Re: Chinese economy to surpass US by 2016
LoL, probably true. But we shall see. The US, Europe and even Russia have a lot to lose with a fulcrum shift like that.
Said it before in here, everyone who made it a habit to shit on America (esp during 2002-2008) for being some evil empire set on dominating all, will be in for a shit-storm of a surprise when/if China becomes the worlds true powerhouse.
http://english.aljazeera.net/indepth/opinion/2011/04/2011415133455105416.html#
China's Bad Growth Bet
I recently took two trips to China just as the government launched its 12th Five-Year Plan to rebalance the country's long-term growth model. My visits deepened my view that there is a potentially destabilizing contradiction between China's short- and medium-term economic performance.China's economy is overheating now, but, over time, its current overinvestment will prove deflationary both domestically and globally. Once increasing fixed investment becomes impossible - most likely after 2013 - China is poised for a sharp slowdown. Instead of focusing on securing a soft landing today, Chinese policymakers should be worrying about the brick wall that economic growth may hit in the second half of the quinquennium.
Despite the rhetoric of the new Five-Year Plan - which, like the previous one, aims to increase the share of consumption in GDP - the path of least resistance is the status quo. The new plan's details reveal continued reliance on investment, including public housing to support growth, rather than faster currency appreciation, substantial fiscal transfers to households, taxation and/or privatization of state-owned enterprises (SOEs), liberalization of the household registration (hukou) system, or an easing of financial repression.
China has grown for the last few decades on the back of export-led industrialization and a weak currency, which have resulted in high corporate and household savings rates and reliance on net exports and fixed investment (infrastructure, real estate, and industrial capacity for import-competing and export sectors). When net exports collapsed in 2008-2009 from 11 per cent of GDP to 5 per cent, China's leader reacted by further increasing the fixed-investment share of GDP from 42 per cent to 47 per cent.
Thus, China did not suffer a severe recession - as occurred in Japan, Germany, and elsewhere in emerging Asia in 2009 - only because fixed investment exploded. And the fixed-investment share of GDP has increased further in 2010-2011, to almost 50 per cent.
Overinvestment is the problem
The problem, of course, is that no country can be productive enough to reinvest 50 per cent of GDP in new capital stock without eventually facing immense overcapacity and a staggering non-performing loan problem. China is rife with overinvestment in physical capital, infrastructure, and property. To a visitor, this is evident in sleek but empty airports and bullet trains (which will reduce the need for the 45 planned airports), highways to nowhere, thousands of colossal new central and provincial government buildings, ghost towns, and brand-new aluminum smelters kept closed to prevent global prices from plunging.
Commercial and high-end residential investment has been excessive, automobile capacity has outstripped even the recent surge in sales, and overcapacity in steel, cement, and other manufacturing sectors is increasing further. In the short run, the investment boom will fuel inflation, owing to the highly resource-intensive character of growth. But overcapacity will lead inevitably to serious deflationary pressures, starting with the manufacturing and real-estate sectors.
Eventually, most likely after 2013, China will suffer a hard landing. All historical episodes of excessive investment – including East Asia in the 1990's - have ended with a financial crisis and/or a long period of slow growth. To avoid this fate, China needs to save less, reduce fixed investment, cut net exports as a share of GDP, and boost the share of consumption.
The trouble is that the reasons the Chinese save so much and consume so little are structural. It will take two decades of reforms to change the incentive to overinvest.
Income issues
Traditional explanations for the high savings rate (lack of a social safety net, limited public services, aging of the population, underdevelopment of consumer finance, etc.) are only part of the puzzle. Chinese consumers do not have a greater propensity to save than Chinese in Hong Kong, Singapore, and Taiwan; they all save about 30 per cent of disposable income. The big difference is that the share of China's GDP going to the household sector is below 50 per cent, leaving little for consumption.
Several Chinese policies have led to a massive transfer of income from politically weak households to politically powerful companies. A weak currency reduces household purchasing power by making imports expensive, thereby protecting import-competing SOEs and boosting exporters' profits.
