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This article is full of naive propaganda bits (state-owned roads destroying state-owned schools), but it has one important observation. China has been keeping

by 1gor 17y ago

This article is full of naive propaganda bits (state-owned roads destroying state-owned schools), but it has one important observation. China has been keeping its currency pegged to the dollar and lived off US consumption. Now US will not be consuming much for a long time, so China has nowhere to sell their goods to. Unemployment and riots are at hand, it seems. Of course, that's wrong. China can and will continue growing, but this time the engine of growth will be their own consumer market. Which is huge. There are already more internet users in China than people in the US. When renminbi will start appreciating vs. other currencies, the population will start feeling richer and will consumer more, import more and borrow more. Today they already have shortages of consumer goods on the mainland, such as cars, even though dozen of producers are struggling to keep up with demand. China, in other words, is where Japan was in the 60s and early 70s (maker of transistor radios and cheap scooters, export-oriented mostly). And it will go on to become what Japan was in the 80s, only with 1 billion population.

robak 17y ago
"China has been keeping its currency pegged to the dollar and lived off US consumption. Now US will not be consuming much for a long time, so China has nowhere to sell their goods to." If they let yuan up freely, the Chineese will buy their own prodcuts as their purchasing power will go up. I see it as evolution, not revolution. They will not need exports anymore with 1.3 billion people market whose currency is actually worth something. In the short term - yeah they may have issues. Long term - the transition of wealth from US to them will be complete once usd hyperinflates and their currency rises in value a few times.
deleted 17y ago
[deleted]
joe_the_user 17y ago
Sorry, The article is correct in stating that internal consumer demand is not a proportionately large part of China's economy. The two largest, disproportionately largest, sectors of China's economy are real estate and exports. Further, China's recovery program is not oriented towards increasing the relative size of this sector of the economy but rather, as the article says, increasing the amount of internal capital investment through forced bank loans.
- 1gor 17y ago
  There is no point in arguing with the statements of today's facts. Such statements are also not very interesting, since they are common knowledge. What is interesting, is the dynamics and the direction of the change. In all emerging market economies that managed to stabilize their currencies and make them appreciate (Latin America in the 90s) this has led to domestic consumer booms and reduction of current accounts surpluses (or running up deficits). China has not gone this route yet, but this is a massive reserve of growth. I am sure their leaders understand this. Of course, to focus on domestic market instead of exports, it represents a major policy change. But fundamentals increasingly point at this scenario, so we may reasonably assume that this is what will eventually happen. I also do not buy the 'forced loans' concept. Throughout last years of rapid growth Chinese authorities have been in fact imposing artificial caps on domestic credit growth, since they don't have developed domestic debt market, and therefore lack effective tools to sterilize their dollar interventions. Immediately after financial crisis, the Chinese have removed many of those lending restrictions, as part of their 'stimulus'. Now, because of the developing stock market bubble in domestic Chinese stocks, the authorities are bringing the lending restrictions back. I think the idea of 'forced loans' came from the same area as fables of state-planned road running through schools and kindergartens (but not through villas of state officials). It is so heavily mixed up with ideological propaganda and clichés, that it does not really deserve a serious discussion.
  - joe_the_user 17y ago
    Hmm, The fact that state imposes cap when it wishes should make it more likely that the state can also impose loan levels when it wishes. Moreover, I have read a number of news items I think the idea of 'forced loans' came from the same area as fables of state-planned road running through schools and kindergartens Uh, the point was not about exactly which projects the Chinese state choose to impose but that the Chinese can impose project and solely and only on bureaucratic initiative, even those projects involve considerable hardship on people. A well-known example of this is the Three Gorges Damn - up to a million people are thought to have been displaced by this initiative.

by 1gor 17y ago

robak 17y ago

"China has been keeping its currency pegged to the dollar and lived off US consumption. Now US will not be consuming much for a long time, so China has nowhere to sell their goods to." If they let yuan up freely, the Chineese will buy their own prodcuts as their purchasing power will go up. I see it as evolution, not revolution. They will not need exports anymore with 1.3 billion people market whose currency is actually worth something. In the short term - yeah they may have issues. Long term - the transition of wealth from US to them will be complete once usd hyperinflates and their currency rises in value a few times.

deleted 17y ago

[deleted]

joe_the_user 17y ago

Sorry, The article is correct in stating that internal consumer demand is not a proportionately large part of China's economy. The two largest, disproportionately largest, sectors of China's economy are real estate and exports. Further, China's recovery program is not oriented towards increasing the relative size of this sector of the economy but rather, as the article says, increasing the amount of internal capital investment through forced bank loans.

1gor 17y ago
There is no point in arguing with the statements of today's facts. Such statements are also not very interesting, since they are common knowledge. What is interesting, is the dynamics and the direction of the change. In all emerging market economies that managed to stabilize their currencies and make them appreciate (Latin America in the 90s) this has led to domestic consumer booms and reduction of current accounts surpluses (or running up deficits). China has not gone this route yet, but this is a massive reserve of growth. I am sure their leaders understand this. Of course, to focus on domestic market instead of exports, it represents a major policy change. But fundamentals increasingly point at this scenario, so we may reasonably assume that this is what will eventually happen. I also do not buy the 'forced loans' concept. Throughout last years of rapid growth Chinese authorities have been in fact imposing artificial caps on domestic credit growth, since they don't have developed domestic debt market, and therefore lack effective tools to sterilize their dollar interventions. Immediately after financial crisis, the Chinese have removed many of those lending restrictions, as part of their 'stimulus'. Now, because of the developing stock market bubble in domestic Chinese stocks, the authorities are bringing the lending restrictions back. I think the idea of 'forced loans' came from the same area as fables of state-planned road running through schools and kindergartens (but not through villas of state officials). It is so heavily mixed up with ideological propaganda and clichés, that it does not really deserve a serious discussion.
- joe_the_user 17y ago
  Hmm, The fact that state imposes cap when it wishes should make it more likely that the state can also impose loan levels when it wishes. Moreover, I have read a number of news items I think the idea of 'forced loans' came from the same area as fables of state-planned road running through schools and kindergartens Uh, the point was not about exactly which projects the Chinese state choose to impose but that the Chinese can impose project and solely and only on bureaucratic initiative, even those projects involve considerable hardship on people. A well-known example of this is the Three Gorges Damn - up to a million people are thought to have been displaced by this initiative.