (or even most) foreign investment stolen money (though there is a lot of corrupt money sloshing around, including a lot from China). However, even just “middle class” millionaire foreign investors parking money in international real estate is highly problematic for the places where the houses are. As an example, my parents live in a quiet suburb of Los Angeles, and recently a few of the neighboring houses were bought by foreign investors. Maintenance has all but stopped. One house was rented long-term to a group of college students who used it as a party house. Tenants move in and out of those houses within a year or two instead of staying long term. Any communication goes through a scummy property management company. If a critical mass of houses get like that, the neighborhood becomes a much different place. Everything becomes transactional and low-trust. The only way to get stuff fixed is by filing formal complaints or threatening legal action. Minor problems just pile up because it’s not worth the trouble. People stop caring about making things pleasant, or even making them work. Remote owners and management companies are just there to make a buck, and tenants are just temporarily stopping through for a place to sleep while they work out something more permanent elsewhere.
redahs 8y ago
> Maybe housing costs are what's causing the slump (if there is one)? Yes, that's how the business cycle has worked in western countries since the classical antiquity. The largest component of urban housing costs is the price for access to land, and payments for access to land are surplus payments beyond what is necessary for land to be supplied, because land is a fixed a natural resource with no labor cost of production. An increase in land banking and the holding of real estate for investment purposes decreases the supply of land available, increases payments for access to it. This increases the market valuations for real estate value based on the increase in the capitalized value of future rent payments. This increases the opportunity cost of investing money in productive businesses which employ labor to produce goods and services relative to putting money into land. This decreases investment in production of non-land goods and services which have a labor cost of production, which decreases the demand for labor, which decreases wages. Decreased wages then lead to decreased consumption which leads to decreased ability to pay rent, which then results in a drop in property valuations based upon capitalized rent payments. After a sustained period of rents increasing faster than wages, the property bubble usually pops and results in an economic depression. One solution to avoid this problem is through taxing and redistributing surplus land rents through a land value tax, which countries such as Taiwan have implemented. China has people smart enough to clear this hurdle and find creative solutions to continue rapid growth, but since Xi has consolidated power and gone back to heavily promoting Marxism as the economic model for China's future, the current political situation makes it seem unlikely that they will actually do so.
baybal2 8y ago
FYI, netting $1400 a month in China is freaking a lot for somebody who is not an engineer or a communist. An average fancy lunch costs CNY25 in the most expensive part of the town. Living a careless life on $700 per month can be done effortlessly. To note, China is a freaking HIGH tax country. Earning $1400 post tax means her gross income must be around CNY25000 with freebies and perks, which makes her into top 5% of the workforce. She earns almost as much as engineers do.
- contingencies 8y ago
  Your numbers are out of date. In 2002 I recall eating a huge bowl of noodles in rural Yunnan for CNY1. Today an average "fancy lunch" costs at least CNY60 in a Tier 1 city. Hell, even one beer usually costs that. That's USD$10. In Shenzhen, an average bowl of noodles is CNY20+. (The cheapest of the cheap, if you can find it and are willing to eat it, is about CNY8-16.) In the airports it's CNY60+ nationally. In high speed trains nationally a central kitchen produced low quality mass-meal in a thermoform container is CNY45, and perhaps purchased by 1/3 of travelers. For more reference prices take a look at http://ele.me/ http://ele.me/ delivery service. The delivery fees alone are around CNY7 (USD$1+). This is not "fancy lunch in the most expensive part of town" but "the stuff the average white collar worker eats daily".
  - baybal2 8y ago
    No... These are prices in an award winning place in downtown Shenzhen https://imgur.com/a/XqTC9zE https://imgur.com/a/XqTC9zE For a snob, one can go to Michelin rated Putien where you can get few very satiating dishes under CNY40
    - contingencies 8y ago
      A few places is not the same as the market as a whole. Regarding your example: yes, you can order some tofu for 23元 but you will need three such dishes for one person to feel sated and such places have minimum order sizes for delivery that typically exceed 2 dishes. (So at your example place, 3 x 25元 average dish price = 75元 per head, plus delivery fee) PS. Downtown Shenzhen is called Futian (福田; "abundant fields") not Putien (which is not even Pinyin, suggesting you are an overseas Chinese person or foreigner with little mainland exposure). I have been based here for most of the last 18 years.

pjc50 8y ago

Sounds like they've completed the upgrade to Western status.

JKCalhoun 8y ago
Or Japanese.

thatfrenchguy 8y ago

Less consumption -> Less CO2 emissions, so that’s awesome I guess ?

