6 ms·

I have my sincere doubts about this. China always had a requirement to grow 6% for every city. So I believe some numbers are inflated ( mostly about real estat

I have my sincere doubts about this. China always had a requirement to grow 6% for every city. So I believe some numbers are inflated ( mostly about real estate eg. Ghost cities, ..). This doesn't give many issues, because there is actual growth. The reasoning goes that when the growth slows, the entire pyramid goes crumbling down ( debts). As weird as it is, I think it's an objective overview of everything China related. It's a personal hunch of all the FOMO I read about China and can't support it with links. The reasoning I follow is: expansion internally (China), expansion externally ( requirement) with Africa / one road one belt, knocking down on bank fraud, no export of money internationally, ... In the process, trying to become too big too fail. We'll see if I'm right about this. Ps. I could be wrong, so comments are appreciated

echevil 8y ago
I think Chinese government has to welcome slowing down because it's just impossible to maintain a growth rate like that indefinitely. The GPD of China already come close to that of US. At this scale, the same growth rate is naturally becoming harder and harder to achieve and simply pursuing that number might lead to catastrophic outcome. A slow down in economy growth gives China more time to fix the structural problems caused by rapid growth, and reduces the chances of a sudden crush. Overall I'd say it leads to a much more healthier economy. It has side effects of course, but Chinese government have much better control of the macro-economy compared to free markets in most other countries, and that would help a lot in avoiding economical crisis. The debt issue is concerning, but I think Chinese government is much faster in acting on and fixing problems. Some of the slow down mentioned in the article, such as the fall in housing market, seems to be exactly what the government want, as they've tighten the rules for real estate by a lot earlier this year. There're strict criteria people have to meet to be eligible for purchasing a house. This is a good thing because the current real estate market in China is almost insane.
- tonyedgecombe 8y ago
  If China did have "much better control of the macro-economy compared to free markets" the they wouldn't have the debt problem.
ganzuul 8y ago
They have in practice been exporting huge sums of money overseas by buying companies all over the world.
- NicoJuicy 8y ago
  And they have reduced this, government issued: https://www.theguardian.com/business/2017/aug/18/china-moves-curb-overseas-acquisitions-firms-debt-levels-rise https://www.theguardian.com/business/2017/aug/18/china-moves...
clomond 8y ago
My understanding is that both of you can be right. The "Chinese government" is not a singular, monolithic entity in the same way the "US Government" is actually a bunch of departments, branches and jurisdiction levels each with competing and sometimes differing interests and goals. (but yes, it is more unified in China in the sticking to party line). The Chinese federal government has been wanting to make this re-balancing for a long time (a shift away from exports towards domestic consumption, and shifts from inefficient state owned enterprises to companies that can operate more efficiently and are "market oriented"). Where you are also correct is that many of the inflated GDP numbers and "inefficient" investments / capital towards things like ghost cities are mostly driven by state governments, in their attempt to meet the "goals" as stated by the federal government.
- friedman23 8y ago
  > and shifts from inefficient state owned enterprises to companies that can operate more efficiently and are "market oriented") Do you have evidence of this? Isn't one of the biggest US complaints that many Chinese businesses are indistinguishable from the government?
  - clomond 8y ago
    I've seen it in various economics articles/readings on the topic regarding the governments long term economic strategy. (see article below I found) You are also right - yes one of the biggest complains IS that many Chinese businesses are "owned" by the government with lots of influence there. However, the big resistive force here preventing this further breakup is that they are such huge employers, and it is not politically easy to reduce and remove so many people from the payrolls. So it has been a slow process. Here is an article roughly related: https://www.forbes.com/sites/kenrapoza/2015/12/30/china-starts-breaking-up-its-state-owned-enterprises/#1e4940e5f606 https://www.forbes.com/sites/kenrapoza/2015/12/30/china-star...
    - friedman23 8y ago
      I'm sure there are a few technocrats that have this as one of their goals in China but (note: this is speculation) I doubt the reason there is friction from moving away from state sponsored businesses is changing payrolls. Communist party leaders own huge portions of their state sponsored businesses and directly benefit from their success. Chinese leaders don't want fair competition, they want to be rich.
jcfrei 8y ago
> The reasoning goes that when the growth slows, the entire pyramid goes crumbling down ( debts). Since every bank in China is under the direction of the central government it's up to a committee therein to decide which companies end up bankrupt. China might look like it has a modern capital market but it's still centrally controlled for key parts. National banks can and will infinitely extend credit lines to unprofitable companies if it's in the governments interest (for example to prevent public unrest).

