4 ms·

Rebalancing the domestic economy toward greater household income is necessary to provide sustained growth in China, and that's what Michael Pettis argues in you

Rebalancing the domestic economy toward greater household income is necessary to provide sustained growth in China, and that's what Michael Pettis argues in your link to his blog. Make no mistake though, the national and Party leadership is deathly afraid of low growth and it is exactly what they seek to avoid. The leadership knows they must create domestic consumer demand and that this must happen through an increase in household spending or, as Michael Pettis notes, in spending on behalf of households. Low auto sales seems like evidence that this isn't happening quickly enough. They can use the threat of trade war to convince others of the need for this shift, but actual trade war, or actual low growth? No thanks. When you are riding a tiger, you don't want it getting too hungry. China has a long history of civil unrest, the Taiping Rebellion being a good example. Twenty to thirty million people were killed, and economic depression following a trade war was the impetus. The result of this horror was China on her knees, and is precisely what the leadership seeks to avoid. https://www.facinghistory.org/nanjing-atrocities/nation-building/seeds-unrest-taiping-movement https://www.facinghistory.org/nanjing-atrocities/nation-buil... The return to authoritarianism can be seen as battening down the hatches before the storm. Shifting spending to household income goes against powerful interests. A large national health program and social security could help, but debt funding is not an option now, and the alternative is taxing wealthy individuals and wealthy local governments. This also creates unrest.

tanilama 8y ago
Then they shouldn't hype up the real estate price so much, it is draining the domestic consumers dry.
- sokoloff 8y ago
  Well, some of them. Others are presumably finding it a path to future wealth, while others are cashing in on realized appreciation.
  - deleted 8y ago
    [deleted]
  - tanilama 8y ago
    LoL, u have no idea.
- franknine 8y ago
  It's a traditional Chinese mindset that people should own land properties or houses. A man who does not own a house would be deemed not worth marrying, thus making overhyping real estate price possible since some people would take it anyway.
sho 8y ago
> China has a long history of civil unrest > The return to authoritarianism can be seen as battening down the hatches Obligatory not a "China expert" but I think you're very much correct. A lot of people don't seem to understand how different, and explosive, the political situation is in China. There is very little social trust, certainly little trust in government, and things could fly apart quickly and violently. The CCP is in a very difficult situation, trapped between fragmented and competing power bases, from a gigantic and angry rural underclass to godlike and kleptocratic SOEs to the tier-1 (and even 2) cities who by this point are practically mini-states with a law unto themselves. It is no surprise they have pulled every trick in the book to try to keep the music playing. I totally agree that there needs to be a proper national health and social security system; this will be on the same magnitude as the "New Deal" the US had after the great depression. This could only be accomplished by a massive tax, and even more importantly power, overhaul. Xi Jinping is totally unreadable to me and I have no idea whether he is consolidating power just because that's what "strongmen" do or because he understands he needs it to execute on the desperately needed reforms. I doubt anyone not literally in the Politburo could say for sure. I hope it's the latter. I keep saying this every year but the stakes just keep getting higher - things in China will come to a head sooner rather than later. And when they do, I want to be very far away, because it is a whole lot of shit, and a very big fan...
- cm2187 8y ago
  But also isn’t China half way through its industrial revolution, with still a massive rural population almost living in the previous century? Are there other examples of countries that stalled in that process and the political consequences of a two tier population?
  - simonh 8y ago
    The rural labour pool is running pretty low at this point, it’s mostly just kids growing up and going to work in the cities rather than actual untapped capacity. Of course given China’s scale that’s still millions of workers looking for jobs every year. I’d say at this point China is very much an industrialised country with a young but burgeoning domestic economy. Wages for manufacturing workers have been rising steadily as a result though and low value manufacturing that relies on the lowest wages is moving on to places like Vietnam. It’s still pretty rough out in the countryside, my wife is Chinese and I’ve been out in the countryside, but it is getting better.
senectus1 8y ago
> China has a long history of civil unrest oh come on... China has a long history. (period) within that is periods of civil unrest and various degrees of prosperity and peace. Its a bit unfair to paint them as a chaotic state... they're far from that.
- brownbat 8y ago
  Interesting point. To expand on it... By analogy, western Europe has a long history of basically continual war, generally featuring some combination of France, Prussia, England, and Spain. No one analyzes Brexit as a return to literal western European warfare, at most as an analogy of interests. The last century featured advances in weaponry that changed the cost benefit of armed conflict in a way to make some types of historically prevalent warfare much more rare. You could argue that the difference with China is the fear that information control and the other authoritarian elements of the communist party are masking significant internal discontent, making the political situation more volatile than can be reliably observed. And... that civil wars aren't the type of warfare that technology has made more rare. (Really just limiting superpower territorial invasions of other superpowers?). But who knows. China is such an enormous complicated country that there are basically no parallel examples to help us predict its future... Even China's past is limited help. China of the Tang dynasty was more similar in population to present day Myanmar. Its problems and issues and politics might have basically no discernable relationship to China's real issues today.
- deleted 8y ago
  [deleted]
- PakG1 8y ago
  China has had 4 or 5 revolutions (depending on whether you want to count the Cultural Revolution; it was perhaps an anti-revolution where while revolutions normally attempt to overthrow the government, the cultural revolution attempted to maintain the government's power) in the last century. There are few countries in the world that can say they've gone through five revolutions within the last century. https://en.wikipedia.org/wiki/Chinese_Revolution https://en.wikipedia.org/wiki/Chinese_Revolution I believe it has a long history of unrest in the modern era compared to all large countries (measured by population) out there. The Chinese government knows their own history and people well, and I believe they are managing the risk with a serious mindset. Their methods may be up for debate, but they're not of the mindset that there's no risk.

