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Tl;dr - 1. Mass employment via light and low skilled manufacturing will not help provide mass prosperity in 2025. Automation is the name of the game (can confi

Tl;dr - 1. Mass employment via light and low skilled manufacturing will not help provide mass prosperity in 2025. Automation is the name of the game (can confirm in Vietnamese and Indian high value manufacturing as well as Chinese) 2. Work to build a social safety net that complements gig work. An export driven economy is increasingly tenuous in the current climate. Expanding a domestic consumer market by ensuring prosperity reaches the bottom half is what will allow you to build a resilient economy. ---------- I've ranted about this for over a decade now. Concentrating only on export and industry development while ignoring the need to expand a domestic consumer market either by leveraging higher incomes (highly unlikely) OR a stronger social safety net is the solution to over-production in most cases. It's an increasingly mainstream view in Chinese economic academia as well, but the Xi admin remains petulantly opposed to what it derisively terms as "Welfarism" ("福利主义典范国家，中产塌陷、贫富分化、社会撕裂、民粹喧嚣，这不乏警示— 防止落入“福利主义”养懒汉陷阱"*) [0]. Li Keqiang was a major proponent of expanding the social safety net due to his early experiences in childhood, but he sadly passed away. Countries like Vietnam are following a similar approach, and it is not going to end well. [0] - http://theory.people.com.cn/n1/2021/1116/c40531-32283350.html http://theory.people.com.cn/n1/2021/1116/c40531-32283350.htm... * - "In a welfare state, the middle class is collapsing, the rich and the poor are polarized, society is torn apart, and populism is clamoring. This is a warning to avoid falling into the trap of "welfarism" that breeds laziness."

