Tag Archives: Chinese economy

China’s Turn, by Mike Whitney

Posted on March 2, 2023 | Leave a comment

The U.S. may go to war to prevent the Chinese economy’s emergence as the world’s largest. From Mike Whitney at unz.com:

Ukraine is the first flashpoint in a great power struggle between the United States and China. After years of shifting its industries to low-wage locations around the world, the US finds itself steadliy losing market-share to a faster-growing and more resourceful China. By most estimates, China’s economy will overtake the United States by 2035 at which point, Beijing will be in a much better position to shape international trade relations in a way that promotes its own interests. With growth, comes power, and that rule will certainly apply to China as well. China has emerged as an industrial powerhouse that sits at the very epicenter of the most populous and fastest growing region in the world. It is for that reason that the United States has initiated a series of provocations on the island of Taiwan and in the South China Sea. The US has abandoned all hope of prevailing over China through conventional free market competition. Instead, the US plans to engage China militarily in a desperate attempt to drain its resources, garner broader support for economic sanctions and isolate isolate China from its regional trading partners. It is a risky and disruptive plan that could backfire spectacularly, but Washington is moving forward regardless. US foreign policy mandarins and their globalist allies will not accept an outcome in which China is the world’s biggest and most powerful economy. This is from an article at China Macro Economy:

Although the pace of China’s economic rise has slowed in recent years, it appears on track to end the United States’ lengthy run as the world’s largest economy by around 2035, according to the latest projection by economists at Goldman Sachs.

The new estimate is 10 years later than the investment bank had predicted in 2011. But economists Kevin Daly and Tadas Gedminas said that potential growth in China still remains significantly higher than in the US.

“China has already closed most of the gap with US GDP,” they said in a report published on Tuesday, adding that China’s gross domestic product has risen from 12 per cent of the US’ in 2000 to a little under 80 per cent.

China’s annual economic growth will be around 4 per cent from 2024 to 2029, compared with 1.9 per cent in the US, according to the report, which projects what the global economy will look like through 2075….

The US dollar’s exceptional strength over the past 10 years is another reason for the 10-year revision in when China’s economy will become No 1, Daly added… But the US dollar’s strength versus the Chinese yuan is likely to diminish over the coming decade, providing more ground for China to overtake the US, according to the report.

The report also projected that the weight of global GDP will shift more towards Asia over the next 30 years, and that the world’s five largest economies in 2050 will be China, the United States, India, Indonesia and Germany.” (“China GDP to surpass US around 2035, years later than previously expected, Goldman Sachs predicts”, China Macro Economy)

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China Is Winning the Economic Race with the US – The Consequences Will Be Profound, by Judith Bergman

Posted on August 17, 2022 | Leave a comment

The tragedy is that the U.S. is falling behind in innovation, which used to be the country’s strength. From Judith Bergman at gatestoneinstitute.org:

  • The [Harvard Belfer Center] report, “The Great Economic Rivalry: China Vs. the US,” predicts that at the current rate China will overtake the US economically within a decade.
  • When it comes to trade, China has now displaced the US. “When this century began, China was knocking on the door of the WTO and the U.S. was the leading trading partner of most major economies. Today, China has overtaken the U.S. to become the largest trading partner for nearly every major nation… by 2018, 130 countries traded more with China than they did with the U.S…..” — The Belfer Report.
  • China’s trade policies are not a matter of simply creating more wealth for China, but as with most things that China does, a way to increase China’s power and other countries’ dependency on it.
  • Today, the U.S. is the world’s largest debtor; China is the largest creditor.
  • When it comes to manufacturing, China already displaced the US a decade ago.
  • “China is now the world’s largest manufacturer and exporter of scores of essential goods, including 90% of refined rare earth minerals, 80% of solar panels, 50% of computers, and 45% of electric vehicles.” — The Belfer Report.
  • Crucially, China is severely challenging the US when it comes to innovation…. In 2013, the US was the number one top innovating country, according to the Bloomberg Innovation Index, but by 2020, it was not even in the top 10, having fallen to number 11…. China’s laser-like focus on frontier technologies has positioned it to dominate races like 5G and AI in the future.
  • China is determined to see this development to its goal of becoming the dominant power in the world by 2049.

