8 ms·

The risk here is that China will follow in the footsteps of Japan. Throughout the 70s and 80s it looked like Japan was the future. They made all the latest coo

by simonh 5y ago

The risk here is that China will follow in the footsteps of Japan. Throughout the 70s and 80s it looked like Japan was the future. They made all the latest cool gadgets, and were buying up forgegin assets. Cyberpunk novels were set in the high tech mega-hub of Chiba City, a district of Tokyo famous for it's gadget shops. The massive real estate collapse in the 90s ended all that, and when I visited Chiba around 2000 for work the bit I went to was a drab business park. Two decades later Japan is still mired in debt. Japanese nation debt is 234% of GDP. China's is 270% of GDP. The USA has 100% of GDP. As long as China's growth rate offers a chance of growing out of that debt hole all looks rosy. If growth slows significantly, or if debt keep pace with growth until that happens, they could find themselves in deep trouble for a very long time.

iamcurious 5y ago
What's the next China then?
- r4vik 5y ago
  Vietnam and Bangladesh
  - baybal2 5y ago
    Ravik, what do you think of Bangladesh vs. India business-wise?
  - Ajay-p 5y ago
    I think labor will move to wherever it is cheapest. If China continues with economic irregularities, then Vietnam, Bangladesh, and other SE Asian nations may see enormous investment. What IF manufacturing pivoted outside of China? What would that do to the global balance of power?
    - baybal2 5y ago
      There are more factors to it than just cost of labour. Skilled assembly line workforce now comes at CNY10000-CNY15000 per month, more than the labour cost in cheaper US states, not to say that employers in USA pay close to nothing besides the salary itself (social security, pension fund, other welfare payments are minimal) Yet, nobody runs to open factories in USA. Some Chinese companies tried, and everybody seen how it went. In short: biggest manufacturing MNCs want nothing, but very skilled, educated, and young workforce coming at near no cost, and they bet everything on an all in investment in the country where have it. Samsung chose Vietnam. Now it is 1/3 of Vietnam's GDP.
    - LurkingPenguin 5y ago
      Vietnam will continue to see investment and has a bright future, but when thinking about China, it's a mistake to place too much emphasis on labor cost. Yes, the cost of labor is important, but it's not the only factor. Just a few examples of why China will be tough to dethrone: - China has a much larger pool of labor. It has literally hundreds of millions of potential migrants who can move from rural areas to urban areas to work in factories. This is multiples of Vietnam's entire population. - Vietnam is not yet anywhere near competitive with China in terms of skilled labor. - It was comparatively easy for China to develop the Pearl River Delta, which was once primarily agricultural, and turn it into one of the world's most powerful industrial regions because it can produce food in other parts of the country. Vietnam, which is much smaller, doesn't have that luxury with the Mekong Delta. So there's a land limitation in Vietnam. - The supply chains in China are far more robust and often highly integrated. For example, it's common to find factories located in super close proximity to the suppliers of the raw inputs they need. Sometimes the manufacturers are vertically integrated or have overlapping ownership with suppliers. - Although Vietnam has invested heavily in improving its infrastructure, China is still many years ahead in terms of roads, rail, deep water ports, etc. - Foreign companies that manufacture in China have also invested in Chinese manufacturing because it helps them open the door to China's domestic consumer market. The Vietnamese domestic consumer market is much much smaller.
      - baybal2 5y ago
        > - China has a much larger pool of labor. It has literally hundreds of millions of potential migrants who can move from rural areas to urban areas to work in factories. This is multiples of Vietnam's entire population. Believe me, you don't want to hire the people left there in villages, even if they are young, and moderately educated. But in its majority, the labour that still drips from inland China is of lower quality kind. Anguished, tired, middle-aged men who didn't manage to move to the coastal cities during the heydays. > - It was comparatively easy for China to develop the Pearl River Delta, which was once primarily agricultural, and turn it into one of the world's most powerful industrial regions because it can produce food in other parts of the country. Vietnam, which is much smaller, doesn't have that luxury with the Mekong Delta. So there's a land limitation in Vietnam. Vietnam makes quite a lot of food, more than China by acreage by far. China is surprisingly agriculturally unproductive country. Take a look on Bangladesh, it has turned a food exporter, despite the truly microscopic size of arable land.
