/biz/ - Business & Finance

[Anonymous No.728125]

Why is the Chinese economy grinding to a halt?

[Anonymous No.728136]

>>728125
they don't actually know how to do anything on their own

[Anonymous No.728140]

>>728125
Same reason why old China fell to the Europeans: the Chinese have literally had creativity and innovation bred out of them because keeping your mouth shut and head down was usually the most favorable course of action in their society.

[Anonymous No.728150]

>>728125

It's artificially created housing boom, which the PRC created to have double-digit growth during the last recession, is slowly coming apart and busting. Also, chinese workers now demand higher wages and some work safety policies, so as a result labor is more expensive compared to shittier asian countries like bangadesh or vietnam.

Not to go full habbenings, but China really is fucked in the next few years. Their government will either have to print their way out causing hyperinflation or will have to deal with all it's major banks going bankrupt. Neither option is palpable, especially when the US might enter it's own recession as well if/when the federal reserve bank decides to raise interest rates.

So, basically everything there is fucked and the scheme could only last so long. In my opinion, the reason China is building their new development bank is to loan itself money from it to keep the Ponzi scheme going.

[Anonymous No.728194]

the economies of Europe and USA are very weak despite what the politicians try to sell you

stagnant incomes and declining labor force participation. Simple, really.

[Anonymous No.728199]

>>728150
No one beats America, ever.

[Anonymous No.728333]

>>728194

not as weak as China's though

stagnant incomes is a lot easier to manage than a 1929 style bust of all your major banks

[Anonymous No.728354]

Their entire economy is built on cheap manufacturing and stealing intellectual property

As said by others above, China doesn't do anything but sweat shops.

They've turned the entire country into a toxic waste dump and they have an even worse birth rate problem than Japan has, but not because of NEETs, like in Japan, it's because there are no fucking Chinese women for the men.

[Anonymous No.728383]

>>728140

[Anonymous No.728585]

>>728150
So, your theory is the China Development Bank is, what, Federal Reserve 2.0?
Also, everybody owes everybody anyway, and nobody can afford it, so what's the difference?

I keep seeing this -

'X company is going great, should be great profits this quarter'
>oh fuck, no it wasn't, it was all hype, bullshit and creative accounting. They're fucked.

-or-

'this nation is doing great, their economy should be great this year'
>oh fuck, no it wasn't, that was all hype, bullshit and creative accounting. They're fucked.

[Anonymous No.728613]

>>728354
>no fucking Chinese women for the men
It's true, fucking Chinese women is a task for Americans.

[Anonymous No.728626]

What country would you guys consider to have a stable economy or seems to be promising in the long run?

[Anonymous No.728731]

The big issue is you dont get any accuracy from china because they hide everything, and the state allows it.

Theres untold amounts of foreign wealth holed up and hidden there only to be brought out on foreign investments from their companies.

Their economy is far from stagnant. Just gl ever having a unbiased source chart them.

[Anonymous No.728759]

>>728626

USA

[Anonymous No.728760]

>>728626

USA
USA
USA
S&P500

[Anonymous No.728763]

> Real estate bubble deflating (China artificially inflated its GDP growth numbers by building huge housing projects that are now empty)

> Labor shortage / rising wages

> Environmental issues that became too embarrassing/unhealthy to ignore

[Anonymous No.728868]

>>728585

because the fallout won't be as large in the US, America can take 5-10 years of bearish markets and not collapse. If anything, the US is a net food importer which during a global Drought (in places like California, Oklahoma, central asia, and South Africa) means that US consumers are better shielded from rising food prices. The US also has the FDIC, and while it's housing markets and student loan markets are clearly in bubbles the actual integrity of banks is more or less guaranteed. If the entire world economy were to fall to pieces tomorrow, the average American would at least continue to have their savings backed up by the government.

Meanwhile, China built arguably the biggest housing bubble in history, in order to maintain double digit (!) growth during a global recession. All that costs money, something the Chinese government probably doesn't have. If their banks were to suddenly face a cash flow crisis, there's uncertainty if the PRC would be able to insure deposits. If they can't, then their recession spirals into a depression. On top of that, you have the global Drought I mentioned over causing food prices to rise and you have less investment overall in China because things are expensive compared to other countries now.

Anyway, "the difference" is that the US has 200+ years of experience with economic busts to be able to handle another one. America got fucked hard in 1893 and 1929, mostly because banks, backed by nothing, became insolvent and depositors were completely fucked out of their money when the economic boom times ended. China is in a similar boat, however they inflated the bubble even bigger which could be catastrophic and lead to a repeat of the 1950s for them (or so Stratfor thinks) because they're reliant on the west for jobs and food. If the entire world enters recession, the US will at least remain stable, China doesn't have that luxury.