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China at the Crossroads, by Charles Hugh Smith

Posted on August 4, 2022 | Leave a comment

China faces economic challenges. How it resolves them will play a big part in global affairs for the next few decades. From Charles Hugh Smith at oftwominds.com:

Watch where capital is flowing. That’s pretty much all you need to know to predict the future.

The word “China” evokes strong emotions, so let’s set it aside in favor of a simple syllogism:

1. Certain things matter in all economies.

2. China is an economy.

3. Therefore these certain things matter in China.

Four things matter to all economies:

1. The flow of capital and talent in or out of an economy.

2. The productivity of that capital and talent.

3. The availability and cost of energy.

4. The stability of the primary foundation of the majority’s wealth.

Capital and talent flowing into an economy and being productively invested generates prosperity. Capital and talent squandered on unproductive speculation generates bubbles of phantom wealth that eventually pop, destroying the illusion of wealth.

Capital and talent fleeing an economy generates stagnation and collapse. Capital and talent are democratic in the most basic form: both vote with their feet. Dictators can strut around ordering everyone to wear their underwear on the outside of their clothing, but if people can vote with their feet, he soon finds he’s talking to himself and a handful of clueless cronies.

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Chinese Slowdown, Much More Than Covid, by Daniel Lacalle

Posted on April 18, 2022 | Leave a comment

Why would a heavily indebted economy subject to an increasing repressive government slow down? From Daniel Lacalle at dlacalle.com:

The most recent macroeconomic figures show that the Chinese slowdown is much more severe than expected and not only attributable to the covid-19 lockdowns.

The lockdowns have an enormous impact. 26 of 31 China mainland provinces have rising covid cases and the fear of a Shanghai-style lockdown is enormous. The information coming from Shanghai proves that these drastic lockdowns create an enormous damage to the population. Millions of citizens without food or medicine and rising suicides have shown that the infamous “zero covid” policy often disguises mass population control and repression.

It is easy to use the covid-19 lockdowns as the reason for the weakening of the Chinese economy but that would be a gross simplification. The problem is deeper.

China is going through a severe slowdown caused by the burst of the enormous real estate bubble and the crackdown on the private sector, which has led to a cut in investment growth.

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“The Endgame Of Communist Rule Has Begun”: Evergrande’s Fall Shows How Xi Has Created A China Crisis, by Niall Ferguson

Posted on September 28, 2021 | Leave a comment

Is Evergrande illustrating the shaky foundations of a society and economy built on debt and repression? From Niall Ferguson at Bloomberg via zerohedge.com:

The developer’s collapse isn’t leading to global contagion, but China’s looming economic disaster might…

A major mistake of the Cold War was the tendency of Western observers to overestimate the Soviet Union. I have often wondered if the same mistake is being repeated with the People’s Republic of China. Then again, for every article over the last 10 years that predicted China’s economy would overtake that of the U.S., there were at least two prophesying a “China crisis.”

“The endgame of Chinese communist rule has now begun,” wrote David Shambaugh in 2015.

Wisely, he added: “Its demise is likely to be protracted.”

That same year, Jim Chanos of Kynikos Associates warned, “We’re getting inexorably to a tipping point in China.”

Last week began with yet another China tipping point. The impending collapse of the giant property developer China Evergrande Group, we were warned, could be China’s “Lehman Moment.” For 24 hours, global stock markets retreated by a couple of percentage points. By Tuesday morning, however, the story appeared to be over. The jitters subsided and investors got back to parsing the utterances of U.S. Federal Reserve Chair Jay Powell to make sure that nothing he said was surprising.

So if the China crisis never happens — no matter how many times China permabears like Chanos predict it — does China eventually overtake the U.S.? Thus far, it has done so only in terms of gross domestic product adjusted on the basis of “purchasing power parity,” which allows for the fact that a meal in Chongqing is quite a bit cheaper than one in Chicago. On a current dollar basis, China’s GDP last year was still just 72% of U.S. GDP, even with Hong Kong included.

