Moon of Alabama Brecht quote
September 12, 2023

Kasandras Beware - China's Economy Will Not Hit A Wall

The economist and columnist of the New York Times Paul Krugman wrote about China hitting the wall:

China is in big trouble. We’re not talking about some minor setback along the way, but something more fundamental. The country’s whole way of doing business, the economic system that has driven three decades of incredible growth, has reached its limits. You could say that the Chinese model is about to hit its Great Wall, and the only question now is just how bad the crash will be.
...
Wages are rising; finally, ordinary Chinese are starting to share in the fruits of growth. But it also means that the Chinese economy is suddenly faced with the need for drastic “rebalancing” — the jargon phrase of the moment. Investment is now running into sharply diminishing returns and is going to drop drastically no matter what the government does; consumer spending must rise dramatically to take its place. The question is whether this can happen fast enough to avoid a nasty slump.

That was written in 2013 when China's GDP at purchase power parity reached $16.3 trillion. The number has since more than doubled to a projected $33 trillion in 2023. (In the same time span U.S. GDP(ppp) grew from $17 to $26 trillion.) But that hasn't influenced Krugman's conclusions. Two week ago he wrote another column that paints the same gloomy picture and prescribes the same false medicine:

Since the late 2000s, however, China seems to have lost a lot of its dynamism.
...
... China clearly can’t sustain anything like the high growth rates of the past.
...
At a fundamental level, China is suffering from the paradox of thrift, which says that an economy can suffer if consumers try to save too much. If businesses aren’t willing to borrow and then invest all the money consumers are trying to save, the result is an economic downturn. Such a downturn may well reduce the amount businesses are willing to invest, so an attempt to save more can actually reduce investment.
...
The obvious answer is to boost consumer spending. Get state-owned enterprises to share more of their profits with workers. Strengthen the safety net. And in the short run, the government could just give people money — sending out checks, the way America has done.

How is giving checks (btw: no Chinese or European citizen uses those antique instruments) to people who are saving instead of consuming supposed to increase their consumption? I would presume that it would rather increase their savings. Giving more income to people who like to save to increase consumption is like pushing on a string.

David Fishman, an economist who lives in China and speaks Mandarin, had an interesting chat with a taxi driver. He concludes:

1. Even after buying a property, long-term considerations still drive Yang to save money, most prominently his daughter and parents.
2. Yang and his wife give up consumption in pursuit of their long-term goals, even working an extra job, to put away extra cash for those goals.
3. He associates loose/free consumption habits with youth and a lack of responsibility. His consumption today is strategic and intentional.
4. He is unperturbed by the prospect of real estate losing value, since he bought his house to live in, and doesn't intend to resell it.

Now, macro econ punditry is *not* my lane.

But if I hear a pundit talking about Chinese consumers, and how they will/won't behave in response to some government policy, I will always wonder what their mental model of this generic Chinese consumer's behavior looks like.

To be credible, that consumer behavior model should probably look like Yang, willing to work an extra job & skip consumption, not out of today's financial necessity, but in preparation of being a good filial son, and so his 3-year old daughter can take dance lessons someday.

And that is Krugman's problem with diagnosing China's economy. People work hard in China. And they like to save instead of consuming all their income. They retire pretty early but live long (though that retirement age is likely to rise). So having a bit of money on the side will make for a nicer living in later years:

The official retirement age for men is 60. Women in managerial positions have a retirement age of 55, while blue-collar female workers can retire at 50.

Chinese people are simply not Americans. But Krugman's economic models presume that they are and he isn't willing or capable of looking beyond those.

Still he was onto something when he opened his column with this:

The narrative about China has changed with stunning speed, from unstoppable juggernaut to pitiful, helpless giant.

It is indeed a fact that the narrative about China's economy has changed way more than China's economic numbers. But Krugman fails to ask why.

Some argue that this narrative change serves investment interests:

First, the most salient preoccupations of Western commentators reflect the skewed distribution of foreign-owned capital within the Chinese economy.
...
The second feature relates to the financial industry’s reliance on the art of political-economic storytelling to sell investment options.

But it is probably more a political instrument to support the general U.S. war against China.

Newsweek recently published a rather laughable story which asked if Shanghai (25 million permanent inhabitants) had turned into a 'ghost town'.

