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The big mistake of this kind of analysis is to assume that it depends only on the desires of the US. But other countries have agency too, they can also decide t

The big mistake of this kind of analysis is to assume that it depends only on the desires of the US. But other countries have agency too, they can also decide to be first class economies. The current status of China is due to its focus on achieving greatness. There's not much that the US could or can do to derail China from its achievements. Let's stop trying to block other countries and step up to work harder.

ryandamm 2y ago
China has major structural weaknesses in its economy that are currently overshadowed by the US cr*pping its own and its allies’ pants. Specifically: there is not much of a home grown consumer economy; they have driven growth too heavily on exports and infrastructure build, leading to a massive overhang in building, a housing bubble that is teetering dangerously close to unwinding, and a major shortage of domestic consumer demand. The Chinese people should be richer; the fact that they export a lot is a symptom of the failure to build up the household sector so domestic demand partly balances investment. Again, read Michael Pettis’s “China Financial Markets” blog at the Carnegie Endowment: https://carnegieendowment.org/china-financial-markets https://carnegieendowment.org/china-financial-markets
- suraci 2y ago
  China is collapsing!
  - coliveira 2y ago
    Its even funny, since 2005 the major economists are calling for a major collapse in the Chinese economy, but it never happens as they hope...
- csomar 2y ago
  Since the pandemic China on Western TVs is about to "collapse". However, what I saw is new EVs, new Phones, record high exports, record high solar panels installations, new metros/airports etc... Something must be very wrong in your assessment, right?
  - ryandamm 2y ago
    https://carnegieendowment.org/china-financial-markets/2023/04/can-chinas-long-term-growth-rate-exceed-2-3-percent https://carnegieendowment.org/china-financial-markets/2023/0... I like Michael Pettis's analysis, though I'll grant you that the distortions he cites in the Chinese economy have gone on longer than he predicted possible. But the health of the Chinese economy is not just the visible things you cite, but also the distribution of assets and balance sheets in the economy. Per Pettis (and other sources), the banking system is dealing with a large debt overhang in society. Pettis's proposed policy fix is to assign that debt to the state, to state-owned-enterprises, or to the corporate sector. Because the long-term growth of China's economy depends on being less reliant on exports, and having a more "normal" mix of domestic demand. There are nuances there, but Pettis does a better job than I do in explaining it. The trouble is that it's not politically expedient to assign the losses due to (unrealized) bad debt to those entities. And the result is a slow, grinding failure in the housing sector. The government does have a tight lid on dissent, but I understand that the Chinese people are in a more precarious position than they should be due to many households having overinvested in nonproductive real estate projects. How that unwinds will be fascinating to watch, and extremely relevant to world economics and geopolitics. To be clear, I really am hoping for the best for China and its people. The right policy is sometimes well-known but hard to execute, and that's the tragedy. (It's playing out now, in spectacular style, in the US.)
    - ryandamm 2y ago
      A more succinct point: the US economy looked really strong in mid-2008. Consumption was very strong, but it turns out that consumption was fueled by unsustainable debt. China has a serious debt problem in its economy. Not government debt like in the US, but shadow banking debt. My fear, based on reading Pettis primarily, is that the Chinese people will end up paying for that debt. Households that have expensive second homes as investment vehicles will suffer those losses (since there isn't sufficient population to fill those homes), unless those losses are socialized or redistributed.
      - suraci 2y ago
- nosianu 2y ago
  Again this focus on the financials, exactly what is criticized. What do they matter when they have sooo much of the real economy, of the world's manufacturing? On the one hand you have a bunch of virtual numbers, on the other one you have a large number of top factories, scientists and engineers (they days of copying are long past). You would go with the virtual numbers if you could choose? Even if finance completely collapses and all money vanishes, they will still have all those real things. Restarting finance from there is far, far easier than the other way around. Too much magical thinking around "money". PS: I don't like the article though. Lots of... "statements", let's put it that way.
  - franktankbank 2y ago
    China has to flip a money switch and woops now they have a middle class. Everyone else?
tmn 2y ago
I’m not following your critique in relation to the article. It seems to encompass your final line. Step up and work harder. No mention of blocking other countries.
stereolambda 2y ago
> But other countries have agency too, they can also decide to be first class economies. An interesting thing is that they likely cannot, outside of some exceptional circumstances--which might include the current clownish situation. Lots of countries would like to be among leading economies. But they don't have enough capital, cannot get it on really favorable terms, don't have the know-how, cannot have effective protectionism to start up (blocked by international rules and retaliations). You can attract foreign capital and corporations, but it's much harder to tie their people and wealth to you permanently. There is a term 'middle income trap' for example. The impressive thing about PRC is how they've had enough power leverage and ability to play into turn-of-Millennium Western establishment's mentality to really push ahead. But there are many countries that couldn't.
- coliveira 2y ago
  Well, if countries follow the schemes proposed by the G7 they certainly have no space to become great economies. That's the whole purpose of the IMF, the World Bank, etc, to keep countries a small cog in the G7 economy. That's why China is seen as a "threat".