oezi 1y ago
As Germany and Japan can attest, export-led growth works great until it doesn't, because you are stuck to suppress wages across the economy to maintain your export edge. You need to also build the internal market and carefully manage the housing market as the central instrument for wealth accumulation of your citizens. I think the US is unique to realize that they can achieve more by being a consumer spending economy and using run-away housing prices to inflate their citizens wealth (using immigration to increase demand).
- t_mann 1y ago
  I can see the point re internal market vs export orientation. But why make the housing market the focal point of wealth creation? Wouldn't the stock market be a much more overall beneficial place to let your population accumulate wealth (which the US also does quite successfully, through 401k, cheap and trustworthy financial products like ETFs, a strong SEC,...)? Pushing house prices ever higher comes with so many societal problems, and also with serious financial risks. The start of Japan's lost decades, which you mentioned, wasn't weak domestic demand. It was a housing price bubble so extreme that small areas of central Tokio were worth more than all of California. Domestic demand was actually very strong in Japan up until that bubble burst. The biggest financial crisis in the US in recent memory (2008) was also due to the housing market, its consequences eclipsing that of the dotcom bubble or the 1987 crash. That being said, stock market bubbles are no fun either - the Great Depression of the 1930's was caused by a stock market crash. But at least stocks don't tend to push people into homelessness already while they're booming.
- nanliu 1y ago
  The US can do this because the dollar's global reserve currency status. This works on a longer cycle but will be far more painful and difficult to address when it reaches a tipping point.
araes 1y ago
I like his cake comparison. Obvious Portal joke. 分蛋糕和做蛋糕哪个更重要呢？表面上来看，分蛋糕直接关涉公平，但从根本上来看，分蛋糕和做蛋糕并不是二者取其一，做大蛋糕是前提，公平分配蛋糕是结果，发展则是前提和关键，任何分配制度必须首先建立在做大蛋糕、有蛋糕可分的基础上。(...) 另一方面，分好蛋糕，搞好分配制度改革是为了推进经济社会发展，而不只是为了完成消费。 Trans. by Firefox (w/ a little bit of G. Translate edits): "Which is more important: dividing the cake or making the cake? On the surface, the cake is directly related to fairness, but fundamentally speaking, the cake and making the cake are not one of the two, making the cake is the premise, the fair distribution of the cake is the result, the development is the premise and the key, any distribution system must first be based on the big cake, the cake can be divided." ... "On the other hand, dividing the cake well and carrying out distribution system reform is to promote economic and social development, not just to complete consumption." It works, and its a reasonable comparison, it's also just amusing to read some some Chinese position paper and then he starts wandering into cake discussions after a bunch of very formal propaganda stuff "superiority of socialism is ultimately to be reflected in its development of productive forces", ect...
- alephnerd 1y ago
  Honestly, it's sad and frustrating. It's literally a "let them eat cake" kind of statement. China is at the point where a social safety net is needed to ensure long term prosperity, and concentrating on an export first model isn't going to cut it long term, because high value industries are heavily automated and skilled, and simply don't demand or need that many employees. China has reached a point where the mean years of education amongst working age people (~8 years) has caught up with countries that used to be much richer than China 15 years ago like Brazil, Thailand, Turkiye, and Malaysia and it's mean life expectancy has outpaced all those countries except Turkiye and Thailand, which it is for all intents and purposes tied [0]. This is a MASSIVE win for global poverty eradication. Yet the median age is significantly higher than all of them except Thailand [1], and median disposable household income remains around $400/mo [2] - lower than Thailand [3], Malaysia [4], or Türkiye's [5] despite having a GDP per capita (~13.3k in 2024) that is comparable to the latter 2 and above Thailand's. Now is the time for China to expand its welfare system in order to make that leap into being a truly developed country, just like South Korea did in the late 1990s and early 2000s. Expanding the welfare state would help hundreds of millions of Chinese gain the ability to purchase higher value goods thus reducing the specter of "overproduction" leading to the current global trade war, while truly ensuring common prosperity. Otherwise, it will flounder like Malaysia and Thailand did, both of which used to be South Korea's peer until the Asian Financial Crisis, or Turkiye after it's peak in 2014. People mention "course correction" but what course correction can you do when disdain for a welfare system is so engrained in the upper echelons of leadership. This is not a statement on the "collapse of China" (that's dumb), but if this problem around domestic consumption and a lack of a safety net is not nipped in the bud in the next 3-5 years, it will be much harder for China to take full advantage of the capabilities it has and ensure common prosperity. [0] - https://globaldatalab.org/shdi/table/2022/lifexp+msch/BRA+CHN+MYS+THA+TUR/?levels=1+4&interpolation=0&extrapolation=0 https://globaldatalab.org/shdi/table/2022/lifexp+msch/BRA+CH... [1] - https://ourworldindata.org/grapher/median-age?tab=discrete-bar&time=2022&country=CHN~BRA~TUR~THA~MYS https://ourworldindata.org/grapher/median-age?tab=discrete-b... [2] - https://www.stats.gov.cn/english/PressRelease/202501/t20250124_1958443.html https://www.stats.gov.cn/english/PressRelease/202501/t202501... [3] - https://www.nso.go.th/nsoweb/storage/survey_detail/2023/20231018103954_32528.pdf https://www.nso.go.th/nsoweb/storage/survey_detail/2023/2023... [4] - https://ekonomi.gov.my/sites/default/files/2023-12/Jadual4-Pendapatan-Isi-Rumah-Kasar-Bulanan-Penengah-Mengikut-Kumpulan-Etnik-Ketua-Isi-Rumah-Strata-dan-Negeri-Malaysia-1970-2022.pdf https://ekonomi.gov.my/sites/default/files/2023-12/Jadual4-P... [5] - https://data.tuik.gov.tr/Bulten/Index?p=Gelir-Dagilimi-Istatistikleri-2024-53712 https://data.tuik.gov.tr/Bulten/Index?p=Gelir-Dagilimi-Istat...
eunos 1y ago
>Xi admin remains petulantly opposed to what it derisively terms as "Welfarism" The joke I heard that Xi welfare mindset is much closer to Reagan than other welfare states. However I say it's not entirely wrong. Freebies and welfare including very generous pension is really addictive policy and no electorates would be willing to sap them out much less going cold turkey. The chicken will come home to roost when it's time to upgrade your tech, industry or infrastructure but you don't have adequate capital to do that.
- alephnerd 1y ago
  While there are issues with populism induced freebies, China's social welfare spent is anemic for the size of economy it is. Almost all social welfare has been devolved to the state level, but state level spend and incentives are overwhelmingly spent on large capex projects that align with larger initiatives (eg. the EV price wars with dozens of SoEs jumping into the fray despite the overwhelming majority of the Chinese EV industry being won over by private sector BYD). That's tens of billions of dollars of capex per province just on one initiative that has turned into a price war that is forcing central level intervention. It's the same misaligned incentive structures that lead to the construction boom and bust in during the 2015-20 period, the overzealous Zero COVID enforcement, and the subsequently haphazard end to Zero COVID. Most provinces are heavily indebted and lack a robust enough capital market to raise from in the way you can get local and state bonds in the US, or municipal bonds in much of the EU. The Xi admin's policies is the equivalent of America having Reaganism during the 1950s-80s. Reaganism was bad for the US, but at least the US had a higher human capital by the 1980s thanks to New Deal (1930s-1950s) and Great Deal (1960s-70s) policies for a generation. The kinds of people who had sympathy for solving spatial inequality in China are no longer represented after Li's passing, and this kind of petulant opposition to welfare expansion with no data to show otherwise is what will trip up China longterm if something does not change in the next 3-5 years. The kinds of policies being pushed by the Xi admin currently are similar to those from a decade ago, yet China is a much older society than it was 10 years ago, and as I pointed out elsewhere, a society where the median household is much poorer than it's peers at GDP per capita (and even significantly below in the case of Thailand). This is the same point the Economist article is getting at - a country where 10-20 million people are earning European and American level salaries but with almost half a billion people with Indian or Vietnamese levels of household incomes is an underperforming society if spending cannot be unlocked because the bottom half of society is saving heavily for a rainy day due to a limited to nonexistent social safety net. And now that most of China is at Thailand level ages, there just isn't much room for convergent development using an export model. If a social safety net expansion comparable to the Great Deal isn't initiated by 2029-30, I truly cannot see how a 4-5% GDP growth rate can be sustained over a long enough time period to converge with a Japan, Korea, or Western Europe, let alone the US.