The Global Times editors see political motives behind such 'bad China' narratives:

If only Newsweek is doing this, then it is an isolated case, indicating the media outlet's problematic professional ethics and the negative impact it caused is not significant. However, starting from March or April this year, not only Newsweek but also other US and Western media outlets have been selectively using some specific data from a certain point or in a certain field to generalize, and even fabricate information to undermine, the Chinese economy. This is a coordinated and large-scale campaign, with consistent steps, intense actions, and extensive content, which is rare in recent years. Can we say that this is a coincidence?

The 'bad China' narrative is an economic phenomenon but is used for political reasons:

In the field of economics, there is a term called narrative economics, which uses storytelling to influence judgments, even at the cost of creating false information, to undermine the morale and confidence of the target and attempt to deter foreign investment, thereby having a substantial impact on the economy. The US has openly regarded China as its biggest competitor and even treats China as an imaginary enemy in many practical aspects. We cannot expect it to engage in fair competition with China. In order to win this "competition" initiated by itself, the US often resorts to any possible means. This perspective can explain the phenomenon in which the US is badmouthing the Chinese economy in a collective manner and can also roughly predict the US' future actions toward China, indicating that it aligns with the basic facts.

The problem the Gloom and Doom in China narratives have is that they are propaganda. Propaganda does not change reality. It falls apart when confronted with facts.

War propaganda falls apart when a war is lost. Economic propaganda falls apart when the new numbers come in. Krugman's doom and gloom propaganda from 2013 was defeated by China's growth. His 2023 propaganda is likely to have the same fate.

Posted by b on September 12, 2023 at 16:39 UTC | Permalink

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thanks b... aside from the ethnocentric viewpoints that are on regular display in the western msm, they also are propagandistic too.. the lines are blurred between it all, but it goes on for obvious intent, as cultivating a positive attitude towards others and other countries requires more work and honesty - which appear in short supply..

Posted by: james | Sep 12 2023 16:48 utc | 1

4. He is unperturbed by the prospect of real estate losing value, since he bought his house to live in, and doesn't intend to resell it.

Are Uber drivers buying homes?

Posted by: too scents | Sep 12 2023 16:50 utc | 2

If anyone tells you Chinese GDP numbers are fake, just look at the consumer data for luxury goods.

"We have grown with the market," Ola Kaellenius, chairman of Board of Management of Mercedes-Benz said, vowing it would continue to "grow in China, with China." Mercedes-Benz delivered over 750,000 passenger vehicles in #China last year, comprising around 1/3 of its global sales. [2022 sales]

Compare it to the US

"On a year-to-date basis, MBUSA recorded sales of 286,764 Mercedes-Benz passenger vehicles in calendar year 2022"

China has a huge upper middle class because it has a huge economy. Luxury goods like expensive cars are definitely not an elite thing in China.

Posted by: chessboardpiece | Sep 12 2023 16:52 utc | 3

"What China Did to Make Apple Lose $200 Billion in Two Days


Apple shares fell 2.9 percent on reports that China plans to extend the ban on iPhone use to government-backed agencies and companies.

This week, Apple posted its biggest drop in more than a month. The company lost about $200 billion in two days, and its shares are currently the worst performers in the Dow Jones Industrial Average, CNN reported.

China is the largest foreign market for the company's products, and sales in China accounted for about a fifth of the company's total revenue last year.

On Wednesday, the Wall Street Journal reported that China had banned the use of iPhones for central government employees and that managers had notified staff of the ban through chat groups or meetings.

On Thursday, Bloomberg reported that those bans had been extended to state-backed firms, including energy giant PetroChina, that employ millions of workers and control vast swathes of China's economy."

https://obektivno.bg/kakvo-napravi-kitaj-taka-che-apple-da-zagubi-200-miliarda-za-dva-dni/

Sanctions can be tougth

Posted by: Paul from Norway | Sep 12 2023 16:56 utc | 4

>How is giving checks (btw: no Chinese or European citizen uses those antique instruments) to people who are saving instead of consuming supposed to increase their consumption?

