4 ms·

> to drive all of their money towards reinvestment Can you be specific about how this is done?

steveBK123 3y ago
Being a hybrid planned/market economy, CCP still has much of a say in what businesses prosper & which do not. China has very little in the way of a consumer sector, quite the opposite of the US consumerism. This means there's very little for consumers to spend their money on versus a US consumer. China's savings rate as a result of these pressures hovers around 50%, compared to the low 4% in US / 10% in UK / 20% in Germany & Northern EU countries. Saving such a high % of income means more money is available in the banking system to be lent out to businesses for investment. So China has an export driven market in which they sell goods to the world, and then re-invest it to build more capacity to build more exports to..
- caskstrength 3y ago
  > China has very little in the way of a consumer sector, quite the opposite of the US consumerism. This means there's very little for consumers to spend their money on versus a US consumer. FWIW Chinese middle class tend to gobble up ridiculous amount of foreign overpriced luxury crap instead, starting from designer clothes and ending up with several thousands of dollars worth bottles of whisky (that I bet absolute majority of the buyers couldn't distinguish from random Johnnie Walker in blind testing). High saving rates must be cultural and not just a result of not having the ability to spend the money.
  - zdragnar 3y ago
    > High saving rates must be cultural and not just a result of not having the ability to spend the money. You can see this too in the generation that lived through the Great Depression, and some carry-over into the next one. OTOH those who grew up in boom times tend to take on unhealthy amounts of debt (esp credit card, for weddings and vacations, and fancy cars) and have to struggle to learn to live within their means. China has had a lot of rough times to until relatively very recently, and much of the country hasn't shared in a lot of the economic growth.
- sooheon 3y ago
  Isn't this a false dichotomy? The inverse -- high spending and low savings -- still leads to reinvestment. From business POV whether they get funds via loans or via revenue the money they have to invest in growth is the same.
  - steveBK123 3y ago
    In China you have a lot of SOA (State Owned Enterprises) and entire sectors loosely under the CCP thumb. So 50% of income going back into banks which then direct capital as the CCP sees fit.. more export oriented growth. This is very different than the US model. In the US ~95% of income goes into spending which flows into private enterprises which make operational cost, capital cost, and saving decisions on their own. The US model is more decentralized. We have to create incentives and schemes like IRA and Opportunity Zones to get private individuals and companies to deploy capital where the government prefers, and even then it only works on the margins.
- berserk1010 3y ago
  The Chinese savings rate is a bit of a mirage, since there are a couple of things happening * Chinese banks are swallowing many Chinese citizens' deposits in the bank, without recourse and explanation. There are protests of course, and of course those are squashed. There's even a story of a public listed company's assets in the bank being swallowed without recourse, and the company had to shut down * The banking system aren't able to lend the deposits out, because the Chinese government has asked them to take over real estate companies and local government debts. Also, there is very little consumer spending, and the state enterprises don't like competitions, so very little investment is given to private enterprises these days * Increasing bankruptcies. 8.5M in 2023, up from 5M in 2020. https://www.asiafinancial.com/record-number-of-chinese-blacklisted-for-debt-defaults https://www.asiafinancial.com/record-number-of-chinese-black...
- coryfklein 3y ago
  > This means there's very little for consumers to spend their money on versus a US consumer. How does this line up American consumers spending a large percentage of their money on products built in... China? Surely the Chinese products available to Americans are also available to the Chinese? I have to imagine they are orders of magnitude cheaper in China too given the drastically lower cost of shipping and warehousing.
  - nradov 3y ago
    Shipping and warehousing only accounts for a tiny fraction of the cost of most consumer products. It's hardly an order of magnitude difference. Chinese consumers can buy pretty much the same products as Americans (with a few limited exceptions such as weapons and narcotics). But they tend to save more on a percentage basis. Some of this is cultural. But mostly it's a practical reaction to a lack of a social safety net. Even though China is nominally communist, as a practical matter most consumers have to pay out of pocket for healthcare and retirement hence they save for those things. They also save to purchase residential real estate since it is seen as the only safe store of value and owning a home is somewhat necessary for marriage (at least for men).
    - steveBK123 3y ago
      Lenin "He who does not work shall not eat"
      - tretiy3 3y ago
        it was not Lenin though https://en.wikipedia.org/wiki/He_who_does_not_work,_neither_shall_he_eat https://en.wikipedia.org/wiki/He_who_does_not_work,_neither_...