  - jhallenworld 5y ago
    For Vietnam there is the risk of the authoritarian single party rule. It works as long as the decisions are wise, but nothing can be done if they are not. I kind of think this is what's happening in China now.
    - p_j_w 5y ago
      >It works as long as the decisions are wise, but nothing can be done if they are not. Given how things are going here in the states, I'm not sure this is a problem limited to single party states.
  - nradov 5y ago
    If sea level rise predictions are accurate then much of Bangladesh is going to have frequent flooding problems. Can they engineer their way around the problem while still growing the rest of the economy?
    - r4vik 5y ago
      This might even be a good thing to force hyper urbanisation, can you imaging if the whole country is quickly forced to abandon rural living?
      - baybal2 5y ago
        Dhaka is to see 30M people by 2030, if not more. The pace of its growth is crazy.
- rocgf 5y ago
  Maybe India?
  - baybal2 5y ago
    Saying India... Have anybody here ever tried not operating, but just registering a company in India? If so, tell people here how many months it took... The biggest exhibit of what's wrong with India, is to compare it to Bangladesh. Despite stating of with pretty much nothing in 1971, 2 decades surviving off humanitarian aid, and effectively 2 more decades of civil war, BD has now higher GDP per capita than India, better projections for coming years, and beating India on many, many more economic stats. And Bangladesh is by no means an example of good governance, or brilliant leadership.
    - logicchains 5y ago
      > Saying India... Have anybody here ever tried not operating, but just registering a company in India? If so, tell people here how many months it took... Is it even harder than registering a company in China?
      - baybal2 5y ago
        It is
- mooreds 5y ago
  Mexico is my vote. Great demographics, great access to the USA market.
  - jhallenworld 5y ago
    I can attest that the people there are very hard working, I think most US citizens have no idea. At least this is true for people who are lucky enough to end up as professionals at the many factories that are there. Of course there are still many poor. One interesting theory I heard about the entire Latin world (explaining why it tends to be poor) is that the old Spanish empire was deliberately modeled to be an extension of aristocratic Roman empire. The problem that this causes is too much power in the hands of aristocrats, with not enough space left for risk-taking entrepreneurs. To the degree that this is true (I'm not sure..), longstanding contact with the US may moderate it in Mexico in particular. Here is a video about it: https://www.youtube.com/watch?v=efz4Aket2ao https://www.youtube.com/watch?v=efz4Aket2ao
    - lotsofpulp 5y ago
      That is impossible to believe considering you can go to almost every corner of the US and see Mexicans and other people of Hispanic or Latin American origin working in hard, manual labor roles.
    - beerandt 5y ago
      There's something to that, in that even among successful Mexican immigrants, there seems to be a (relative) lack of leveraging that success into establishing businesses, or other investments that require long-term commitment. Whether it's because of proximity, that so many come without family and/or plan on eventually returning home, or the related effect of so much of earnings getting sent back to Mexico every month, but there is definitely a cultural difference of some sort at play.
    - keyboardCowBoy 5y ago
      Maybe they are hard working as they have no choice. Majority of Mexicans work odd jobs. The auto factories there have huge training centers because of extremely high turn over.
- jillesvangurp 5y ago
  In terms of population growth, India and Nigeria are currently predicted to have the worlds largest population by the end of this century. Both China and India would shrink in population. China by quite a lot. https://www.weforum.org/agenda/2020/09/the-world-population-in-2100-by-country/ https://www.weforum.org/agenda/2020/09/the-world-population-...
  - jhallenworld 5y ago
    Also Kenya: it's all about Lagos vs. Nairobi.
- MangoCoffee 5y ago
  India: its huge young population however India needs a govrt like China to control and plan everything. India's govrt is its own worst problem.
aikinai 5y ago
Chiba is a rural/suburban prefecture neighboring Tokyo with a lot of rice farms, some beaches, and Tokyo Disneyland. I think you meant Akihabara, and yes it changed, but not into an office park. It went from hard electronics to video game shops and maid cafés.
- simonh 5y ago
  Yep, I'm just pointing out that the imagined future of a technologically advanced and ascendant Japan portrayed in Cyberpunk literature, and epitomised by William Gibson's vision of Chiba City in Neuromancer never happened. As a Gibson fan seeing the reality of Chiba and pondering Japan's failing fortunes at the time was sobering. I did visit Akihabara and it was a lot of fun browsing he gadget shops, but most of the actual devices were under powered little toys like tiny laptops running Windows CE.
