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Isn't that just Chinese policy cancelling out American policy. China prevented sanctions from killing Huawei by subsidizing them. But often those kinds of subsi

Isn't that just Chinese policy cancelling out American policy. China prevented sanctions from killing Huawei by subsidizing them. But often those kinds of subsidies make companies weaker and less competitive in the long run. There are plenty of examples of that in the US. So if Huawei did get stronger and more resilient that is noteworthy. But it's probably too early too tell.

alephnerd 2y ago
> Isn't that just Chinese policy cancelling out American policy Pretty much. And that's the point from the US side (http://industrialpolicy.us/resources/SpecificIndustries/IT/final-memo-china-strategy-group-axios-1.pdf http://industrialpolicy.us/resources/SpecificIndustries/IT/f...) The whole idea of the Sullivan Principle is to force Chinese players to spend more and more money but remaining the same distance apart (2 gen) [0]. The idea is Chinese players keep burning money building capacity, yet lagging behind relatively speaking, and that money could have been used for better applications by China. Already China's GDP per Capita has remained stagnant since COVID began [1] and those tens of billions spent on building capacity could have been better applied building a more robust domestic economy, yet median per capita household incomes are stuck at around $4.6k/yr with a massive urban-rural gap (approx $7k urban, $2.9k rural) [2]. Without a robust domestic economy, and increased limits on export markets, this only leads to overproduction and deflation. Edit: can't reply, so replying in here. Const 2015 dollars is still an approximation of production, and even then absolute household disposable income is low. It doesn't matter what GDP per Capita you have if the delta between that and median household income remains so large. All this implies is that the majority of revenue from production is captured by a minority. This is extremely rickety, and leads to long term economic malaise. And it's not like you are paying in 2015 dollars in 2024 - absolute cost of inputs still change, and these kinds of transformations don't mean much when looked at holistically with other metrics like median household disposable income and nominal GDP per Capita. Reply 2: Yet 50% of Chinese households still have a disposable income of well below $5k/yr. You can argue PPP all you want (it isn't even the correct application when discussing median incomes) yet inputs and all trade abroad continues to be executed at nominal rates. Only 13% of per capita household income per quarter is spent on transportation and telecom (ie. ~$50/mo per Chinese household), and much of that is spent on existing products not new products. Sure you have overproduction today, but what about 5 years from now? With absolute growth decreasing how are median household incomes expected to increase? And even the Chinese government has a finite amount of money - and instead of giving it to consumers to allow them to build a domestic economy it's only going to a handful of businesses that themselves are heavily automated and gatekept due to skilling requirements [0] - https://www.belfercenter.org/event/competition-without-catastrophe-how-america-can-both-challenge-and-coexist-china-belfer https://www.belfercenter.org/event/competition-without-catas... [1] - https://data.worldbank.org/indicator/NY.GDP.PCAP.CD?locations=CN https://data.worldbank.org/indicator/NY.GDP.PCAP.CD?location... [2] - https://www.stats.gov.cn/english/PressRelease/202402/t20240201_1947120.html https://www.stats.gov.cn/english/PressRelease/202402/t202402...
- addicted 2y ago
  Yup. And although Chinese exports have rebounded in a big way, China’s economy has remained extremely weak. Because China has lost the massive buffer that the rest of The world was giving it by investing in it for free, transferring technology to China for free, building its industries for it for free, and in return being kicked out the moment the Chinese did not need them anymore.
  - riehwvfbk 2y ago
    Those investments were more than paid for with cheap Chinese labor. Which is why these companies moved manufacturing there in the first place. Now China doesn't need the buffer anymore. In fact, it's ahead in many areas, electric cars for example. Smart.
    - alephnerd 2y ago
      Yet the median Chinese household cannot afford those EVs, because median household income has stagnated at around 33k Yuan/$4.5k for years now. If you're overproducing yet there is limited ability for domestic consumers to put these products, this means you are dependent on foreign trade partners. Yet even these trade partners are forcing Chinese players to manufacture in those markets or face high tariffs and revocation of MFN guaruntees.
      - riehwvfbk 2y ago
        The median American can't afford to pay for a new car outright either. And they've got loans in China too.
        alephnerd 2y ago
        Absolutely, yet absolute consumption remains low [0]. The kind of consumption on high tech gizmos is barely 13% of per capita household consumption (so median is much lower). There just isn't enough spend on a quarterly basis to subsidize industries like EVs, Chips, etc industry without export - and most markets are only increasing the barrier of entry, or requiring domestic JVs. Every EV, PV, Construction, etc JV that a Chinese manufacturer creates in countries like Mexico, Brazil, Indonesia, India, etc is an equivalent amount of jobs and domestic investment lost. What's the point of being ahead if you're spending tens of billions yet most domestic consumers cannot afford them. This only kills domestic capacity long term (and is what Zhou Qiren has argued for years and why he was so prominent at the third plenum). Edit: cannot reply below so replying here Yet even with low prices, products are still relatively expensive. For example, auto loans tend to be limited to 36 months by banks to non-high income consumers. Assuming you get a 3.85% loan (as the current Chinese LPR is) to purchase the BYD Seagull (cheapest EV), even with a 50% down you are looking at half of the median monthly disposable household income (~$150/mo). The per capita Chinese household spends no more than $50/mo on transportation AND telecom according to govt stats [0]. And this is the crux of the issue - if most Chinese cannot afford most products, and foreign markets are increasingly adding tariffs where does all this stuff go? [0] - https://www.stats.gov.cn/english/PressRelease/202404/t20240424_1948702.html https://www.stats.gov.cn/english/PressRelease/202404/t202404...
kerkeslager 2y ago
> China prevented sanctions from killing Huawei by subsidizing them. But often those kinds of subsidies make companies weaker and less competitive in the long run. There are plenty of examples of that in the US. Such as?
- lovethevoid 2y ago
  The Big Three US automotive companies
  - kerkeslager 2y ago
    There are a dozen reasons I can think of off the top of my head for why US automotive companies are not competitive that have nothing to do with subsidies.
    - lelandbatey 2y ago
      You should list them. Ya know, cause you asked for a list, we gave a list (of which this is one item) and now you're claiming that there's an unnamed "dozen reasons [why not.]" Don't just stand there posturing, argue your point like the rest of us or get off the stage.
      - kerkeslager 2y ago
        > You should list them. Sure! - Private healthcare in the US driving up the cost of labor. - Landlordism driving up the cost of labor. - Inability to automate away labor due to unions. - High CEO pay. - Inability to fire poor-performing workers due to unions. - Poor engineering due to lack of US investment in education. - Short-term-ism where executives and shareholders are motivated by quarterly profits rather than long-term growth (in contrast with i.e. Toyota). - Higher cost of labor caused by needing to attract workers to places with poor urban upkeep, like Detroit or Flint. > cause you asked for a list I did not. > we gave a list (of which this is one item) Where? I don't see it.
- ok_dad 2y ago