BadassFractal 8y ago
Or skipping children altogether: https://www.independent.co.uk/environment/children-carbon-footprint-climate-change-damage-having-kids-research-a7837961.html https://www.independent.co.uk/environment/children-carbon-fo...
- thatfrenchguy 8y ago
  The paper (https://www.biologicaldiversity.org/programs/population_and_sustainability/pdfs/OSUCarbonStudy.pdf https://www.biologicaldiversity.org/programs/population_and_... ) cited by the paper (http://iopscience.iop.org/article/10.1088/1748-9326/aa7541/meta http://iopscience.iop.org/article/10.1088/1748-9326/aa7541/m...) cited by the article says an interestingly different story: lifetime emissions of CO2 that are saved by different actions (US) Increase car’s fuel economy from 20 to 30 mpg 148 Reduce miles driven from 231 to 155 per week 147 Reduce number of children by one: Constant-emission scenario 9,441 Optimistic scenario 562 Pessimistic scenario 12,730 So basically fighting climate change, or having kids who consume less, has a much greater impact.
graeme 8y ago
That's just an individual. If consumption for an individual is down due to price, that's consistent with risin carbon demand. (Global carbon use is up)
- quadrangle 8y ago
  um, if people are being priced out, that could come from either supply or demand (or both or other factors). But I think the core point is that if individuals drop out of a market, that relieves demand which can keep prices down and thus allow others to keep consuming! In other words, if many of us do the environmental thing and drive less, that just enables wasteful irresponsible others to more cheaply use up all the same gasoline in the end. Or because LED lights got so efficient, places (in China incidentally) can plaster them over most of the surface of a building for no reason other than showing off, thus using up all the efficiency gains. To actually reduce overall consumption and pollution, we need widespread social changes that make such consumption and pollution seem shameful (and/or illegal) even though the market price isn't itself discouraging. The only market solution would involve effectively internalizing the now-externalized costs of pollution.

samschooler 8y ago

This may be bad for the economy, but to me this sounds like a good thing? People are lowering their spending and carbon footprint. Now if this is because they legitimately can't afford it, that's different; but cutting consumption is generally good.

opportune 8y ago
Cutting unnecessary consumption is good, but generally in market-oriented / capitalist economies you need consumption in some form to drive the economy. Cutting consumption can result in pretty big ripple effects as not only retailers and physical good extractors/manufacturers get hurt, but all the businesses servicing them get hurt too. Lowering consumption in the US, for example, would hurt Google and Microsoft a lot. In addition to the imports, it sounds like a lot of the problem is due to rising rents and housing prices. I’m basically a broken clock on this, but a “strong” housing market is not necessarily good for the economy. Increasing home prices and rents can wipe out real growth the same way inflation can
- BadassFractal 8y ago
  That's interesting. My econ understanding is pretty wimpy, so excuse the basic question here: is the broader theory here that "rising rents + increasing housing prices" = some sort of rent-seeking capitalism, whereas consumption of the not-real-estate kind is actually sustainable, desirable and beneficial long term?
  - opportune 8y ago
    I’m no economist either, but it’s not rocket science to figure out that when rents increase on housing without improvements, you are losing quality of life (if we account for inflation) - though theoretically the rent increase could actually reflect the area becoming nicer / more convenient. Consumption of real estate is fine when it means building real estate that will actually be used (which China is doing a lot of, even though some is unused). It’s bad when it essentially becomes speculation on property values, and I would argue that it’s also bad when property values rise and that wealth creation is only captured by incumbents / people that got in the market at the right time. Other consumption can be non sustainable, but at least it often directly leads to some quality of life improvement that a rent hike may not.

opportune 8y ago

Sounds like the Chinese can finally enjoy all the wonderful side effects of a mature economy

lxe 8y ago

I wonder, if true, how this trend will affect China's insane property market.

baybal2 8y ago
Everything can be. Biggest thing to carry out of that is all press coverage in the West of Chinese economy goes through a lot of "broken phones." You have to do your own first hand research to get an idea of anything. Example: the headline says "Shenzhen's property prices beat that of Manhattans" , but that only a half truth - average still climbs up, but median were going down for close to 3 years. Yes, the 400sqm mansion apartments did probably beat NYC long time ago, but who cares about them? In overall, SZ market got push not due to demographics as popular narrative says, bur thanks to their (failed) universiade. A giant amount of property speculators, top tier ones at that, bought into the idea that universiade, just like the Olympics, will magically push property prices and Shenzhen will see its own share of Pangu plazas (the once most expensive apartment building in China). Well it just became the self fulfilling prophecy, but only for the top of the market. Another thing few people know - Shenzhen spend more money on the universiade than most countries spent on the Olympics. To their disappointment, the event did not even sell half of all tickets, and went completely invisible to the outside world.