Being a hybrid planned/market economy, CCP still has much of a say in what businesses prosper & which do not. China has very little in the way of a consumer sector, quite the opposite of the US consumerism. This means there's very little for consumers to spend their money on versus a US consumer. China's savings rate as a result of these pressures hovers around 50%, compared to the low 4% in US / 10% in UK / 20% in Germany & Northern EU countries. Saving such a high % of income means more money is available in the banking system to be lent out to businesses for investment. So China has an export driven market in which they sell goods to the world, and then re-invest it to build more capacity to build more exports to..

caskstrength 3y ago
> China has very little in the way of a consumer sector, quite the opposite of the US consumerism. This means there's very little for consumers to spend their money on versus a US consumer. FWIW Chinese middle class tend to gobble up ridiculous amount of foreign overpriced luxury crap instead, starting from designer clothes and ending up with several thousands of dollars worth bottles of whisky (that I bet absolute majority of the buyers couldn't distinguish from random Johnnie Walker in blind testing). High saving rates must be cultural and not just a result of not having the ability to spend the money.
- zdragnar 3y ago
  > High saving rates must be cultural and not just a result of not having the ability to spend the money. You can see this too in the generation that lived through the Great Depression, and some carry-over into the next one. OTOH those who grew up in boom times tend to take on unhealthy amounts of debt (esp credit card, for weddings and vacations, and fancy cars) and have to struggle to learn to live within their means. China has had a lot of rough times to until relatively very recently, and much of the country hasn't shared in a lot of the economic growth.
sooheon 3y ago
Isn't this a false dichotomy? The inverse -- high spending and low savings -- still leads to reinvestment. From business POV whether they get funds via loans or via revenue the money they have to invest in growth is the same.
- steveBK123 3y ago
  In China you have a lot of SOA (State Owned Enterprises) and entire sectors loosely under the CCP thumb. So 50% of income going back into banks which then direct capital as the CCP sees fit.. more export oriented growth. This is very different than the US model. In the US ~95% of income goes into spending which flows into private enterprises which make operational cost, capital cost, and saving decisions on their own. The US model is more decentralized. We have to create incentives and schemes like IRA and Opportunity Zones to get private individuals and companies to deploy capital where the government prefers, and even then it only works on the margins.
berserk1010 3y ago
The Chinese savings rate is a bit of a mirage, since there are a couple of things happening * Chinese banks are swallowing many Chinese citizens' deposits in the bank, without recourse and explanation. There are protests of course, and of course those are squashed. There's even a story of a public listed company's assets in the bank being swallowed without recourse, and the company had to shut down * The banking system aren't able to lend the deposits out, because the Chinese government has asked them to take over real estate companies and local government debts. Also, there is very little consumer spending, and the state enterprises don't like competitions, so very little investment is given to private enterprises these days * Increasing bankruptcies. 8.5M in 2023, up from 5M in 2020. https://www.asiafinancial.com/record-number-of-chinese-blacklisted-for-debt-defaults https://www.asiafinancial.com/record-number-of-chinese-black...
coryfklein 3y ago
> This means there's very little for consumers to spend their money on versus a US consumer. How does this line up American consumers spending a large percentage of their money on products built in... China? Surely the Chinese products available to Americans are also available to the Chinese? I have to imagine they are orders of magnitude cheaper in China too given the drastically lower cost of shipping and warehousing.
- nradov 3y ago
  Shipping and warehousing only accounts for a tiny fraction of the cost of most consumer products. It's hardly an order of magnitude difference. Chinese consumers can buy pretty much the same products as Americans (with a few limited exceptions such as weapons and narcotics). But they tend to save more on a percentage basis. Some of this is cultural. But mostly it's a practical reaction to a lack of a social safety net. Even though China is nominally communist, as a practical matter most consumers have to pay out of pocket for healthcare and retirement hence they save for those things. They also save to purchase residential real estate since it is seen as the only safe store of value and owning a home is somewhat necessary for marriage (at least for men).
  - steveBK123 3y ago
    Lenin "He who does not work shall not eat"
    - tretiy3 3y ago
      it was not Lenin though https://en.wikipedia.org/wiki/He_who_does_not_work,_neither_shall_he_eat https://en.wikipedia.org/wiki/He_who_does_not_work,_neither_...