  - aikinai 5y ago
    Oh, I see what you’re saying now. Not that the real Chiba was ever an electronics Mecca, but that it was in the book and reality never matched up. I guess in another timeline Chiba could have become Shenzhen. That would have been cool.
- psychlops 5y ago
  Had to google wtf 'maid cafe'...just when I thought Japan couldn't be any more weird.
fallingknife 5y ago
Your numbers are off. You are comparing China's total debt, public and private, to just the US federal government's debt. For total debt China and the US actually have very similar numbers. http://fingfx.thomsonreuters.com/gfx/rngs/CHINA-DEBT-HOUSEHOLD/010030H712Q/index.html http://fingfx.thomsonreuters.com/gfx/rngs/CHINA-DEBT-HOUSEHO...
- Ajay-p 5y ago
  Please, what this mean in simpler terms?
  - christophilus 5y ago
    No one knows, but I think it means we're going to see a massive deleveraging event in both China and the US. But maybe we can all keep kicking the can indefinitely. Who knows?
    - beerandt 5y ago
      If Chinese are looking for alternatives to collapsing domestic investment, I don't see how they do that at the scale they need to without leaning further into US bonds, whether directly or via Chinese government using it to back up domestic offerings.
      - tevon 5y ago
        Do you think this would put us (the US) in a stronger strategic position going forward? It seems like the music has to stop eventually for Chinese growth, especially since the differential between "real" GDP and reported GDP is likely larger than even this seems. If they lean into US bonds, wouldn't that weaken their strategic position? I'm not sure they'd be willing to do so.
  - topkai22 5y ago
    Public debt = all loans to the government of a country US Federal Debt = all loans to the US Federal Government (which excludes loans to state and local governments). Private Debt = all loans to non-governmental entities (individuals/businesses/corporations) in a country.
endisneigh 5y ago
What you're describing applies to any country, not just China, and not to mention your numbers are off anyways (see sibling comment). I don't know why people keep comparing China to Japan, the only real similarity is that they're both in east Asia. China has an order of magnitude more people, isn't a small island, has a larger military, different form of government, different economic system, etc. etc. Much of China's debt is in the form of housing and infrastructure - it's debt nonetheless, but is also an asset. Not all debt is strictly a "liability." Not to mention Chinese citizens save far more than American's, so a simple comparison of the total debt load isn't entirely fair to either nation. China's main issue is not making sure their (debt) investments are fueling more growth and not going into the ether, like other countries' debt. Of course, this challenge is hardly unique to China. Fortunately for them, they have a large domestic population to use to fuel growth. They'll just need to make sure they can properly incentivize more population growth to keep the positive feedback loop humming along.
- zepto 5y ago
  Empty and decaying real-estate is a liability, not an asset.
  - endisneigh 5y ago
    I disagree - tales of the decaying infrastructure in China is greatly exaggerated (though, like the USA there is decaying and unrenovated housing). The majority of China lives in rural areas, until this is no longer the case, urban housing will always be a large asset in China due to their attempts to urbanize the entire country.
    - zepto 5y ago
      There are 90 million currently empty homes in China.
      - endisneigh 5y ago
        So what? USA has more empty homes per capita (17 million for 330 million citizens, vs. 60 million in China for over 1.3 billion). If you compare it by density it looks even worse for the USA. In any case, it's not really a useful, or meaningful metric anyway. https://www.abc.net.au/news/2021-09-21/china-property-bust-evergrande/100472190 https://www.abc.net.au/news/2021-09-21/china-property-bust-e... https://data.census.gov/cedsci/table?t=Vacancy&d=ACS%201-Year%20Estimates%20Detailed%20Tables&tid=ACSDT1Y2019.B25002 https://data.census.gov/cedsci/table?t=Vacancy&d=ACS%201-Yea...
modo_mario 5y ago
Japanese economy was getting too big for the US's tastes. The housing crisis and stagnation followed a tradewar after which the US forced it to do technology transfers, limit exports to the US, take a minimum amount of american imports in industries, etc and forced it to pick up a shitty monetary policy. The thing is. Japan kind of had to roll with it. Exporting to the USSR was a nono, other markets like china were not nearly as developed yet and western Europe being another export market was joining the US in it's efforts. Additionally they weren't allowed a standing army but did have the US military around. China has less of those restrictions.