redahs 8y ago

They could clear up rents rising faster than savings and consumption by copying Taiwan and implementing a land value tax as Sun Yat Sen and Henry George originally recommended. However Xi has consolidated power, begun promoting Marx more heavily, and claims Marxism is still totally correct for the future of China, so they probably won't. With a greater push for Marxism, if the economy begins to slow we should expect greater nationalization of Chinese industry. Hopefully investors realize that Taiwan is the more sustainable political-economic system in light of current conditions.

deleted 8y ago
[deleted]
prolikewh0a 8y ago
While China may be a Communist Dictatorship, the economy is extremely capitalistic with no aspects of Marxism. Do the workers own the means of production? No, not Marxist. Privatization also is not Marxism.

erulabs 8y ago

This idea of consumption being the indicator of health for an economy is troubling to me. Less consumption certainly appears troubling to shareholders, and as some have pointed it should be viewed as a positive thing re: environmentalism - less consumption means less resource utilization. But from a purely economic standpoint - saving is not a bad thing. Murray Rothbard wrote the following (fairly obvious statement): "To increase production, man must form capital. To create it, he must restrict his consumption and transfer his labor for that period to producing immediately-satisfying consumers’ goods." The article explicitly mentions the -goals- of those who are saving - to buy homes or raise children. Henry Hazlitt writes: "But when money is invested it is used to buy capital goods–houses or office buildings or factories or ships or motor trucks or machines. Any one of these projects puts as much money into circulation and gives as much employment as the same amount of money spent directly on consumption. “Saving,” in short, in the modern world, is only another form of spending." In other words - Why would it ever be bad that people are -expanding- the time horizon of their goals (favoring long term investments over short term ones - ie: houses instead of lattes)? If anything, this ought to be an indicator of a strengthening economy, even if it means "slumping" share prices in the meantime.

hendzen 8y ago
Where does the capital come from that flows in to savings? - From wages, which are paid by enterprises that create the goods that are consumed - From investment gains in enterprises that create the goods that are consumed Its consumption all the way down.
- quadrangle 8y ago
  Nonsense. Capital is ownership of raw materials and means of production, even if we use money to track that effectively. Capital comes from natural resources more than anything else. Consuming those resources destroys capital rather than generating it — except when the consumption is an investment that increases our access to more resources (i.e. using oil to run equipment to get more oil as well as examples that aren't the same resource). If we live more consuming lifestyles, we drive up the demand for resources which could increase the motivation of people to get them and thus drive economic growth short-term, until/unless we use up the resources entirely. And that all still ignores externalized costs (pollution and other harms) that can come from the extra consumption.

calimac 8y ago

Each story cited the high housing expense to income ratio. Focus on problem not symptoms.

mattmanser 8y ago

I've been reading articles like this on HN for the last 10 years. I no longer know what to make of them. Ideologically, I'm opposed to the Chinese government and always felt they deserved to fall, a little like the USSR. The idea of political incarceration sickens me to the soul. So the articles delighted me, a shameful delight in another's misfortune. But these articles come out promising a herald of an imminent decline and they still climb. Now I have a grudging respect for their emergence, and a less rosy view of the virtues of Democracy, after it did little but cause misery in much of Iraq, Afghanistan and Russia. Perhaps this time China will finally succumb to its prophecised doom. More likely, I suspect, I will be reading on HN about another compelling portent of China's imminent decline in a year's time.

