politico.com:
The conventional wisdom in Washington and in most of the rest of the world is that the roaring Chinese economy is going to pull the global economy out of recession and back into growth. It's China's turn, the theory goes, as American consumers -- who propelled the last global boom with their borrowing and spending ways -- have begun to tighten their belts and increase savings rates.
Robert L. Borosage: Tripping in China: Barack Obama's Challenge
For Obama's trip to Asia, the White House paints a full agenda -- Afghanistan, human rights, North Korean nukes, climate change, trade relations, and the economy. But it's really just the economy, stupid.
Op-Ed Contributor Beijing's Path Forward
In China's Growth Story, Credit as Villain?
Geithner to Japan: spend more, export less
Dollar Trades Near 2-Week Low; Reports May Show China's Growth
Want to reply to a comment? Hint: Click "Reply" at the bottom of the comment; after being approved your comment will appear directly underneath the comment you replied to
I’ve seen similar “empty” cities in China for the last 15 years. And over a few years, these cities have (so far) inevitably filled up.
The Tsinghua professor quoted in the original news report is exactly right in that regard. All of the previous rounds of physical infrastructure in China has paid off economically and socially.
There are two numbers which define China, and is far more important than GDP in any given year:
1) population: 1.3 billion and counting.
2) urbanization rate: 45% and climbing.
China’s urbanization rate will rise to 70% by 2035. If you do the math, that means 325 million Chinese currently living in rural villages will move to urban cities within the next 25 years.
And if you do the math again, that means:
- for every square foot of real estate currently in existence in China… it’ll be doubled over the next 25 years.
- it also means building 15 New York’s from scratch over the next 25 years.
Ah, Capitalism. How can you have infinite growth in a finite space?
If we really, really believe it will work it will work.
Good luck with that one...
If they are they will take us with them. But then no one forced our government to sell its soul to them.
No.
It's from Politico.
Ignore it.
Thank you.
I realized when I read " Chinese collapse, of course, would have profound effects on the United States, limiting China’s ability to buy U.S. debt" that the journalist that wrote this article is just babbling and doesn't actually know anything about the subject matter...
The conventional wisdom is that finance is complicated and hard, but c'mon, think about it: China holds US debt because the USA has had a HUGE balance of payments deficit with China (meaning a strong Dollar relative to the Yuan has allowed the US to consume huge quantities of Chinese-made goods, in exchange for which the Chinese have accumulated a huge amount of US sovereign debt).
In other words, a collapse of the Chinese consumer markets and a dramatic weakening of the Yuan relative to the Dollar WOULD NOT limit the Chinese ability to finance US economic activity... on the contrary, it would put the US consumer back in the "driver's seat" again... not where we want to be, but at least it would give us the illusion of increased economic activity...
Thanks for that very clear explanation.
The Yuan is "pegged" to the dollar, not traded. :))
uh... no. Yuan was pegged until 2005. Since 2005 Yuan trades on a managed float, which you may view as a "peg" in more words, but there is a difference.
Politico must be suffering from projection.
Politico is projecting.
Definitely.
Maybe if the Chinese, or anyone for that matter, could buy American goods instead of American debt, we would be a lot better off.
We would need to make something here first.
Weapons.
China buys quite a lot of American intellectual property.
Hence it is very important to secure copyright and patent rights. There has been some significant movement in this direction, albeit not nearly enough.
Yes, manufacturing, natural resources.
I live in France. So much American hatred towards France for what France "owed" Americans, in order to support the Iraq invasion. Yet so little is said about what America owes.
We've already destroyed our manufacturing base... unlike money, factories don't seem to flow across borders quickly and easily.
Please expand your cryptic comment, SaltySaltillo. Factories have already "flow[ed] across borders quickly and easily." When is the last time you bought a TV made on the US mainland? Check the labels in your shoes or clothing lately? A few years ago, a documentary about Wal-Mart showed a Rubbermaid factory closing and packing up the equipment to be shipped overseas. Wal-Mart has regularly whipsawed vendors against each other, telling them what Wal-Mart would pay per unit for, say, a pair of socks. When the vendor complained meeting such a price was impossible, the Wal-Mart reps suggested moving production to China to meet Wal-Mart's target cost.
I am of the impression that investing in a sworn enemy of the United States is treason.
Of which sworn enemy are you speaking?
Please quote.
China and its communiststs. Duh!
Is China headed towards a collapse?
I doubt it very much.
Me too. The article cited a short-seller, not a sociologist or economist. The one deals with a business, the others with whole societies. I doubt China will "collapse" like a Lehmann or Enron.
The Chinese are literally "eating" everything in their country. They, like us, are poisoning their streams, their air and their soil. You cannot "eat" and/or poison everything in your country indefinitely, without collapsing. You cannot continue adding millions of new humans every day to a planet of an ever increasingly and rapidly shrinking base of natural resources. And, to top it all is the looming Global Warming and Energy Descent. Now ain't all that a pickle of a problem? Everything else is just prattle.
what chanos and the other bears are not accurately measuring is the rate of absorption of the chinese population into the new paradigm of modernity. only 15% of the population has been absorbed into the new economy. the rate of absorption begins to grow exponentially once it reaches a critical mass. critical mass is the point where new participants create the demand for new infrastructure to tooth brushes creating the organic growth needed to minimize the importance of the current export dependent economy.
I'm not sure "new paradigm of modernity" is a good way to express it, but "consumerism" might be. The Chinese have been suffering a mild recession of their own that doesn't even appear on our radars, because for us they were catastrophic, but compared to the way things are now, a recession in China is growth in the rest of the world.
China has a different economy than the US or the West. Their per capita income if that of Albania the poor man of Europe. In absolute terms the Chinese government has been able to finance their manufacturing sector in a similar fashion that our government is - as the large debtor not expected to pay the principle - just the interest. Except China has a national bank and they owe most of this money to themselves. They have company and job creation with a sole purpose of making things for the export and making China rich in the process. Then the government "saves" an enormous part of this which allows them to accumulate a huge trade surplus. They can't afford to unpeg their currency form the dollar at this time because a huge export sector with slim margins would collapse overnight. Many companies in China are insolvent and they will never be able to pay back the debt they have accumulated but in the meantime they are employing people and cranking out products. The profit margins are extremely thin or nonexistent in many but not all companies. It is the American corporations that make incredibly much greater profit on those products when they are sold here. Will all of this collapse in some spectacular fashion? It is possible but it is also possible that the US of A will collapse even sooner.
That's right. I think the naysayers forget the thing that differentiates China from the US and that is, the savings rate which is much higher in China and debt rate which is much lower in China. WIth this, they have a buffer for any collapse. But of course, the Chinese economy is also not all sweet and dandy as there are large pockets of excesses in the form of overinvestment and centralized govt wastage.
Below is a link to a very in depth article about the global economy and what is happening in China. It is interesting in light of this Politico article.
http://www.atimes.com/atimes/Global_Economy/KK10Dj01.html
The fundamentals in China are strong.
How do you know this?
Like Japan in the early 90's we attribute super powers to China. But China contains the seeds of their own downfall because of the contridiction between "capitalism" and "state control". The US on the other hand, if we only have the courage to rely on the power of the individual as opposed to the collective, will rebound continually, as we have after each setback. Rely on the government to save us and we will fail.
What's wrong with relying on government to save you from Saddam's WMDs?
Loading comments…
First Posted: 11-10-09 09:45 AM | Updated: 11-10-09 10:04 AM