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I don’t get this article. China exceeded their economic growth target for 2018 in April when their economy hit 6.8% growth. Their wages are steadily increasing.

I don’t get this article. China exceeded their economic growth target for 2018 in April when their economy hit 6.8% growth. Their wages are steadily increasing. Their internal market is the healthiest of any g20 economy. Investments both internally and internationally are up and their population has little dept. On top of that they haven’t touched retirement age, so they have a lot of leverage there.

AJ007 8y ago
I don't know what their "real" gdp growth was, but the larger point is that GDP growth occurred because of an even larger increase in debt. That debt likely went to wasteful/non-productive projects. That isn't healthy or sustainable.
village-idiot 8y ago
I’m no economist, but I think the point is that they’re collecting debt at a high rate too. If they continue to grow faster than that debt, all is well. Once their growth starts to revert to the G20 mean, they’ll need to change their strategies dramatically. But I’m not an economist.
- RachelF 8y ago
  Yes, the debt needs to be used productively. Otherwise you borrow to build things that do not generate enough return to pay back the debt. You also inflate asset bubbles, some Chinese property is as expensive as Silicon Valley or NYC, per square foot.
tsuabing2 8y ago
> China exceeded their economic growth target for 2018 in April when their economy hit 6.8% growth Wrong. Fake GDP. It's estimated that 1/3 of their GDP is wasteful government spending. Many of their provinces also have confessed to 20-30% fake GDP, thus another 1/3 of their gdp is fake. https://www.bloomberg.com/news/articles/2018-01-19/this-is-how-china-s-regions-fare-in-the-fake-gdp-data-stakes https://www.bloomberg.com/news/articles/2018-01-19/this-is-h... https://www.investors.com/politics/editorials/new-study-shines-light-literally-on-chinas-and-russias-fake-gdp-data/ https://www.investors.com/politics/editorials/new-study-shin... so we're looking at maybe 1-2% gdp growth, and maybe their GDP is only about 70% of what they claim (9T vs 13T) > Their wages are steadily increasing. Wrong. Chinese graduates salaries have fallen for second year in a row. https://www.ft.com/content/fb5865e4-4993-11e7-919a-1e14ce4af89b https://www.ft.com/content/fb5865e4-4993-11e7-919a-1e14ce4af.... > Their internal market is the healthiest of any g20 economy Wrong. Consumer spending growth declined. https://www.google.com/search?q=chinese+spending+down&rlz=1C5CHFA_enUS745US745 https://www.google.com/search?q=chinese+spending+down&rlz=1C... . Beijing rent increased 25% !!! in july year over year. That's not a healthy sign of any economy. https://www.ft.com/content/6324fc2a-a445-11e8-8ecf-a7ae1beff35b https://www.ft.com/content/6324fc2a-a445-11e8-8ecf-a7ae1beff... . and now we know Chinese consumers are taking on too much personal debt https://www.bloomberg.com/view/articles/2018-02-15/chinese-consumers-are-building-up-too-much-household-debt https://www.bloomberg.com/view/articles/2018-02-15/chinese-c... And did you forget China is about to be hit with tariffs from US on 200B worth, soon to be 500B? when their economy is export oriented? > Investments both internally and internationally are up Wrong. Yuan has lost 12% this year. Chinese stock market has crashed 30% this year. That's not a sign of increasing FDI. that's FDI leaving and screaming > On top of that they haven’t touched retirement age Wrong. Chinese demographics looks horrible, and will reach peak in 2025. Their population will shrink 1/3 in the next 60 years.