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Posted in Banking, Business, Collapse, Debt, Economics, Economy, Eurasian Axis, Geopolitics, Governments, History

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China’s Fatal Dilemma, by Charles Hugh Smith

Posted on February 12, 2020 | 2 comments

Even quasi-effective policies in China to combat the coronavirus would enact a heavy economic toll. From Charles Hugh Smith at oftwominds.com:

Ending the limited quarantine and falsely proclaiming China safe for visitors and business travelers will only re-introduce the virus to workplaces and infect foreigners.

China faces an inescapably fatal dilemma: to save its economy from collapse, China’s leadership must end the quarantines soon and declare China “safe for travel and open for business” to the rest of the world.

But since 5+ million people left Wuhan to go home for New Years, dispersing throughout China, the virus has likely spread to small cities, towns and remote villages with few if any coronavirus test kits and few medical facilities to administer the tests multiple times to confirm the diagnosis. (It can take multiple tests to confirm the diagnosis, as the first test can be positive and the second test negative.)

As a result, Chinese authorities cannot possibly know how many people already have the virus in small-town / rural China or how many asymptomatic carriers caught the virus from people who left Wuhan. They also cannot possibly know how many people with symptoms are avoiding the official dragnet by hiding at home.

No data doesn’t mean no virus.

If the virus has already been dispersed throughout China by asymptomatic carriers who left Wuhan without realizing they were infected with the pathogen, then regardless of whatever official assurances may be announced in the coming days/weeks, it won’t be safe for foreigners to travel in China nor will it be safe for Chinese workers to return to factories, markets, etc.

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A Decade Of… What Exactly? by Michael Every

Posted on December 25, 2019 | Leave a comment

Historians looking back on the decade now ending may well name it the decade of debt. From Michael Every at zerohedge.com:

Authored by Rabobank’s Michael Every

Summary

  • We are now close to the end of the year and the second decade of the 21st century
  • 2010-19 saw a marked difference between growth in developed and emerging markets – but both may be about to slow together
  • World Total Factor Productivity growth was virtually zero – and China’s performance crucial
  • 2010-19 was a decade of record high debt… following a global crisis created by too much debt
  • Absolute poverty levels continued to decline – yet there was increased in perceived insecurity and hardship in many developed markets
  • There was a major increase in global asset prices, especially of stocks and houses…
  • … and in inequality of wealth and income, even as gaps between states narrowed
  • Interest rates went up and then down again in developed markets, and bond yields fell to record lows; but emerging markets also saw rates and yields spike
  • The USD gained against most major FX crosses, and most so against struggling emerging markets
  • What do the 2020s hold for us if this was what the 2010s provided? China arguably holds the key on many fronts

A very mixed decade

We are now close to the end of the year and, given it is 2019, also of the second decade of the 21st century. That marks an opportune time to look backwards in order to then try to look forwards.

In many respects this has been a difficult decade – for example, what do we even refer to it as: “The twenty-tens” or “The twenty-teens”? Far more importantly, of course, the key developments seen over the last ten years present a very mixed picture. Some are certainly positive, and yet arguably more are deeply negative.

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Posted in Banking, Business, Currencies, Debt, Economy, Financial markets, Governments, History, Investing, Money, Politics

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New Reality of China’s Failing Economy Is Coming Soon, by James Rickards

Posted on August 24, 2018 | Leave a comment

James Rickards sees trouble ahead for the Chinese, and consequently for the global, economy. From Rickards at dailyreckoning.com:

I’ve written for years that Chinese economic development is partly real and partly smoke and mirrors, and that it’s critical for investors to separate one from the other to make any sense out of China and its impact on the world.

My longest piece on this topic was Chapter Four of my second book, The Death of Money (2014), but I’ve written much else besides, including many articles for my newsletters.

There’s no denying China’s remarkable economic progress over the past thirty years. Hundreds of millions have escaped poverty and found useful employment in manufacturing or services in the major cities.