Agree that Krugman is a hack in general, but he is correct on this specific point. 'National savings rate' is different from 'how much the average person saves or consumes'. The distribution of incomes between households and 'firms' (mainly owners of stocks in the US, also SOEs in China) matters more than the average person's savings rate. Even if the average household saves 50% of their income, the average billionaire saves 99%+ (more complicated in China bc of SOEs, but the same idea applies). China's national savings rate is high largely because the proportion of national income that goes to households/workers is low relative to GDP. Although personally I think it would be better for China to reduce policies that subsidize SOEs at the expense of workers (artifically repressed interest rates to benefit corporate borrowers, subsidized energy costs for businesses, etc) and invest in healthcare than cut everyone checks. Twitter user Duke of Qin also had a funny response to this--China doubling their military spending would also increase 'consumption' in a macro sense, it doesn't need to be personal consumption.

Posted by: Rob P | Sep 12 2023 17:04 utc | 5

Posted by: too scents | Sep 12 2023 16:50 utc | 2

The Didi (Chinese Uber) driver could have a hometown. In small cities and towns in China, owning a house is quite affordable. At the extreme, in Heilongjiang province in the northeast of China where the area is becoming depopulated houses in a small city there go for $400 per square meter.

"Hegang, a little-known city in China's Northeast, has earned an overnight reputation on social media for its low home prices. A 50-square-meter flat costs an estimated 20 thousand yuan, less than 3,000 US dollars."

Posted by: chessboardpiece | Sep 12 2023 17:14 utc | 6

In the western médias, all the news from China are Bad, Always. I can't remember any positive information about China.

Posted by: Koui | Sep 12 2023 17:16 utc | 7

@chessboardpiece
A lot of those Mercedeses which were bought in China were moved to Russia.

Posted by: john70 | Sep 12 2023 17:19 utc | 8

The Western lies and misrepresentations are driven by both the need for masking propaganda and wish projection from the Western elites. As life for the majority continues to deteriorate in the West, while the oligarchs make out like bandits, the population has to be told that the grass cannot be greener anywhere else. This is classic "1984" Winston Smith demonization of the competitor nation stuff.

There is a novel I read when I was young that I cannot remember the name of where the population lives underground because they are told that the air above has been poisoned. The protagonists climb up and out onto the surface and find that the air is fine and that the lying elites have nice cottages on the surface that they get to enjoy. The average citizen can never know the truth about the "other place", whether it be the Earth's surface, China, Russia etc.

At the same time, the elites have been desperately wanting China to collapse so that it will be defenceless against their extractive profiteering and cease to be a threat, this has been going on now for decades. Every year there is at least one "China crash" book published. They are the projection of the elite's desperate wishes and the need to protect their world view: China can't be successful its got strong government that restricts capitalists and professes Marxist beliefs!

The result of these two drivers leads to escalating lies and misrepresentations the stronger and more successful China becomes, such as the Uyghur "genocide" (now cultural genocide after the rapid growth of the Uyghur population put the lie to the other type), organ harvesting, a youth unemployment crisis, property crash crisis etc.

As B states, China will be fine. Its Party-state has demonstrated its extremely high levels of competence over the past decades, reinforced by Xi's purging of the corrupt and not competent enough. And the shrill sound of Western propaganda will intensify.

Posted by: Roger | Sep 12 2023 17:20 utc | 9

Krugman’s only claim to fame is his nose

Posted by: Enough said | Sep 12 2023 17:28 utc | 10

Posted by: Rob P | Sep 12 2023 17:04 utc | 5

I'm not a stock broker. what is SOE?

Posted by: stones | Sep 12 2023 17:29 utc | 11

Regarding China, CNBC recently reported that the US will now help Vietnam build up its military defense capabilities against China. I know that Vietnam and China have had historic hostilities that span centuries, but it still seems surprising that Vietnam would go as far as to turn to the US for help in building its military strength in defense against China.

Posted by: Inkan1969 | Sep 12 2023 17:31 utc | 12

Posted by: Enough said | Sep 12 2023 17:28 utc | 10

Krugman’s only claim to fame is his nose

I'm sorry to read that you don't like people with noses like that...

Posted by: Inkan1969 | Sep 12 2023 17:33 utc | 13

How is giving checks (btw: no Chinese or European citizen uses those antique instruments) to people who are saving instead of consuming supposed to increase their consumption? I would presume that it would rather increase their savings. Giving more income to people who like to save to increase consumption is like pushing on a string.

Sorry, but this is the wrong take. China does not have a high savings rate because the average Chinese person saves a large percentage of his income; rather, it has a high savings rate because wealth is heavily concentrated into relatively few hands. The definition of wealth is that you have far more money than you can spend, hence the high savings.