Low interest rates on deposits and low lending rates for firms and developers mean that the household sector's massive savings receive negative rates of return, while the real cost of borrowing for SOEs is also negative. This creates a powerful incentive to overinvest and implies enormous redistribution from households to SOEs, most of which would be losing money if they had to borrow at market-equilibrium interest rates. Moreover, labor repression has caused wages to grow much more slowly than productivity.
To ease the constraints on household income, China needs more rapid exchange-rate appreciation, liberalization of interest rates, and a much sharper increase in wage growth. More importantly, China needs either to privatize its SOEs, so that their profits become income for households, or to tax their profits at a far higher rate and transfer the fiscal gains to households. Instead, on top of household savings, the savings - or retained earnings - of the corporate sector, mostly SOEs, tie up another 25 per cent of GDP.
But boosting the share of income that goes to the household sector could be hugely disruptive, as it could bankrupt a large number of SOEs, export-oriented firms, and provincial governments, all of which are politically powerful. As a result, China will invest even more under the current Five-Year Plan.
Continuing down the investment-led growth path will exacerbate the visible glut of capacity in manufacturing, real estate, and infrastructure, and thus will intensify the coming economic slowdown once further fixed-investment growth becomes impossible. Until the change of political leadership in 2012-2013, China's policymakers may be able to maintain high growth rates, but at a very high foreseeable cost.
Re: Re: Chinese economy to surpass US by 2016
Originally posted by Robtard
Said it before in here, everyone who made it a habit to shit on America (esp during 2002-2008) for being some evil empire set on dominating all, will be in for a shit-storm of a surprise when/if China becomes the worlds true powerhouse.
China will never become the dominant power in the Americas
Re: Re: Re: Chinese economy to surpass US by 2016
Originally posted by Robtard
Said it before in here, everyone who made it a habit to shit on America (esp during 2002-2008) for being some evil empire set on dominating all, will be in for a shit-storm of a surprise when/if China becomes the worlds true powerhouse.
Yea I've said that as well.
Originally posted by inimalist
China will never become the dominant power in the Americas
I Fing hope not.
Re: Re: Re: Re: Chinese economy to surpass US by 2016
Originally posted by The Dark Cloud
A lot will depend on what happens with the dollar over the next couple years. I don't have a good feeling....
not really, no
unless you think it is so bad that the entire civilized world on the continents collapse...
Re: Re: Re: Re: Re: Chinese economy to surpass US by 2016
Originally posted by inimalist
not really, nounless you think it is so bad that the entire civilized world on the continents collapse...
I don't think it will be the end of civilization but I can see triple digit inflation along with 20% or higher unemployment.
A bit off topic but...
Chinese government gives jobs to unemployed people for really shit pay - however, they still work and don't suck it out of the government.
If you go to any park in China there are more ''cleaners'' there than the actual visitors - they don't do any hard work, but they don't sit at home either, and they get some money for spending a day in the park picking up any rubbish that may have gone undetected by the other 30 cleaners there. And the parks are immaculately clean here.
Same thing with the ''security'' officers...tons of people standing around at the entrance of random places - they don't really have any power to do anything, they just stand there and get paid for ''looking out'' for trouble makers. And there are NEVER any.
US should start doing the same - instead of just handing out checks, make people earn it by cleaning parks or ''looking important''.
Some portion of their growth is artificial, government mandated stuff. They have things called "Ghost Cities" (entire developed areas with no inhabitants) constructed to meet deadlines and quotas. That's about as close to literally digging and filling ditches as you can get. If they're willing to do that I suspect they're willing to inflate things in other ways.
Originally posted by Utsukushii
Creepy
Yeah, the US will be like "shucks, we owe China, guess we go be slaves for them now".
China is buying all the debt because they want to own a currency that will undergo tripple digit inflation...
EDIT: are we all on the same page here, who actually thinks the Chinese goal is to destroy America? not just surpass it in certain economic or military issues, or not just have more control of their region, but thinks a real aspiration of the Chinese state is to reduce America to ruins? We all understand this is, in fact, counter-productive to Chinese interests? They bought your debt because they expect you to recover, not because they want to own your broken and beaten country... LOL, china has its own poor, underdeveloped country to deal with