[Anonymous No.728870]

>>728585

Because the fallout won't be as large in the US, America can take 5-10 years of bearish markets and not collapse. If anything, the US is a net food importer which during a global Drought (in places like California, Oklahoma, central asia, and South Africa) means that US consumers are better shielded from rising food prices. The US also has the FDIC, and while it's housing markets and student loan markets are clearly in bubbles the actual integrity of banks is more or less guaranteed. If the entire world economy were to fall to pieces tomorrow, the average American would at least continue to have their savings backed up by the government.

Meanwhile, China built arguably the biggest housing bubble in history, in order to maintain double digit (!) growth during a global recession. All that costs money, something the Chinese government probably doesn't have. If their banks were to suddenly face a cash flow crisis, there's uncertainty if the PRC would be able to insure deposits. If they can't, then their recession spirals into a depression. On top of that, you have the global Drought I mentioned over causing food prices to rise and you have less investment overall in China because things are expensive compared to other countries now.

Anyway, "the difference" is that the US has 200+ years of experience with economic busts to be able to handle another one. America got fucked hard in 1893 and 1929, mostly because banks, backed by nothing, became insolvent and depositors were completely fucked out of their money when the economic boom times ended. China is in a similar boat, however they inflated the bubble even bigger which could be catastrophic and lead to a repeat of the 1950s for them (or so Stratfor thinks) because they're reliant on the west for jobs and food. If the entire world enters recession, the US will at least remain stable, China doesn't have that luxury.

[Anonymous No.728873]

>>728763
>>728868
Are there any articles/books/etc you recommend about the Chinese housing situation?

[Anonymous No.728884]

>>728873

There really aren't any books on it, because it's happening right now and started fairly recently (2008ish).

However, if you look at how the Chinese financial system works, and how many things they've built, most reasonable observers can conclude that the PRC is both 1) unprepared for an economic recession 2) overextended their housing market (otherwise their ghost cities would not exist) and 3) historically speaking have a very difficult time managing economic crisis (the last for them was in the 50s with Mao, look at how that went).

Right now, the Chinese economy is in a slump which is partially why oil prices are slow low (because demand is low as well). So, we would expect that the Chinese markets would go down right? However that's not occurring, even though it's obvious natural bear markets are starting. However, their stock market is growing, even though demand for their products overseas in the US is down. It's an eerily similar situation as 2007 right as the global economy began to slow down. Back then, the PRC just built more homes and encouraged people to speculate. Now they don't have that, because the housing market is slowing and people have maxed their credit and are buying stocks on margin. This is happening worldwide, but it's happening to a much, much larger degree in the PRC. If the bubble were to suddenly pop, China would find itself in a situation where it's banks would be insolvent just as it's new middle class has huge debts that were used to purchase worthless stock and housing. The US, at least, has the FDIC as well as tighter restrictions on how much stock people can buy if they have less than 25k in the bank.

[Anonymous No.728894]

>>728884

Also want to mention that China's growth right now is similar to Japan in the 80s before the Nikkei blew up, which was done in part due to rising wages causing nip companies to become less competitive, especially against China and South Korea.

[Anonymous No.728905]

>>728894
You seem to know quite a bit about this, I've done my best to pay attention to China. I've wondered what will happen to China's population once all their unchecked pollution catches up to them. Not just an older population, but a sicker one. Cancers of every type among other diseases.

Wonder what the rest of the world will do when China starts to crumble under its own weight. Boxer rebellion 2.0?

[Anonymous No.728913]

>>728905

well it depends on a lot. Boxer rebellion 2.0 is a possibility but imo the China is more bound to have a repeat of the 1950s, aka a decade or so of extreme civil unrest, famine, etc until they either kill enough people to retain control or they're kicked out of power by revolutionaries

[Anonymous No.728921]

>>728873
Try this guy's blog. Finance professor at Peking U:
http://blog.mpettis.com/2014/09/what-does-a-good-chinese-adjustment-look-like/
http://blog.mpettis.com/2014/10/how-to-link-australian-iron-with-marine-le-pen/

[Anonymous No.728934]

Why has the Chinese stock market skyrocketed in the past year?

[Anonymous No.728948]

>>728934

In short, the Chinese housing market is slowing and the PRC aims to deflate it while inflating a stock bubble. Despite the facts that China's growth rates slowed to 20-year lows, with industrial profits down 8% in 36 months, their stock market is booming because the PRC government did a huge campaign (lowering interest rates, various fees etc) to get regular citizens into the stock market, hence why millions of new trade accounts have opened up in the past few months. The issue is that many of these people, at least on paper, appear to be uneducated and ill-informed about their stock choices much in the same manner as Americans were during the dotcom years. The rise of margin buying, especially with shadow banks, doesn't help either especially when it's happening because the PRC tried to cut the amount of money people could borrow from regular banks. Most of the speculation is now being directed towards newer Chinese tech companies which make up about 10-15% of the Chinese economy.

Mind you, the whole "cutting interest rates" thing is pretty much what the Federal Reserve did in 1996, and look at where we ended up in 2006-8. China did similar late last year, and as a direct result they're having a massive stock rally.