tanilama 8y ago

Then they shouldn't hype up the real estate price so much, it is draining the domestic consumers dry.

sokoloff 8y ago
Well, some of them. Others are presumably finding it a path to future wealth, while others are cashing in on realized appreciation.
- deleted 8y ago
  [deleted]
- tanilama 8y ago
  LoL, u have no idea.
franknine 8y ago
It's a traditional Chinese mindset that people should own land properties or houses. A man who does not own a house would be deemed not worth marrying, thus making overhyping real estate price possible since some people would take it anyway.

sho 8y ago

> China has a long history of civil unrest > The return to authoritarianism can be seen as battening down the hatches Obligatory not a "China expert" but I think you're very much correct. A lot of people don't seem to understand how different, and explosive, the political situation is in China. There is very little social trust, certainly little trust in government, and things could fly apart quickly and violently. The CCP is in a very difficult situation, trapped between fragmented and competing power bases, from a gigantic and angry rural underclass to godlike and kleptocratic SOEs to the tier-1 (and even 2) cities who by this point are practically mini-states with a law unto themselves. It is no surprise they have pulled every trick in the book to try to keep the music playing. I totally agree that there needs to be a proper national health and social security system; this will be on the same magnitude as the "New Deal" the US had after the great depression. This could only be accomplished by a massive tax, and even more importantly power, overhaul. Xi Jinping is totally unreadable to me and I have no idea whether he is consolidating power just because that's what "strongmen" do or because he understands he needs it to execute on the desperately needed reforms. I doubt anyone not literally in the Politburo could say for sure. I hope it's the latter. I keep saying this every year but the stakes just keep getting higher - things in China will come to a head sooner rather than later. And when they do, I want to be very far away, because it is a whole lot of shit, and a very big fan...

cm2187 8y ago
But also isn’t China half way through its industrial revolution, with still a massive rural population almost living in the previous century? Are there other examples of countries that stalled in that process and the political consequences of a two tier population?
- simonh 8y ago
  The rural labour pool is running pretty low at this point, it’s mostly just kids growing up and going to work in the cities rather than actual untapped capacity. Of course given China’s scale that’s still millions of workers looking for jobs every year. I’d say at this point China is very much an industrialised country with a young but burgeoning domestic economy. Wages for manufacturing workers have been rising steadily as a result though and low value manufacturing that relies on the lowest wages is moving on to places like Vietnam. It’s still pretty rough out in the countryside, my wife is Chinese and I’ve been out in the countryside, but it is getting better.

senectus1 8y ago

> China has a long history of civil unrest oh come on... China has a long history. (period) within that is periods of civil unrest and various degrees of prosperity and peace. Its a bit unfair to paint them as a chaotic state... they're far from that.

brownbat 8y ago
Interesting point. To expand on it... By analogy, western Europe has a long history of basically continual war, generally featuring some combination of France, Prussia, England, and Spain. No one analyzes Brexit as a return to literal western European warfare, at most as an analogy of interests. The last century featured advances in weaponry that changed the cost benefit of armed conflict in a way to make some types of historically prevalent warfare much more rare. You could argue that the difference with China is the fear that information control and the other authoritarian elements of the communist party are masking significant internal discontent, making the political situation more volatile than can be reliably observed. And... that civil wars aren't the type of warfare that technology has made more rare. (Really just limiting superpower territorial invasions of other superpowers?). But who knows. China is such an enormous complicated country that there are basically no parallel examples to help us predict its future... Even China's past is limited help. China of the Tang dynasty was more similar in population to present day Myanmar. Its problems and issues and politics might have basically no discernable relationship to China's real issues today.
deleted 8y ago
[deleted]
PakG1 8y ago
China has had 4 or 5 revolutions (depending on whether you want to count the Cultural Revolution; it was perhaps an anti-revolution where while revolutions normally attempt to overthrow the government, the cultural revolution attempted to maintain the government's power) in the last century. There are few countries in the world that can say they've gone through five revolutions within the last century. https://en.wikipedia.org/wiki/Chinese_Revolution https://en.wikipedia.org/wiki/Chinese_Revolution I believe it has a long history of unrest in the modern era compared to all large countries (measured by population) out there. The Chinese government knows their own history and people well, and I believe they are managing the risk with a serious mindset. Their methods may be up for debate, but they're not of the mindset that there's no risk.