alephnerd 2y ago

> Isn't that just Chinese policy cancelling out American policy Pretty much. And that's the point from the US side (http://industrialpolicy.us/resources/SpecificIndustries/IT/final-memo-china-strategy-group-axios-1.pdf http://industrialpolicy.us/resources/SpecificIndustries/IT/f...) The whole idea of the Sullivan Principle is to force Chinese players to spend more and more money but remaining the same distance apart (2 gen) [0]. The idea is Chinese players keep burning money building capacity, yet lagging behind relatively speaking, and that money could have been used for better applications by China. Already China's GDP per Capita has remained stagnant since COVID began [1] and those tens of billions spent on building capacity could have been better applied building a more robust domestic economy, yet median per capita household incomes are stuck at around $4.6k/yr with a massive urban-rural gap (approx $7k urban, $2.9k rural) [2]. Without a robust domestic economy, and increased limits on export markets, this only leads to overproduction and deflation. Edit: can't reply, so replying in here. Const 2015 dollars is still an approximation of production, and even then absolute household disposable income is low. It doesn't matter what GDP per Capita you have if the delta between that and median household income remains so large. All this implies is that the majority of revenue from production is captured by a minority. This is extremely rickety, and leads to long term economic malaise. And it's not like you are paying in 2015 dollars in 2024 - absolute cost of inputs still change, and these kinds of transformations don't mean much when looked at holistically with other metrics like median household disposable income and nominal GDP per Capita. Reply 2: Yet 50% of Chinese households still have a disposable income of well below $5k/yr. You can argue PPP all you want (it isn't even the correct application when discussing median incomes) yet inputs and all trade abroad continues to be executed at nominal rates. Only 13% of per capita household income per quarter is spent on transportation and telecom (ie. ~$50/mo per Chinese household), and much of that is spent on existing products not new products. Sure you have overproduction today, but what about 5 years from now? With absolute growth decreasing how are median household incomes expected to increase? And even the Chinese government has a finite amount of money - and instead of giving it to consumers to allow them to build a domestic economy it's only going to a handful of businesses that themselves are heavily automated and gatekept due to skilling requirements [0] - https://www.belfercenter.org/event/competition-without-catastrophe-how-america-can-both-challenge-and-coexist-china-belfer https://www.belfercenter.org/event/competition-without-catas... [1] - https://data.worldbank.org/indicator/NY.GDP.PCAP.CD?locations=CN https://data.worldbank.org/indicator/NY.GDP.PCAP.CD?location... [2] - https://www.stats.gov.cn/english/PressRelease/202402/t20240201_1947120.html https://www.stats.gov.cn/english/PressRelease/202402/t202402...