echevil 8y ago

I think Chinese government has to welcome slowing down because it's just impossible to maintain a growth rate like that indefinitely. The GPD of China already come close to that of US. At this scale, the same growth rate is naturally becoming harder and harder to achieve and simply pursuing that number might lead to catastrophic outcome. A slow down in economy growth gives China more time to fix the structural problems caused by rapid growth, and reduces the chances of a sudden crush. Overall I'd say it leads to a much more healthier economy. It has side effects of course, but Chinese government have much better control of the macro-economy compared to free markets in most other countries, and that would help a lot in avoiding economical crisis. The debt issue is concerning, but I think Chinese government is much faster in acting on and fixing problems. Some of the slow down mentioned in the article, such as the fall in housing market, seems to be exactly what the government want, as they've tighten the rules for real estate by a lot earlier this year. There're strict criteria people have to meet to be eligible for purchasing a house. This is a good thing because the current real estate market in China is almost insane.

tonyedgecombe 8y ago
If China did have "much better control of the macro-economy compared to free markets" the they wouldn't have the debt problem.

ganzuul 8y ago

They have in practice been exporting huge sums of money overseas by buying companies all over the world.

NicoJuicy 8y ago
And they have reduced this, government issued: https://www.theguardian.com/business/2017/aug/18/china-moves-curb-overseas-acquisitions-firms-debt-levels-rise https://www.theguardian.com/business/2017/aug/18/china-moves...

clomond 8y ago

My understanding is that both of you can be right. The "Chinese government" is not a singular, monolithic entity in the same way the "US Government" is actually a bunch of departments, branches and jurisdiction levels each with competing and sometimes differing interests and goals. (but yes, it is more unified in China in the sticking to party line). The Chinese federal government has been wanting to make this re-balancing for a long time (a shift away from exports towards domestic consumption, and shifts from inefficient state owned enterprises to companies that can operate more efficiently and are "market oriented"). Where you are also correct is that many of the inflated GDP numbers and "inefficient" investments / capital towards things like ghost cities are mostly driven by state governments, in their attempt to meet the "goals" as stated by the federal government.

friedman23 8y ago
> and shifts from inefficient state owned enterprises to companies that can operate more efficiently and are "market oriented") Do you have evidence of this? Isn't one of the biggest US complaints that many Chinese businesses are indistinguishable from the government?
- clomond 8y ago
  I've seen it in various economics articles/readings on the topic regarding the governments long term economic strategy. (see article below I found) You are also right - yes one of the biggest complains IS that many Chinese businesses are "owned" by the government with lots of influence there. However, the big resistive force here preventing this further breakup is that they are such huge employers, and it is not politically easy to reduce and remove so many people from the payrolls. So it has been a slow process. Here is an article roughly related: https://www.forbes.com/sites/kenrapoza/2015/12/30/china-starts-breaking-up-its-state-owned-enterprises/#1e4940e5f606 https://www.forbes.com/sites/kenrapoza/2015/12/30/china-star...
  - friedman23 8y ago
    I'm sure there are a few technocrats that have this as one of their goals in China but (note: this is speculation) I doubt the reason there is friction from moving away from state sponsored businesses is changing payrolls. Communist party leaders own huge portions of their state sponsored businesses and directly benefit from their success. Chinese leaders don't want fair competition, they want to be rich.

jcfrei 8y ago

> The reasoning goes that when the growth slows, the entire pyramid goes crumbling down ( debts). Since every bank in China is under the direction of the central government it's up to a committee therein to decide which companies end up bankrupt. China might look like it has a modern capital market but it's still centrally controlled for key parts. National banks can and will infinitely extend credit lines to unprofitable companies if it's in the governments interest (for example to prevent public unrest).