- andygoo 8y ago
  Why government spending is neccesarily wasteful? I would say consumption of financial services part of GDP which is massive in us is less relevant to layman that vital services government provides
  - denimnerd 8y ago
    some of the spending just saw on my trip was mind blowing. Acres of granite pavers and timber decking in new parks. Huge new city walls in place of ancient ones. (protecting them they call it)
  - village-idiot 8y ago
    Ever heard of Chinese ghost cities? Completely designed and built cities that could home millions but only hold a thousand or so? That's wasteful government spending. https://www.businessinsider.com/these-chinese-cities-are-ghost-towns-2017-4 https://www.businessinsider.com/these-chinese-cities-are-gho...
- ebikelaw 8y ago
  Following this line of thinking, all or even more than all US GDP "growth" is attributable to wasteful medical and educational inflation.
  - mdorazio 8y ago
    Not all, but a good chunk. Definitely less than half. Somewhere around 18% of current US GDP is healthcare spending [1], growing at around 5% year over year. Education spending is somewhere around 5% of GDP [2]. It's hard to figure out how much actual growth is occurring there since most of the ridiculous increases have been specifically in college, not in K-12 which is the bigger share. Total increase seems to be somewhere below 3% year over year growth. We can even add in military spending and not get to half. Thanks to this year's absurd 9% budget increase [3], military spending is now above 4% of GDP again. So, healthcare + education + military accounts for around 27% of GDP and about 5.2% weighted average growth for that 27%. US GDP is up 4.2% annualized for Q2 this year, so that growth in our 3 categories is only accounting for maybe a third of total GDP growth. [1] https://www.advisory.com/daily-briefing/2017/02/16/spending-growth https://www.advisory.com/daily-briefing/2017/02/16/spending-... [2] https://en.wikipedia.org/wiki/List_of_countries_by_spending_on_education_(%25_of_GDP) https://en.wikipedia.org/wiki/List_of_countries_by_spending_... [3] https://www.washingtonpost.com/news/wonk/wp/2018/06/19/u-s-military-budget-inches-closer-to-1-trillion-mark-as-concerns-over-federal-deficit-grow/?noredirect=on&utm_term=.49887612eeec https://www.washingtonpost.com/news/wonk/wp/2018/06/19/u-s-m...
tonyedgecombe 8y ago
I don't think anybody believes their growth figures any more.
- longcheng 8y ago
  I don't believe anyone's figure. I believe my eyes, and I see Made-in-China everywhere. I see US is freaking out and waging trade war.
sseth 8y ago
I think Michael Pettis is probably worth quoting here : "In most economies, GDP growth is a measure of economic output generated by the performance of the underlying economy. In China, however, Beijing sets annual GDP growth targets it expects to meet. Turning GDP growth into an economic input, rather than an output, radically changes its meaning and interpretation." See http://carnegieendowment.org/chinafinancialmarkets/75355 http://carnegieendowment.org/chinafinancialmarkets/75355