truedatone 8y ago
10 years ago.... debt to GDP https://www.bloomberg.com/news/articles/2018-02-08/sizing-up-china-s-debt-bubble-bloomberg-economics https://www.bloomberg.com/news/articles/2018-02-08/sizing-up... 2008 - 150% 2018 - 350% (official figure) 450% (official figure plus shadow debt) gdp growth https://tradingeconomics.com/china/gdp-growth-annual https://tradingeconomics.com/china/gdp-growth-annual 2008 - 12% 2018 - 6% children per women http://www.china-profile.com/data/fig_WPP2010_TFR_1.htm http://www.china-profile.com/data/fig_WPP2010_TFR_1.htm 2008 - 1.75 2018 - 1.5 China lost 4 trillion wealth to migration https://www.forbes.com/sites/insideasia/2017/02/22/china-capital-flight-migration/ https://www.forbes.com/sites/insideasia/2017/02/22/china-cap... Nothing goes up forever. Eventually they come crashing down to earth. Noone escapes economics fundamentals.
adventured 8y ago
Oh it was Democracy that caused misery in Russia, not the hang-over and cultural destruction of 70 years of party dictatorship and failed experiments with various degrees of Communism? Not to mention mass genocide, starvation, poverty and oppression on a scale of which humanity has rarely seen. Meanwhile Czech, Romania, Slovakia, Poland, Estonia, Latvia, Lithuania - all of which are Democratic, and all of which have had superior economic outcomes to Russia - haven't had that problem. Turns out when you forcibly hold a giant land mass together that shouldn't be together, there is a high cost. Was Russia expected to snap instantly into a perfect Democratic model from that? How many elections did they hold that were Democratic before returning to a dictatorship? Not a very long experiment as it turns out. When did Iraq get Democracy? Was that before or after the vast civil war that killed hundreds of thousands of people and demolished its cities; or was it before or after ISIS ripped the country in half? Immediately after leaving a brutal dictatorship that had tortured the nation for decades? Another mass of land arbitrarily forced together by a great power, with horrible consequences. Afghanistan got its Democracy with a helping of decades of religious civil war that decimated the country and continues to this day with everything persistently under attack by the Taliban. They're expected to accomplish what beautiful form of Democracy in that atmosphere of on-going civil war? Using those three as examples of Democracy causing misery, is plainly absurd.

rahimnathwani 8y ago

The phenomena described are not new; this article could have been written 2, 3 or 5 years ago, when property values had already risen to levels that meant most couples have no hope of ever buying a basic apartment in the city where they work. The title is a little strange: avocados have been a luxury item for as long as I've been in China. A single, medium-sized avocado usually costs between US$1.50 and $2.00. Avocado toast isn't a staple like it is in SF. And, anecdotally, I've seen more cocktail bars and craft beer places open than I've seen close.

wrong_variable 8y ago
Meh, Up until the 17th and early 18th Century most of global wealth was located in China and India. Its what made them prime target for the militarily strong Europeans. I have been to Europe, Asia and the Middle East and people are almost the same. So how can I explain the widely different living standards ? The only answer that ever made sense to me was colonization. You can see the equalization happening with Britain and US having third world style politics, corruption, etc due to having to learn to live in world without their hegemony. As for democracy, do you think China could have survived democracy ? It would have ended up like Iran. Democracy only works if the country has strong institutions which China doesn't have, they still send their best and brightest to US universities.
- unmole 8y ago
  So, how come India survived democracy?
  - newyork 8y ago
    India has survived democracy completely due to its massive diversity; it's linguistic, religious, racial and social diversity make it almost impossible for any leader/concept to wow an entire nation. It maybe a surprise that its a single country but not really a surprise that it is still democratic
- deleted 8y ago
  [deleted]

Animats 8y ago

This is really important, but too anecdotal. The story was written before Alibaba's Q2 results were out, and says that if Alibaba is down, there's real trouble. Those results are out now, and Alibaba does not seem to have had a bad quarter.

adventured 8y ago
Check out Alibaba's rapidly decelerating platform revenue growth (which is where they make all of their profit). Their top line was bolstered by throwing very large sums of money at one business deal after another. Their platform sales growth declined from 36% to 25% from just the prior quarter. Their profitability almost entirely disappeared as well. They're spending large sums of money to buy cheap revenue, and burning up their margin in doing so, swapping high quality sales for low quality sales. That might be ok if they didn't have a $442b market cap to support (which was premised on them generating a large amount of profit from a high margin ad platform). It remains to be seen whether growth at any cost is a smart approach, or whether it's going to result in driving into a jarring brick wall instead. Junk revenue has consequences.

est 8y ago

It seems that the only thing that downgrades is the quality of nyt reporting. 1/10 failing nyt downgraded itself to 朋友圈 level. I had much higher expectations of this reporting. Give me more stats covering more industries. Not some imaginative figure from 1st-tier whining about living in a big city is costy.

throwaway23434 8y ago

> This way, Mr. Wang — who makes about $2,000 a month after taxes — saves $160 a month. This is very surprising to me. This is the typical grad-student salary in the US (in CS), and in places outside of Bay Area, more than sufficient for a very decent QoL.