- SkyMarshal 5y ago
  > and forced it to pick up a shitty monetary policy. I think this was the real killer. There’s a bestselling book on that in Japan, Princes of the Yen (and documentary on YouTube).
  - jerf 5y ago
    I'm kinda watching China now for this. If they take a hit to their numbers, but use this as an opportunity to cut the deadwood and zombie companies, then they are going to be outshining the rest of the world in relatively short order, because nobody else in the world is willing to take the pain in the short term for the long-term advantage of forcing their economy to be productive. If they, like everyone else in the world, paper over the problem, bail out their financial industry, and kick the can down the road, well, they may still become #1 but it will be much less threatening to anyone else, and it will be much less certain, and depending on how deep they go, yeah, seeing the sort of stagnation Japan did is on the table. Which way will they go? I have no idea. They seem to lie as big as any other country in the world about their economic progress, which would suggest covering over the problems and propping up zombies just like the West is doing. But they might have leadership that can see the advantages in the long term of letting the economy actually experience the pain it needs to align itself properly. Eventually you end up in a place like we are in America, where we've kicked the can down the road so many times that the requisite short-term pain to fix the economy would be almost terminal, if not outright terminal.
scotuswroteus 5y ago
>buying up forgegin assets Freudian typo
anovikov 5y ago
Because China is not a democracy and probably it's size and culture all but prevents effective democratic transition (they are wise to not start it, do it and what happened in Russia will look like a joke), it's bound to get stuck rather quickly. Are there any rich non-democratic countries, apart from petrostates, out there anyway? They will have to either reform (and go bust), or resort to becoming a hermit state, before they reach East European level. And due to the size of their debt, getting stuck means going bust - in their case, just quitting capitalism, calling it a mistake and returning to the good old days.
- hnfong 5y ago
  At the height of its influence, the British Empire was not meaningfully democratic in the modern sense. Sure, England was democratic (kind of), but all their colonies were just authoritarian governments.
  - anovikov 5y ago
    What matters is the absolute GDP level. As soon as you go post-industrial (demand for manufactured goods tapers off because there are enough of them for everyone), authoritarianism works worse and worse.
mlinksva 5y ago
This does not seem like much of a risk. Japan remains wealthy, innovative, and peaceful. If China has these attributes in the future, but is "mired" in debt and slow growth, while the most dynamic catch up growth and attendant industry focus bazaars have moved elsewhere, that's a big win for China and the world.
- bserge 5y ago
  You're right imo. The UK seems to have went through something similar. The thing is, the factories, farms, power plants, equipment, knowhow don't go away. If you have the people and can feed them, a developed country will do fine even if it defaults on its debts and the world hates them. Contrast that with more conservative/isolationist countries that took the dumb advice not to take debt and build fast - they'll be stuck being poor or at best mediocre for a long time. That's much of Eastern Europe imo.
  - rm_-rf_slash 5y ago
    The factories and equipment absolutely went away in the UK. Torn down for imaginary stock market money that vanished in a few years anyway. Can thank the likes of Jim Slater[1] for that. [1] https://en.m.wikipedia.org/wiki/Jim_Slater_(accountant) https://en.m.wikipedia.org/wiki/Jim_Slater_(accountant)
user-the-name 5y ago
> Cyberpunk novels were set in the high tech Chiba City, a district of Tokyo famous for it's gadget shops Neuromancer is the only novel set in Chiba. Chiba is not famous for any gadget shops, it's an industrial and port town, which is most likely why it's the setting of the opening of Neuromancer - the protagonist is an outsider, down on his luck, living in a pretty shitty place.
taneq 5y ago
> The massive real estate collapse in the 90s ended all that, and when I visited Chiba around 2000 for work the bit I went to was a drab business park. I went to the famed Akihabra back in 2012. I'd been expecting, I guess, some super high tech futuristic place. Instead I wandered through rows and rows of street vendors selling what looked like bits of 1980s arcade games.
bazooka_penguin 5y ago
Japan also had to sign the Plaza Accord which inflated the yen against the dollar. Pretty sure china is continuing to do the opposite and shows no signs of stopping.