addicted 2y ago
Yup. And although Chinese exports have rebounded in a big way, China’s economy has remained extremely weak. Because China has lost the massive buffer that the rest of The world was giving it by investing in it for free, transferring technology to China for free, building its industries for it for free, and in return being kicked out the moment the Chinese did not need them anymore.
- riehwvfbk 2y ago
  Those investments were more than paid for with cheap Chinese labor. Which is why these companies moved manufacturing there in the first place. Now China doesn't need the buffer anymore. In fact, it's ahead in many areas, electric cars for example. Smart.
  - alephnerd 2y ago
    Yet the median Chinese household cannot afford those EVs, because median household income has stagnated at around 33k Yuan/$4.5k for years now. If you're overproducing yet there is limited ability for domestic consumers to put these products, this means you are dependent on foreign trade partners. Yet even these trade partners are forcing Chinese players to manufacture in those markets or face high tariffs and revocation of MFN guaruntees.
    - riehwvfbk 2y ago
      The median American can't afford to pay for a new car outright either. And they've got loans in China too.
      - alephnerd 2y ago
        Absolutely, yet absolute consumption remains low [0]. The kind of consumption on high tech gizmos is barely 13% of per capita household consumption (so median is much lower). There just isn't enough spend on a quarterly basis to subsidize industries like EVs, Chips, etc industry without export - and most markets are only increasing the barrier of entry, or requiring domestic JVs. Every EV, PV, Construction, etc JV that a Chinese manufacturer creates in countries like Mexico, Brazil, Indonesia, India, etc is an equivalent amount of jobs and domestic investment lost. What's the point of being ahead if you're spending tens of billions yet most domestic consumers cannot afford them. This only kills domestic capacity long term (and is what Zhou Qiren has argued for years and why he was so prominent at the third plenum). Edit: cannot reply below so replying here Yet even with low prices, products are still relatively expensive. For example, auto loans tend to be limited to 36 months by banks to non-high income consumers. Assuming you get a 3.85% loan (as the current Chinese LPR is) to purchase the BYD Seagull (cheapest EV), even with a 50% down you are looking at half of the median monthly disposable household income (~$150/mo). The per capita Chinese household spends no more than $50/mo on transportation AND telecom according to govt stats [0]. And this is the crux of the issue - if most Chinese cannot afford most products, and foreign markets are increasingly adding tariffs where does all this stuff go? [0] - https://www.stats.gov.cn/english/PressRelease/202404/t20240424_1948702.html https://www.stats.gov.cn/english/PressRelease/202404/t202404...

kerkeslager 2y ago

> China prevented sanctions from killing Huawei by subsidizing them. But often those kinds of subsidies make companies weaker and less competitive in the long run. There are plenty of examples of that in the US. Such as?

lovethevoid 2y ago
The Big Three US automotive companies
- kerkeslager 2y ago
  There are a dozen reasons I can think of off the top of my head for why US automotive companies are not competitive that have nothing to do with subsidies.
  - lelandbatey 2y ago
    You should list them. Ya know, cause you asked for a list, we gave a list (of which this is one item) and now you're claiming that there's an unnamed "dozen reasons [why not.]" Don't just stand there posturing, argue your point like the rest of us or get off the stage.
    - kerkeslager 2y ago
      > You should list them. Sure! - Private healthcare in the US driving up the cost of labor. - Landlordism driving up the cost of labor. - Inability to automate away labor due to unions. - High CEO pay. - Inability to fire poor-performing workers due to unions. - Poor engineering due to lack of US investment in education. - Short-term-ism where executives and shareholders are motivated by quarterly profits rather than long-term growth (in contrast with i.e. Toyota). - Higher cost of labor caused by needing to attract workers to places with poor urban upkeep, like Detroit or Flint. > cause you asked for a list I did not. > we gave a list (of which this is one item) Where? I don't see it.
ok_dad 2y ago