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You were going great until that very last part. But, it is clearly true that China's current position is not unlike that of Japan in the 90's, or South Korea n
by rossdavidh 7y ago
You were going great until that very last part.
But, it is clearly true that China's current position is not unlike that of Japan in the 90's, or South Korea not long after.
I think China's advantage is that they are big enough to create a large consumer market themselves. The U.S. was once in this position, as was the U.K. before them, and they both managed to make the transition from selling to other, richer markets to selling to themselves.
The big problem is, that both the U.K. and the U.S. had periods of internal stress during that transition, and because they were democracies they could blow off steam with electoral "revolts" instead of the literal kind of revolt. Perhaps China has the internal stability to be able to avoid this problem, but perhaps not.
- simonebrunozzi 7y agoWell, not so fast. You are correct that China is indeed different, but if you look at hard data [0], the internal consumer market in China is not substantially larger than Japan, and certainly way smaller than US. Furthermore, the consumer market data includes food, which by a large extent has to remain a domestic product. If we assume that food is 11% of the market (based on "$1.46 trillion worth of food in 2014." in the US [1]), then: US domestic market (without food): $13.32T ($11.85T) EU domestic market (without food): $9.61T ($8.55T) China domestic market (without food): $4.7T ($4.18T) Japan domestic market (without food): $2.76T ($2.46T) As you can see, China is not big enough, by a large margin. [0]: https://en.wikipedia.org/wiki/List_of_largest_consumer_markets# https://en.wikipedia.org/wiki/List_of_largest_consumer_marke... [1]: https://www.ers.usda.gov/topics/food-markets-prices/food-service-industry/market-segments/ https://www.ers.usda.gov/topics/food-markets-prices/food-ser...
- Aperocky 7y agoIf the world stay where it is today forever, sure. You could well bring up that 30 years ago China is about as wealthy as Africa, and that it is a total non-factor in the world economy. The bottomline is this, China had 1.4 billion people, they will consume, even if they consume 1/4th as much individually, the market will be the same size as of the US. It probably already happened, just that services in China is much cheaper. Out of the 13T consumption that is the US market, how much of it is in the form of goods? You'll probably get the same level of service in China for 1/4 the price. The growth of consumption in China has been consistently greater than the growth of the economy as a whole for the past 10 years, and it'll likely happen in the foreseeable future as China's export shrink and infrastructure spending halts.
- rossdavidh 7y agoYes, all of that. In addition, there is a lot of Chinese money that is going abroad, to buy real estate in Vancouver and etc. If this were all brought home as domestic demand, they would have an even larger market to sell into domestically. But, this requires: 1) that it be spread out a little more evenly, and/or... 2) that the people with the money trust their future in China enough to bring it all home Neither of which is easy. On the other hand, neither is impossible, so it could happen.
- tabtab 7y agoRe: U.K. and the U.S. had periods of internal stress during that transition [loss of factories], and because they were democracies they could blow off steam with electoral "revolts" instead of the literal kind of revolt. Is Trump & Brexit the "steam" in this analogy? Just asking.
- rossdavidh 7y agoWhile they may be a form of letting off steam currently, I was referring to much earlier periods in the history of the U.S. and (even earlier) U.K., when they were going through the same transition as China today (of providing your own demand).