by simonh 5y ago

iamcurious 5y ago

What's the next China then?

r4vik 5y ago
Vietnam and Bangladesh
- baybal2 5y ago
  Ravik, what do you think of Bangladesh vs. India business-wise?
- Ajay-p 5y ago
  I think labor will move to wherever it is cheapest. If China continues with economic irregularities, then Vietnam, Bangladesh, and other SE Asian nations may see enormous investment. What IF manufacturing pivoted outside of China? What would that do to the global balance of power?
  - baybal2 5y ago
    There are more factors to it than just cost of labour. Skilled assembly line workforce now comes at CNY10000-CNY15000 per month, more than the labour cost in cheaper US states, not to say that employers in USA pay close to nothing besides the salary itself (social security, pension fund, other welfare payments are minimal) Yet, nobody runs to open factories in USA. Some Chinese companies tried, and everybody seen how it went. In short: biggest manufacturing MNCs want nothing, but very skilled, educated, and young workforce coming at near no cost, and they bet everything on an all in investment in the country where have it. Samsung chose Vietnam. Now it is 1/3 of Vietnam's GDP.
  - LurkingPenguin 5y ago
    Vietnam will continue to see investment and has a bright future, but when thinking about China, it's a mistake to place too much emphasis on labor cost. Yes, the cost of labor is important, but it's not the only factor. Just a few examples of why China will be tough to dethrone: - China has a much larger pool of labor. It has literally hundreds of millions of potential migrants who can move from rural areas to urban areas to work in factories. This is multiples of Vietnam's entire population. - Vietnam is not yet anywhere near competitive with China in terms of skilled labor. - It was comparatively easy for China to develop the Pearl River Delta, which was once primarily agricultural, and turn it into one of the world's most powerful industrial regions because it can produce food in other parts of the country. Vietnam, which is much smaller, doesn't have that luxury with the Mekong Delta. So there's a land limitation in Vietnam. - The supply chains in China are far more robust and often highly integrated. For example, it's common to find factories located in super close proximity to the suppliers of the raw inputs they need. Sometimes the manufacturers are vertically integrated or have overlapping ownership with suppliers. - Although Vietnam has invested heavily in improving its infrastructure, China is still many years ahead in terms of roads, rail, deep water ports, etc. - Foreign companies that manufacture in China have also invested in Chinese manufacturing because it helps them open the door to China's domestic consumer market. The Vietnamese domestic consumer market is much much smaller.
    - baybal2 5y ago
      > - China has a much larger pool of labor. It has literally hundreds of millions of potential migrants who can move from rural areas to urban areas to work in factories. This is multiples of Vietnam's entire population. Believe me, you don't want to hire the people left there in villages, even if they are young, and moderately educated. But in its majority, the labour that still drips from inland China is of lower quality kind. Anguished, tired, middle-aged men who didn't manage to move to the coastal cities during the heydays. > - It was comparatively easy for China to develop the Pearl River Delta, which was once primarily agricultural, and turn it into one of the world's most powerful industrial regions because it can produce food in other parts of the country. Vietnam, which is much smaller, doesn't have that luxury with the Mekong Delta. So there's a land limitation in Vietnam. Vietnam makes quite a lot of food, more than China by acreage by far. China is surprisingly agriculturally unproductive country. Take a look on Bangladesh, it has turned a food exporter, despite the truly microscopic size of arable land.
- jhallenworld 5y ago
  For Vietnam there is the risk of the authoritarian single party rule. It works as long as the decisions are wise, but nothing can be done if they are not. I kind of think this is what's happening in China now.