Infrastructure gains have been historic, including some of the best trains in the world, state-of-the-art transportation hubs, cutting edge telecommunications systems, and a rapidly improving military.

Yet, that’s only half the story.

The other half is pure waste, fraud and theft. About 45% of Chinese GDP is in the category of “investment.” A developed economy GDP such as the U.S. is about 70% consumption and 20% investment.

There’s nothing wrong with 45% investment in a fast-growing developing economy assuming the investment is highly productive and intelligently allocated.

That’s not the case in China. At least half of the investment there is pure waste. It takes the form of “ghost cities” that are fully-built with skyscrapers, apartments, hotels, clubs, and transportation networks – and are completely empty.

This is not just western propaganda; I’ve seen the ghost cities first hand and walked around the empty offices and hotels.

Chinese officials try to defend the ghost cities by claiming they are built for the future. That’s nonsense. Modern construction is impressive, but it’s also high maintenance. Those shiny new buildings require occupants, rents and continual maintenance to remain shiny and functional. The ghost cities will be obsolete long before they are ever occupied.

Other examples of investment waste include over-the-top white elephant public structures such as train stations with marble facades, 128 escalators (mostly empty), 100-foot ceilings, digital advertising and few passengers. The list can be extended to include airports, canals, highways, and ports, some of which are needed and many of which are pure waste.

To continue reading: New Reality of China’s Failing Economy Is Coming Soon

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Trade Is a Matter of Survival for China, by Jim Rickards

Posted on April 6, 2018 | 1 comment

The impetus for everything the Chinese government does to “manage” the economy is political: keeping the Chinese government in power. From Jim Rickards at thedailyreckoning.com:

Many investors are familiar with the fact that President Franklin Roosevelt closed all of the banks in America and confiscated all of the privately-owned gold by executive order in the early days of his administration, which began in 1933.

Presidents since then have seized assets from countries such as Iran, Syria, North Korea and Cuba and imposed sanctions on Russia and many other countries by executive order.

Yet, relatively few are familiar with the statutory authority for these orders.

The president does not need an act of Congress to support such extreme actions. The laws have already been passed and the president has standing authority to act like a dictator with regard to financial assets.

The first such statue was the Trading With the Enemy Act of 1917, TWE. This was used to seize German assets in the U.S. during the First World War. It’s how the U.S. took control of Bayer Aspirin from the German firm Bayer AG.

TWE was the authority FDR used to close the banks and seize the gold. It’s not clear whom FDR considered the “enemy” when he used TWE; probably private gold hoarders. But, in 1977, the Congress enacted an even more extreme version of TWE called the International Emergency Economic Powers Act of 1977, or IEEPA.

This is the equivalent of a nuclear weapon when it comes to financial warfare.

IEEPA allows the president to seize or freeze any asset or block any transaction if the president deems it to be necessary in the case of a national emergency.

The problem is that “national emergency” can be defined broadly to include trade imbalances, lost jobs or any other economic adversity. President Trump may now use IEEPA to block a variety of Chinese deals in the U.S. in retaliation for Chinese theft of U.S. intellectual property.

With the U.S. using its nuclear option in financial warfare, investors should hope that the Chinese don’t respond in kind.

President Trump may not appreciate the extent to which China will go to protect its interests. Trade negotiations are not the art of the deal, as far as China is concerned. Their goal is national survival.

China’s economy is not just about providing jobs, goods and services that people want and need.

It is about regime survival for a Chinese Communist Party that faces an existential crisis if it fails to deliver. The overriding imperative of the Chinese leadership is to avoid societal unrest.

To continue reading: Trade Is a Matter of Survival for China

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Chaos by Robert Gore

Posted on October 6, 2014 | 1 comment

By Robert Gore

There is a law of inverse political thermodynamics. Above a certain threshold necessary to free a social system from chaos, over time the more energy expended to maintain order by a governing body, the less order there will be. Government efforts to promote order often cause disorder, and in extreme cases, chaos. If the spending of governments around the world is a proxy for the energy spent maintaining “order,” then never has so much been expended in pursuit of that elusive goal, to such little effect. Continue reading →

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