oezi 1y ago

As Germany and Japan can attest, export-led growth works great until it doesn't, because you are stuck to suppress wages across the economy to maintain your export edge. You need to also build the internal market and carefully manage the housing market as the central instrument for wealth accumulation of your citizens. I think the US is unique to realize that they can achieve more by being a consumer spending economy and using run-away housing prices to inflate their citizens wealth (using immigration to increase demand).

t_mann 1y ago
I can see the point re internal market vs export orientation. But why make the housing market the focal point of wealth creation? Wouldn't the stock market be a much more overall beneficial place to let your population accumulate wealth (which the US also does quite successfully, through 401k, cheap and trustworthy financial products like ETFs, a strong SEC,...)? Pushing house prices ever higher comes with so many societal problems, and also with serious financial risks. The start of Japan's lost decades, which you mentioned, wasn't weak domestic demand. It was a housing price bubble so extreme that small areas of central Tokio were worth more than all of California. Domestic demand was actually very strong in Japan up until that bubble burst. The biggest financial crisis in the US in recent memory (2008) was also due to the housing market, its consequences eclipsing that of the dotcom bubble or the 1987 crash. That being said, stock market bubbles are no fun either - the Great Depression of the 1930's was caused by a stock market crash. But at least stocks don't tend to push people into homelessness already while they're booming.
nanliu 1y ago
The US can do this because the dollar's global reserve currency status. This works on a longer cycle but will be far more painful and difficult to address when it reaches a tipping point.

araes 1y ago

I like his cake comparison. Obvious Portal joke. 分蛋糕和做蛋糕哪个更重要呢？表面上来看，分蛋糕直接关涉公平，但从根本上来看，分蛋糕和做蛋糕并不是二者取其一，做大蛋糕是前提，公平分配蛋糕是结果，发展则是前提和关键，任何分配制度必须首先建立在做大蛋糕、有蛋糕可分的基础上。(...) 另一方面，分好蛋糕，搞好分配制度改革是为了推进经济社会发展，而不只是为了完成消费。 Trans. by Firefox (w/ a little bit of G. Translate edits): "Which is more important: dividing the cake or making the cake? On the surface, the cake is directly related to fairness, but fundamentally speaking, the cake and making the cake are not one of the two, making the cake is the premise, the fair distribution of the cake is the result, the development is the premise and the key, any distribution system must first be based on the big cake, the cake can be divided." ... "On the other hand, dividing the cake well and carrying out distribution system reform is to promote economic and social development, not just to complete consumption." It works, and its a reasonable comparison, it's also just amusing to read some some Chinese position paper and then he starts wandering into cake discussions after a bunch of very formal propaganda stuff "superiority of socialism is ultimately to be reflected in its development of productive forces", ect...