AJ007 8y ago

I don't know what their "real" gdp growth was, but the larger point is that GDP growth occurred because of an even larger increase in debt. That debt likely went to wasteful/non-productive projects. That isn't healthy or sustainable.

village-idiot 8y ago

I’m no economist, but I think the point is that they’re collecting debt at a high rate too. If they continue to grow faster than that debt, all is well. Once their growth starts to revert to the G20 mean, they’ll need to change their strategies dramatically. But I’m not an economist.

RachelF 8y ago
Yes, the debt needs to be used productively. Otherwise you borrow to build things that do not generate enough return to pay back the debt. You also inflate asset bubbles, some Chinese property is as expensive as Silicon Valley or NYC, per square foot.

tsuabing2 8y ago

> China exceeded their economic growth target for 2018 in April when their economy hit 6.8% growth Wrong. Fake GDP. It's estimated that 1/3 of their GDP is wasteful government spending. Many of their provinces also have confessed to 20-30% fake GDP, thus another 1/3 of their gdp is fake. https://www.bloomberg.com/news/articles/2018-01-19/this-is-how-china-s-regions-fare-in-the-fake-gdp-data-stakes https://www.bloomberg.com/news/articles/2018-01-19/this-is-h... https://www.investors.com/politics/editorials/new-study-shines-light-literally-on-chinas-and-russias-fake-gdp-data/ https://www.investors.com/politics/editorials/new-study-shin... so we're looking at maybe 1-2% gdp growth, and maybe their GDP is only about 70% of what they claim (9T vs 13T) > Their wages are steadily increasing. Wrong. Chinese graduates salaries have fallen for second year in a row. https://www.ft.com/content/fb5865e4-4993-11e7-919a-1e14ce4af89b https://www.ft.com/content/fb5865e4-4993-11e7-919a-1e14ce4af.... > Their internal market is the healthiest of any g20 economy Wrong. Consumer spending growth declined. https://www.google.com/search?q=chinese+spending+down&rlz=1C5CHFA_enUS745US745 https://www.google.com/search?q=chinese+spending+down&rlz=1C... . Beijing rent increased 25% !!! in july year over year. That's not a healthy sign of any economy. https://www.ft.com/content/6324fc2a-a445-11e8-8ecf-a7ae1beff35b https://www.ft.com/content/6324fc2a-a445-11e8-8ecf-a7ae1beff... . and now we know Chinese consumers are taking on too much personal debt https://www.bloomberg.com/view/articles/2018-02-15/chinese-consumers-are-building-up-too-much-household-debt https://www.bloomberg.com/view/articles/2018-02-15/chinese-c... And did you forget China is about to be hit with tariffs from US on 200B worth, soon to be 500B? when their economy is export oriented? > Investments both internally and internationally are up Wrong. Yuan has lost 12% this year. Chinese stock market has crashed 30% this year. That's not a sign of increasing FDI. that's FDI leaving and screaming > On top of that they haven’t touched retirement age Wrong. Chinese demographics looks horrible, and will reach peak in 2025. Their population will shrink 1/3 in the next 60 years.

andygoo 8y ago
Why government spending is neccesarily wasteful? I would say consumption of financial services part of GDP which is massive in us is less relevant to layman that vital services government provides
- denimnerd 8y ago
  some of the spending just saw on my trip was mind blowing. Acres of granite pavers and timber decking in new parks. Huge new city walls in place of ancient ones. (protecting them they call it)
- village-idiot 8y ago
  Ever heard of Chinese ghost cities? Completely designed and built cities that could home millions but only hold a thousand or so? That's wasteful government spending. https://www.businessinsider.com/these-chinese-cities-are-ghost-towns-2017-4 https://www.businessinsider.com/these-chinese-cities-are-gho...
ebikelaw 8y ago
Following this line of thinking, all or even more than all US GDP "growth" is attributable to wasteful medical and educational inflation.
- mdorazio 8y ago
  Not all, but a good chunk. Definitely less than half. Somewhere around 18% of current US GDP is healthcare spending [1], growing at around 5% year over year. Education spending is somewhere around 5% of GDP [2]. It's hard to figure out how much actual growth is occurring there since most of the ridiculous increases have been specifically in college, not in K-12 which is the bigger share. Total increase seems to be somewhere below 3% year over year growth. We can even add in military spending and not get to half. Thanks to this year's absurd 9% budget increase [3], military spending is now above 4% of GDP again. So, healthcare + education + military accounts for around 27% of GDP and about 5.2% weighted average growth for that 27%. US GDP is up 4.2% annualized for Q2 this year, so that growth in our 3 categories is only accounting for maybe a third of total GDP growth. [1] https://www.advisory.com/daily-briefing/2017/02/16/spending-growth https://www.advisory.com/daily-briefing/2017/02/16/spending-... [2] https://en.wikipedia.org/wiki/List_of_countries_by_spending_on_education_(%25_of_GDP) https://en.wikipedia.org/wiki/List_of_countries_by_spending_... [3] https://www.washingtonpost.com/news/wonk/wp/2018/06/19/u-s-military-budget-inches-closer-to-1-trillion-mark-as-concerns-over-federal-deficit-grow/?noredirect=on&utm_term=.49887612eeec https://www.washingtonpost.com/news/wonk/wp/2018/06/19/u-s-m...

tonyedgecombe 8y ago

I don't think anybody believes their growth figures any more.

longcheng 8y ago
I don't believe anyone's figure. I believe my eyes, and I see Made-in-China everywhere. I see US is freaking out and waging trade war.

sseth 8y ago

I think Michael Pettis is probably worth quoting here : "In most economies, GDP growth is a measure of economic output generated by the performance of the underlying economy. In China, however, Beijing sets annual GDP growth targets it expects to meet. Turning GDP growth into an economic input, rather than an output, radically changes its meaning and interpretation." See http://carnegieendowment.org/chinafinancialmarkets/75355 http://carnegieendowment.org/chinafinancialmarkets/75355