It all looks very fishy and gives many people a bad gut feeling. We talk about euphoria in stock bubbles, and there's plenty of that in China despite a bearish outlook on it's industrial base.

This is an issue, because China's economy is still based primarily on foreign exports, especially to the US. If the US's economy slows, which is arguably is, then China is directly impacted. It's not an issue now but in 12-24 months if the global economy continues to slow China will be forced to slow down as well, which could trigger a stock panic. This would be catastrophic, as the PRC could easily burn through their cash reserves keeping their banks afloat or, due to incompetence, act too slowly and allow their banks to completely ollapse.

[Anonymous No.729134]

>>728884
The ghost cities are a myth made by bored reporters.

The Chinese government is massively moving people from the countryside to towns, as means to become a more industrial nation. This is why they keep building those cities, and why real estate has been going up.

Nonetheless, ghost cities exist for a maximum of 5 years before people start moving into them. You can check this if you like - the old ghost cities you probably saw in Vice reports are now populated.

You can read up on it if you want. The ghost city story is just a well-designed story for uninformed people to catch onto.

[Anonymous No.729328]

>>729134

>This is why they keep building those cities, and why real estate has been going up.

real estate has been cooling off for the past few years, hence why the PRC deregulated it's stock markets

>The ghost city story is just a well-designed story for uninformed people to catch onto.

I'm not buying it, given that they're building ghost towns in rural inland areas where nobody lives. It's not a matter of relocation insomuch as people buying a spare apartment and renting it out, which happens in the west as well.

Mind you, I wouldn't be so sceptical if the PRC could actually release some reliable numbers, or in lieu of that release how they calculate the numbers they do give to the media. For as shit as the BLS is in distorting info, how they change how they calculate things (like unemployment, for example) is all clearly stated on their website.

And even if what you said is true, China still has a rapidly expanding stock market, at a rate that resembles a bubble.

[Anonymous No.729346]

>>729134

China can't feasibly afford to move people from food production to not-food production, which is what moving people out of the countryside entails. It already is importing tons of food to keep pace, which is literally creating and exposing a delicate jugular vein in the Chinese economy.

[Anonymous No.729359]

>>728125

this thread has a marked lack of sources beyond reputeless anonymous opinions.

[Anonymous No.729361]

>>729359

you're on /biz/ friend not /r/forex

[Anonymous No.729612]

>>728150
>print their way out
Print their way out of what?

At any rate, they can't, if they don't want to see their factories shut off. The whole economy is based off of exports to the US, and the currency peg is the key to that.

That's why they are the single largest holder of dollar denominated debt.

[Anonymous No.729643]

>>729346

China has gone from being an agricultural country to an industrialized powerhouse in some 30 years

You need one man with a tractor to do the work of 100 peasants. And they build their own tractors now.

That they are being pretty rough with their arable land and that climate change is gonna fuck up their agriculture is not a problem at the moment compared to how it will be in 30 years forward. And the Chinese goverment can much more easily control the economy since it's a top-down system with only one ruling party, so they plot a course and STICK to it, consequenses or not.

When they make a plan to move 100 million rural farmers to the industrial heartland, they are gonna execute that plan, and all those small family farms will end up being owned by a handful of companies/large-scale farmers that can farm them more effectively due to the increased effectiveness.

And even though the Chinese have historically favored non-independant thought, the new and modern generation are raised in a much different enviroment than their parents and grandparents, much more westernized, much more liberal, MUCH better educated

No, the Chinese economy might stand in front of a correction and a major shift in direction from sweatshops to effective factories and higher-skilled jobs, but they will come out much stronger than what most in this thread seem to believe

And politically they are forming ambitious alliances, their own world bank, energy independence from US-allies and so on and so forth

China will grow larger

[Anonymous No.730244]

>>729643

The Chinese staple crop is rice, a crop which is difficult to machine harvest and plant. It can be done, but the gains from mechanization are smaller than with other cereals. And fwiw, the plan thus far has resulted in a massive food deficit.

[Anonymous No.730248]

>>728125
it is slowing not grinding to a halt

[Anonymous No.730408]

>>730244
Thats why they are making a transition to the potatoe. I've read that somewhere but can't find source anymore. I believe they guys in charge of china know better what to do to not fuck up then everyone here on biz. but time will tell

[Anonymous No.730428]

China is shifting from a fixed-investment based economy to a consumption based economy and as such, has slower growth.

China's currently needs labor reform mostly IMO

[Anonymous No.730463]

>>728626
Singapore.

[Anonymous No.730646]

Wouldn't china take everyone down by calling in debt

[Anonymous No.730718]

>>730646

You don't get a big red phone that connects to the White House with every purchase of a billion dollars worth of T-bills. The Chinese can't effectively call in their debt without losing money, due to the specific mechanisms of treasury bond interest.

[Anonymous No.730723]

>>729359
>>729361
>what is a search engine