alephnerd 1y ago
Honestly, it's sad and frustrating. It's literally a "let them eat cake" kind of statement. China is at the point where a social safety net is needed to ensure long term prosperity, and concentrating on an export first model isn't going to cut it long term, because high value industries are heavily automated and skilled, and simply don't demand or need that many employees. China has reached a point where the mean years of education amongst working age people (~8 years) has caught up with countries that used to be much richer than China 15 years ago like Brazil, Thailand, Turkiye, and Malaysia and it's mean life expectancy has outpaced all those countries except Turkiye and Thailand, which it is for all intents and purposes tied [0]. This is a MASSIVE win for global poverty eradication. Yet the median age is significantly higher than all of them except Thailand [1], and median disposable household income remains around $400/mo [2] - lower than Thailand [3], Malaysia [4], or Türkiye's [5] despite having a GDP per capita (~13.3k in 2024) that is comparable to the latter 2 and above Thailand's. Now is the time for China to expand its welfare system in order to make that leap into being a truly developed country, just like South Korea did in the late 1990s and early 2000s. Expanding the welfare state would help hundreds of millions of Chinese gain the ability to purchase higher value goods thus reducing the specter of "overproduction" leading to the current global trade war, while truly ensuring common prosperity. Otherwise, it will flounder like Malaysia and Thailand did, both of which used to be South Korea's peer until the Asian Financial Crisis, or Turkiye after it's peak in 2014. People mention "course correction" but what course correction can you do when disdain for a welfare system is so engrained in the upper echelons of leadership. This is not a statement on the "collapse of China" (that's dumb), but if this problem around domestic consumption and a lack of a safety net is not nipped in the bud in the next 3-5 years, it will be much harder for China to take full advantage of the capabilities it has and ensure common prosperity. [0] - https://globaldatalab.org/shdi/table/2022/lifexp+msch/BRA+CHN+MYS+THA+TUR/?levels=1+4&interpolation=0&extrapolation=0 https://globaldatalab.org/shdi/table/2022/lifexp+msch/BRA+CH... [1] - https://ourworldindata.org/grapher/median-age?tab=discrete-bar&time=2022&country=CHN~BRA~TUR~THA~MYS https://ourworldindata.org/grapher/median-age?tab=discrete-b... [2] - https://www.stats.gov.cn/english/PressRelease/202501/t20250124_1958443.html https://www.stats.gov.cn/english/PressRelease/202501/t202501... [3] - https://www.nso.go.th/nsoweb/storage/survey_detail/2023/20231018103954_32528.pdf https://www.nso.go.th/nsoweb/storage/survey_detail/2023/2023... [4] - https://ekonomi.gov.my/sites/default/files/2023-12/Jadual4-Pendapatan-Isi-Rumah-Kasar-Bulanan-Penengah-Mengikut-Kumpulan-Etnik-Ketua-Isi-Rumah-Strata-dan-Negeri-Malaysia-1970-2022.pdf https://ekonomi.gov.my/sites/default/files/2023-12/Jadual4-P... [5] - https://data.tuik.gov.tr/Bulten/Index?p=Gelir-Dagilimi-Istatistikleri-2024-53712 https://data.tuik.gov.tr/Bulten/Index?p=Gelir-Dagilimi-Istat...

eunos 1y ago

>Xi admin remains petulantly opposed to what it derisively terms as "Welfarism" The joke I heard that Xi welfare mindset is much closer to Reagan than other welfare states. However I say it's not entirely wrong. Freebies and welfare including very generous pension is really addictive policy and no electorates would be willing to sap them out much less going cold turkey. The chicken will come home to roost when it's time to upgrade your tech, industry or infrastructure but you don't have adequate capital to do that.

alephnerd 1y ago
While there are issues with populism induced freebies, China's social welfare spent is anemic for the size of economy it is. Almost all social welfare has been devolved to the state level, but state level spend and incentives are overwhelmingly spent on large capex projects that align with larger initiatives (eg. the EV price wars with dozens of SoEs jumping into the fray despite the overwhelming majority of the Chinese EV industry being won over by private sector BYD). That's tens of billions of dollars of capex per province just on one initiative that has turned into a price war that is forcing central level intervention. It's the same misaligned incentive structures that lead to the construction boom and bust in during the 2015-20 period, the overzealous Zero COVID enforcement, and the subsequently haphazard end to Zero COVID. Most provinces are heavily indebted and lack a robust enough capital market to raise from in the way you can get local and state bonds in the US, or municipal bonds in much of the EU. The Xi admin's policies is the equivalent of America having Reaganism during the 1950s-80s. Reaganism was bad for the US, but at least the US had a higher human capital by the 1980s thanks to New Deal (1930s-1950s) and Great Deal (1960s-70s) policies for a generation. The kinds of people who had sympathy for solving spatial inequality in China are no longer represented after Li's passing, and this kind of petulant opposition to welfare expansion with no data to show otherwise is what will trip up China longterm if something does not change in the next 3-5 years. The kinds of policies being pushed by the Xi admin currently are similar to those from a decade ago, yet China is a much older society than it was 10 years ago, and as I pointed out elsewhere, a society where the median household is much poorer than it's peers at GDP per capita (and even significantly below in the case of Thailand). This is the same point the Economist article is getting at - a country where 10-20 million people are earning European and American level salaries but with almost half a billion people with Indian or Vietnamese levels of household incomes is an underperforming society if spending cannot be unlocked because the bottom half of society is saving heavily for a rainy day due to a limited to nonexistent social safety net. And now that most of China is at Thailand level ages, there just isn't much room for convergent development using an export model. If a social safety net expansion comparable to the Great Deal isn't initiated by 2029-30, I truly cannot see how a 4-5% GDP growth rate can be sustained over a long enough time period to converge with a Japan, Korea, or Western Europe, let alone the US.