  - p_j_w 5y ago
    >It works as long as the decisions are wise, but nothing can be done if they are not. Given how things are going here in the states, I'm not sure this is a problem limited to single party states.
- nradov 5y ago
  If sea level rise predictions are accurate then much of Bangladesh is going to have frequent flooding problems. Can they engineer their way around the problem while still growing the rest of the economy?
  - r4vik 5y ago
    This might even be a good thing to force hyper urbanisation, can you imaging if the whole country is quickly forced to abandon rural living?
    - baybal2 5y ago
      Dhaka is to see 30M people by 2030, if not more. The pace of its growth is crazy.
rocgf 5y ago
Maybe India?
- baybal2 5y ago
  Saying India... Have anybody here ever tried not operating, but just registering a company in India? If so, tell people here how many months it took... The biggest exhibit of what's wrong with India, is to compare it to Bangladesh. Despite stating of with pretty much nothing in 1971, 2 decades surviving off humanitarian aid, and effectively 2 more decades of civil war, BD has now higher GDP per capita than India, better projections for coming years, and beating India on many, many more economic stats. And Bangladesh is by no means an example of good governance, or brilliant leadership.
  - logicchains 5y ago
    > Saying India... Have anybody here ever tried not operating, but just registering a company in India? If so, tell people here how many months it took... Is it even harder than registering a company in China?
    - baybal2 5y ago
      It is
mooreds 5y ago
Mexico is my vote. Great demographics, great access to the USA market.
- jhallenworld 5y ago
  I can attest that the people there are very hard working, I think most US citizens have no idea. At least this is true for people who are lucky enough to end up as professionals at the many factories that are there. Of course there are still many poor. One interesting theory I heard about the entire Latin world (explaining why it tends to be poor) is that the old Spanish empire was deliberately modeled to be an extension of aristocratic Roman empire. The problem that this causes is too much power in the hands of aristocrats, with not enough space left for risk-taking entrepreneurs. To the degree that this is true (I'm not sure..), longstanding contact with the US may moderate it in Mexico in particular. Here is a video about it: https://www.youtube.com/watch?v=efz4Aket2ao https://www.youtube.com/watch?v=efz4Aket2ao
  - lotsofpulp 5y ago
    That is impossible to believe considering you can go to almost every corner of the US and see Mexicans and other people of Hispanic or Latin American origin working in hard, manual labor roles.
  - beerandt 5y ago
    There's something to that, in that even among successful Mexican immigrants, there seems to be a (relative) lack of leveraging that success into establishing businesses, or other investments that require long-term commitment. Whether it's because of proximity, that so many come without family and/or plan on eventually returning home, or the related effect of so much of earnings getting sent back to Mexico every month, but there is definitely a cultural difference of some sort at play.
  - keyboardCowBoy 5y ago
    Maybe they are hard working as they have no choice. Majority of Mexicans work odd jobs. The auto factories there have huge training centers because of extremely high turn over.
jillesvangurp 5y ago
In terms of population growth, India and Nigeria are currently predicted to have the worlds largest population by the end of this century. Both China and India would shrink in population. China by quite a lot. https://www.weforum.org/agenda/2020/09/the-world-population-in-2100-by-country/ https://www.weforum.org/agenda/2020/09/the-world-population-...
- jhallenworld 5y ago
  Also Kenya: it's all about Lagos vs. Nairobi.
MangoCoffee 5y ago
India: its huge young population however India needs a govrt like China to control and plan everything. India's govrt is its own worst problem.

