4 ms·

> Analysts have highlighted the steep plunge in private sector investment, for instance, which barely grew in the January to September period compared to a year

> Analysts have highlighted the steep plunge in private sector investment, for instance, which barely grew in the January to September period compared to a year ago, versus 12.3% growth over the first half of this year. My understanding is that China's meteoric rise in places like Shenzhen has caused local wages to increase and the city to become more expensive to live and do business in, thus giving manufacturing an incentive to seek less expensive areas, like Vietnam, in which the sector is rapidly growing.

baybal2 7y ago
At least a part of the saga of rising salaries without rising productivity is due to China being very lax on interest rates and Xi's government genuinely believing in that being a recipe for growth. Xi himself is said to be very emboldened by what he sees as success of his previous attempts of running the economy by throwing money on SOEs, and he uses that to parry any attempt of central committee to reason with him. There is a well known video going around of the plenum session opening, where Xi basically says "bigger, better resourced state enterprises," and Li says "smaller, and nimbler ones" right after him. Xi ignores that China saw its fastest growth at the time of Chinese rates being rather high. Low rates demoralise the entrepreneurial community. Too many business owners exit because they can go to higher rate countries for rentier lifestyle. Too many business owners think it makes no sense to compete with people who can get billions at 1% interest and throw that to bruteforce their market position. More so, this makes it really appealing for gambling minded, and well connected individuals to take state money, and gamble them on speculations, becoming instant billionaires.
- seanmcdirmid 7y ago
  This sums up china’s problem quite nicely. A good correction/recession would be very useful to being things back down to reality, but the party might be too brittle to weather it very well, especially since the cab has been kicked down the road for so long. The USA and by extension the rest of the world is playing a similarly dangerous game with low interest rates, though in this case connections aren’t as required. The next downturn could make 2008 look mild when it all unravels.

baybal2 7y ago

At least a part of the saga of rising salaries without rising productivity is due to China being very lax on interest rates and Xi's government genuinely believing in that being a recipe for growth. Xi himself is said to be very emboldened by what he sees as success of his previous attempts of running the economy by throwing money on SOEs, and he uses that to parry any attempt of central committee to reason with him. There is a well known video going around of the plenum session opening, where Xi basically says "bigger, better resourced state enterprises," and Li says "smaller, and nimbler ones" right after him. Xi ignores that China saw its fastest growth at the time of Chinese rates being rather high. Low rates demoralise the entrepreneurial community. Too many business owners exit because they can go to higher rate countries for rentier lifestyle. Too many business owners think it makes no sense to compete with people who can get billions at 1% interest and throw that to bruteforce their market position. More so, this makes it really appealing for gambling minded, and well connected individuals to take state money, and gamble them on speculations, becoming instant billionaires.

seanmcdirmid 7y ago
This sums up china’s problem quite nicely. A good correction/recession would be very useful to being things back down to reality, but the party might be too brittle to weather it very well, especially since the cab has been kicked down the road for so long. The USA and by extension the rest of the world is playing a similarly dangerous game with low interest rates, though in this case connections aren’t as required. The next downturn could make 2008 look mild when it all unravels.