Giving cheques to the average person, who by definition of not being wealthy means that they will consume a larger percentage than they save, will increase consumption and thus increase demand. And unfortunately, even though Krugman is an imbecile, in this case he is correct.

Posted by: Comacho in Chief | Sep 12 2023 17:34 utc | 14

Posted by: john70 | Sep 12 2023 17:19 utc | 8

Chinese consumers have consistently purchased over 700,000 Mercedes Benz cars (2019, 2020, 2021, 2022) In the previous years do you believe a huge number of those cars were sent to Russia?

Posted by: chessboardpiece | Sep 12 2023 17:35 utc | 15

Dude, you have got a serious man crush on China.
We have been partners, real actual business partners, with Beijing and with Taiwan, with Taipei, for over a hundred years. I very seriously doubt that this will cease to be the case, in one way or another, because of some yellow journalism in some newspaper.

Posted by: Josh | Sep 12 2023 17:40 utc | 16

That was written in 2013 when China's GDP at purchase power parity reached $16.3 trillion. The number has since more than doubled to a projected $33 trillion in 2023.

Two more issues here:

1. PPP can only be used to measure countries who are at similar stages of economic growth and have roughly the same economies (say, France and Italy). It loses absolutely all meaning when comparing two countries of completely different makeup and economic levels (e.g. China and the US, or since I am going to get shit on for saying that, let's say Zimbabwe and Norway)

2. Any country that has a closed system or a relatively stable banking system can generate whatever GDP number it wants if it is willing to rack up the debt to pay for that GDP number. This is because GDP **does not** measure wealth--it measures economic activity, which normally but not always is correlated to wealth.

This is what China has done--it is borrowing obscene amounts of money (I am too lazy to check the actual numbers) to generate each additional RMB of growth. And then on top of that, because it lacks domestic demand due to its concentrated wealth, this growth is very, very, very heavily export-dependent, meaning that it is particularly vulnerable to the vicissitudes of foreign countries' investment and trade policies.


Incidentally, these are not "pro-American" talking points--Chinese economists, former leaders, and even their central bank, if I recall correctly, have made the same point many times. Even Premier Wen Jiabao (sp?) in 2007 or so made comments to this effect in his famous four "uns" speech, where he pointed out that China was after thirty years of growth, the economy unstable, unbalanced, uncoordinated, and unsustainable.

This is a very, very serious problem and it has only gotten worse in the 15 years since then because China refuses (or is unable) to deal with it.

Posted by: Comacho in Chief | Sep 12 2023 17:45 utc | 17

Propaganda does not change reality. It falls apart when confronted with facts.

Posted by b on September 12, 2023 at 16:39 UTC | Permalink

I wish I could share Bernhardt's optimism. If anything has become painfully obvious in the last years, all too often it is not reality that matters but what people perceive said reality.

No other event has shown the importance of propaganda on such a scale than the war in Ukraine. The attitudes of the citizenry in the western countries reveals the absolute importance of propaganda to push for policies that are harmful for entire nations and yet ensure the acquiesence if not enthusiastic support for such policies. The penultimate stage of totalitarianism.

Posted by: Constantine | Sep 12 2023 17:47 utc | 18

Posted by: Inkan1969 | Sep 12 2023 17:31 utc | 12

Vietnam both seeking help and receiving it from the USA?

Which just goes to show that we are all in the end …tribal.

Class-solidarity- which is in interest of most people in the world- is unattainable as long as ethnic/nationalist motives and movements are allowed to gain traction. Old - school Capitalists knew this well and nothing has changed.

So what will Vietnam do with all its museums on the American war of the 1960s? Shutter them or remove its mention from their teaching curriculum ? So after making a few dollars from sneakers , Vietnam has gone all Yankee.?

It’s enough to make you give up or go out like a Butch Cassidy and the Sundance Kid.

Posted by: Wondrous | Sep 12 2023 17:47 utc | 19

The easiest way to prove China is collapsing is to put money where the propagandist mouth is. Short China's stocks. Let us see the profits.

Krugman is probably still paying his debts from his prediction failure in 2013.

Posted by: Winner | Sep 12 2023 17:47 utc | 20

I'm not a stock broker. what is SOE?