aikinai 5y ago

Chiba is a rural/suburban prefecture neighboring Tokyo with a lot of rice farms, some beaches, and Tokyo Disneyland. I think you meant Akihabara, and yes it changed, but not into an office park. It went from hard electronics to video game shops and maid cafés.

simonh 5y ago
Yep, I'm just pointing out that the imagined future of a technologically advanced and ascendant Japan portrayed in Cyberpunk literature, and epitomised by William Gibson's vision of Chiba City in Neuromancer never happened. As a Gibson fan seeing the reality of Chiba and pondering Japan's failing fortunes at the time was sobering. I did visit Akihabara and it was a lot of fun browsing he gadget shops, but most of the actual devices were under powered little toys like tiny laptops running Windows CE.
- aikinai 5y ago
  Oh, I see what you’re saying now. Not that the real Chiba was ever an electronics Mecca, but that it was in the book and reality never matched up. I guess in another timeline Chiba could have become Shenzhen. That would have been cool.
psychlops 5y ago
Had to google wtf 'maid cafe'...just when I thought Japan couldn't be any more weird.

fallingknife 5y ago

Your numbers are off. You are comparing China's total debt, public and private, to just the US federal government's debt. For total debt China and the US actually have very similar numbers. http://fingfx.thomsonreuters.com/gfx/rngs/CHINA-DEBT-HOUSEHOLD/010030H712Q/index.html http://fingfx.thomsonreuters.com/gfx/rngs/CHINA-DEBT-HOUSEHO...

Ajay-p 5y ago
Please, what this mean in simpler terms?
- christophilus 5y ago
  No one knows, but I think it means we're going to see a massive deleveraging event in both China and the US. But maybe we can all keep kicking the can indefinitely. Who knows?
  - beerandt 5y ago
    If Chinese are looking for alternatives to collapsing domestic investment, I don't see how they do that at the scale they need to without leaning further into US bonds, whether directly or via Chinese government using it to back up domestic offerings.
    - tevon 5y ago
      Do you think this would put us (the US) in a stronger strategic position going forward? It seems like the music has to stop eventually for Chinese growth, especially since the differential between "real" GDP and reported GDP is likely larger than even this seems. If they lean into US bonds, wouldn't that weaken their strategic position? I'm not sure they'd be willing to do so.
- topkai22 5y ago
  Public debt = all loans to the government of a country US Federal Debt = all loans to the US Federal Government (which excludes loans to state and local governments). Private Debt = all loans to non-governmental entities (individuals/businesses/corporations) in a country.

endisneigh 5y ago

What you're describing applies to any country, not just China, and not to mention your numbers are off anyways (see sibling comment). I don't know why people keep comparing China to Japan, the only real similarity is that they're both in east Asia. China has an order of magnitude more people, isn't a small island, has a larger military, different form of government, different economic system, etc. etc. Much of China's debt is in the form of housing and infrastructure - it's debt nonetheless, but is also an asset. Not all debt is strictly a "liability." Not to mention Chinese citizens save far more than American's, so a simple comparison of the total debt load isn't entirely fair to either nation. China's main issue is not making sure their (debt) investments are fueling more growth and not going into the ether, like other countries' debt. Of course, this challenge is hardly unique to China. Fortunately for them, they have a large domestic population to use to fuel growth. They'll just need to make sure they can properly incentivize more population growth to keep the positive feedback loop humming along.

zepto 5y ago
Empty and decaying real-estate is a liability, not an asset.
- endisneigh 5y ago
  I disagree - tales of the decaying infrastructure in China is greatly exaggerated (though, like the USA there is decaying and unrenovated housing). The majority of China lives in rural areas, until this is no longer the case, urban housing will always be a large asset in China due to their attempts to urbanize the entire country.
  - zepto 5y ago
    There are 90 million currently empty homes in China.
    - endisneigh 5y ago
      So what? USA has more empty homes per capita (17 million for 330 million citizens, vs. 60 million in China for over 1.3 billion). If you compare it by density it looks even worse for the USA. In any case, it's not really a useful, or meaningful metric anyway. https://www.abc.net.au/news/2021-09-21/china-property-bust-evergrande/100472190 https://www.abc.net.au/news/2021-09-21/china-property-bust-e... https://data.census.gov/cedsci/table?t=Vacancy&d=ACS%201-Year%20Estimates%20Detailed%20Tables&tid=ACSDT1Y2019.B25002 https://data.census.gov/cedsci/table?t=Vacancy&d=ACS%201-Yea...

modo_mario 5y ago

Japanese economy was getting too big for the US's tastes. The housing crisis and stagnation followed a tradewar after which the US forced it to do technology transfers, limit exports to the US, take a minimum amount of american imports in industries, etc and forced it to pick up a shitty monetary policy. The thing is. Japan kind of had to roll with it. Exporting to the USSR was a nono, other markets like china were not nearly as developed yet and western Europe being another export market was joining the US in it's efforts. Additionally they weren't allowed a standing army but did have the US military around. China has less of those restrictions.