ryandamm 2y ago

China has major structural weaknesses in its economy that are currently overshadowed by the US cr*pping its own and its allies’ pants. Specifically: there is not much of a home grown consumer economy; they have driven growth too heavily on exports and infrastructure build, leading to a massive overhang in building, a housing bubble that is teetering dangerously close to unwinding, and a major shortage of domestic consumer demand. The Chinese people should be richer; the fact that they export a lot is a symptom of the failure to build up the household sector so domestic demand partly balances investment. Again, read Michael Pettis’s “China Financial Markets” blog at the Carnegie Endowment: https://carnegieendowment.org/china-financial-markets https://carnegieendowment.org/china-financial-markets

suraci 2y ago
China is collapsing!
- coliveira 2y ago
  Its even funny, since 2005 the major economists are calling for a major collapse in the Chinese economy, but it never happens as they hope...
csomar 2y ago
Since the pandemic China on Western TVs is about to "collapse". However, what I saw is new EVs, new Phones, record high exports, record high solar panels installations, new metros/airports etc... Something must be very wrong in your assessment, right?
- ryandamm 2y ago
  https://carnegieendowment.org/china-financial-markets/2023/04/can-chinas-long-term-growth-rate-exceed-2-3-percent https://carnegieendowment.org/china-financial-markets/2023/0... I like Michael Pettis's analysis, though I'll grant you that the distortions he cites in the Chinese economy have gone on longer than he predicted possible. But the health of the Chinese economy is not just the visible things you cite, but also the distribution of assets and balance sheets in the economy. Per Pettis (and other sources), the banking system is dealing with a large debt overhang in society. Pettis's proposed policy fix is to assign that debt to the state, to state-owned-enterprises, or to the corporate sector. Because the long-term growth of China's economy depends on being less reliant on exports, and having a more "normal" mix of domestic demand. There are nuances there, but Pettis does a better job than I do in explaining it. The trouble is that it's not politically expedient to assign the losses due to (unrealized) bad debt to those entities. And the result is a slow, grinding failure in the housing sector. The government does have a tight lid on dissent, but I understand that the Chinese people are in a more precarious position than they should be due to many households having overinvested in nonproductive real estate projects. How that unwinds will be fascinating to watch, and extremely relevant to world economics and geopolitics. To be clear, I really am hoping for the best for China and its people. The right policy is sometimes well-known but hard to execute, and that's the tragedy. (It's playing out now, in spectacular style, in the US.)
  - ryandamm 2y ago
    A more succinct point: the US economy looked really strong in mid-2008. Consumption was very strong, but it turns out that consumption was fueled by unsustainable debt. China has a serious debt problem in its economy. Not government debt like in the US, but shadow banking debt. My fear, based on reading Pettis primarily, is that the Chinese people will end up paying for that debt. Households that have expensive second homes as investment vehicles will suffer those losses (since there isn't sufficient population to fill those homes), unless those losses are socialized or redistributed.
    - suraci 2y ago
nosianu 2y ago
Again this focus on the financials, exactly what is criticized. What do they matter when they have sooo much of the real economy, of the world's manufacturing? On the one hand you have a bunch of virtual numbers, on the other one you have a large number of top factories, scientists and engineers (they days of copying are long past). You would go with the virtual numbers if you could choose? Even if finance completely collapses and all money vanishes, they will still have all those real things. Restarting finance from there is far, far easier than the other way around. Too much magical thinking around "money". PS: I don't like the article though. Lots of... "statements", let's put it that way.
- franktankbank 2y ago
  China has to flip a money switch and woops now they have a middle class. Everyone else?

tmn 2y ago

I’m not following your critique in relation to the article. It seems to encompass your final line. Step up and work harder. No mention of blocking other countries.

stereolambda 2y ago

> But other countries have agency too, they can also decide to be first class economies. An interesting thing is that they likely cannot, outside of some exceptional circumstances--which might include the current clownish situation. Lots of countries would like to be among leading economies. But they don't have enough capital, cannot get it on really favorable terms, don't have the know-how, cannot have effective protectionism to start up (blocked by international rules and retaliations). You can attract foreign capital and corporations, but it's much harder to tie their people and wealth to you permanently. There is a term 'middle income trap' for example. The impressive thing about PRC is how they've had enough power leverage and ability to play into turn-of-Millennium Western establishment's mentality to really push ahead. But there are many countries that couldn't.

coliveira 2y ago
Well, if countries follow the schemes proposed by the G7 they certainly have no space to become great economies. That's the whole purpose of the IMF, the World Bank, etc, to keep countries a small cog in the G7 economy. That's why China is seen as a "threat".