SkyMarshal 5y ago
> and forced it to pick up a shitty monetary policy. I think this was the real killer. There’s a bestselling book on that in Japan, Princes of the Yen (and documentary on YouTube).
- jerf 5y ago
  I'm kinda watching China now for this. If they take a hit to their numbers, but use this as an opportunity to cut the deadwood and zombie companies, then they are going to be outshining the rest of the world in relatively short order, because nobody else in the world is willing to take the pain in the short term for the long-term advantage of forcing their economy to be productive. If they, like everyone else in the world, paper over the problem, bail out their financial industry, and kick the can down the road, well, they may still become #1 but it will be much less threatening to anyone else, and it will be much less certain, and depending on how deep they go, yeah, seeing the sort of stagnation Japan did is on the table. Which way will they go? I have no idea. They seem to lie as big as any other country in the world about their economic progress, which would suggest covering over the problems and propping up zombies just like the West is doing. But they might have leadership that can see the advantages in the long term of letting the economy actually experience the pain it needs to align itself properly. Eventually you end up in a place like we are in America, where we've kicked the can down the road so many times that the requisite short-term pain to fix the economy would be almost terminal, if not outright terminal.

scotuswroteus 5y ago

>buying up forgegin assets Freudian typo

anovikov 5y ago

Because China is not a democracy and probably it's size and culture all but prevents effective democratic transition (they are wise to not start it, do it and what happened in Russia will look like a joke), it's bound to get stuck rather quickly. Are there any rich non-democratic countries, apart from petrostates, out there anyway? They will have to either reform (and go bust), or resort to becoming a hermit state, before they reach East European level. And due to the size of their debt, getting stuck means going bust - in their case, just quitting capitalism, calling it a mistake and returning to the good old days.

hnfong 5y ago
At the height of its influence, the British Empire was not meaningfully democratic in the modern sense. Sure, England was democratic (kind of), but all their colonies were just authoritarian governments.
- anovikov 5y ago
  What matters is the absolute GDP level. As soon as you go post-industrial (demand for manufactured goods tapers off because there are enough of them for everyone), authoritarianism works worse and worse.

mlinksva 5y ago

This does not seem like much of a risk. Japan remains wealthy, innovative, and peaceful. If China has these attributes in the future, but is "mired" in debt and slow growth, while the most dynamic catch up growth and attendant industry focus bazaars have moved elsewhere, that's a big win for China and the world.

bserge 5y ago
You're right imo. The UK seems to have went through something similar. The thing is, the factories, farms, power plants, equipment, knowhow don't go away. If you have the people and can feed them, a developed country will do fine even if it defaults on its debts and the world hates them. Contrast that with more conservative/isolationist countries that took the dumb advice not to take debt and build fast - they'll be stuck being poor or at best mediocre for a long time. That's much of Eastern Europe imo.
- rm_-rf_slash 5y ago
  The factories and equipment absolutely went away in the UK. Torn down for imaginary stock market money that vanished in a few years anyway. Can thank the likes of Jim Slater[1] for that. [1] https://en.m.wikipedia.org/wiki/Jim_Slater_(accountant) https://en.m.wikipedia.org/wiki/Jim_Slater_(accountant)

user-the-name 5y ago

> Cyberpunk novels were set in the high tech Chiba City, a district of Tokyo famous for it's gadget shops Neuromancer is the only novel set in Chiba. Chiba is not famous for any gadget shops, it's an industrial and port town, which is most likely why it's the setting of the opening of Neuromancer - the protagonist is an outsider, down on his luck, living in a pretty shitty place.

taneq 5y ago

> The massive real estate collapse in the 90s ended all that, and when I visited Chiba around 2000 for work the bit I went to was a drab business park. I went to the famed Akihabra back in 2012. I'd been expecting, I guess, some super high tech futuristic place. Instead I wandered through rows and rows of street vendors selling what looked like bits of 1980s arcade games.

bazooka_penguin 5y ago

Japan also had to sign the Plaza Accord which inflated the yen against the dollar. Pretty sure china is continuing to do the opposite and shows no signs of stopping.