Posted by: stones | Sep 12 2023 17:29 utc | 11

State Owned Enterprise

Posted by: Comacho in Chief | Sep 12 2023 17:48 utc | 21

Comacho is correct.

You usually take a look at the spending/saving distribution rates.

Its a while now that i looked into it, but 10y or so ago you had about 20% (the poor) in central europe who would spend more than they earn. Their saving rate would be negative while the more people earn the more they save (because what are you gonna spend it for if you have already bought what you wanted?).

So handing out money to the right people does indeed excelerate consumption. People who are struggling to keep their 20 yo car running do replace it, if they have the money to do so.

Posted by: Orgel | Sep 12 2023 17:51 utc | 22

john70 - 8

Sure - all those Benz's went to Russia to be stripped of their chips to install in their washing machines, because those chips were installed in drones & smart bombs for their failing war effort.

Posted by: Eric Blair | Sep 12 2023 17:55 utc | 23

Constantine | Sep 12 2023 17:47 utc | 18
Would you not agree that public enthusiasm for Ukraine's cause is evaporating in the light of reality?
I sense that it is here, in Ontario. And, from my reading of the news, that a similar trend is apparent in much of the world.
If I am right then b's assessment is correct- propaganda crumbles as it is eroded by real events.

Posted by: bevin | Sep 12 2023 17:56 utc | 24

One of your best posts B. Absolutely nailed it. The same shitheads writing the same shit for decades, not just western journalists but western economists.
Western economic principles are still based on an all male workforce and that the renter is king mixed with modern deregulation of banking and accountability. What could go wrong with those principles?
Most observers of China and global south economies seriously believe that they are based on western principles when they're clearly not. I believe economic planning should be handed over to industrial engineers in the west as the pseudo science of economics has been found out to be basic alchemy.

Posted by: Eoin Clancy | Sep 12 2023 17:57 utc | 25

Posted by: Wondrous | Sep 12 2023 17:47 utc | 19

Are you actually taking the Inkanafo troll seriously? Vietnam is pursuing an independent policy and maintaining good relations with all countries. It is prudent to keep other options when you have had past conflicts with a neighbour.

What all such western supremacists deliberately omit is exactly the type of news that debunk their narrative: that Vietnam also maintains good relations with China as well.

Posted by: Constantine | Sep 12 2023 17:57 utc | 26

For some reason people listen to Peter Zeihan, one of the most dubious sources on China.

In 2010, he predicted China would collapse by the end of the decade. "I would say we expect the economic collapse of China in this coming decade. We've been talking for awhile about how the economic system there is remarkably unstable and we think that they're going to reach a break point as all of the internal inconsistencies come to light and shatter. By the end of the decade, it'll be pretty obvious to everybody that the China miracle is over." https://www.businessinsider.com/stratfor-predictions-for-the-next-decade-2010-1

In February of this year, he predicted China will collapse by 2030. "China faces economic collapse before 2030: Peter Zeihan" https://www.taiwannews.com.tw/en/news/4819568

Zeihan used to work at Stratfor which would consistently publish decade outlooks every 5 years and predict China collapsing within that time period.

(1995-2005 Report): China disintegrates in the early part of the 1995-2005 decade https://ipe.ro/rjef/rjef1_18/rjef1_2018p167-178.pdf

(2000-2010 Report): We therefore expect a massive shift in China in the coming decade. On the whole, the greatest probability is for a serious fragmentation of China's national fabric. Toward the end of the decade, China will resemble China of the 1920s more than China of the 1990s. Another possibility is a massive return to the anti- Westernism of the 1950s and 1960s. Beijing can maintain its national integrity by following the Maoist road. However, given government corruption, and the deep involvement of senior party official's families in foreign trade, it is an unlikely outcome short of a Maoist rebellion. Our forecast is for a deeply troubled China, increasingly torn by domestic strife, with a government, in the face of it, alternating between brutal repression and helplessness. In short, as with Russia, one should not confuse China's facade with its reality. https://www.burmalibrary.org/reg.burma/archives/199912/msg00757.html

(2005-2015 Report): Our view of China’s future is in stark contrast with the positive outlooks we see coming from investment houses and others. (…) This rush of foreign investment and interest in China has masked the Chinese economy’s underlying weaknesses and given the government tools to maintain control. But it will not last. Already there is dissent forming in the international community, and the need for quicker profits — or any profits — is driving companies and investors to look elsewhere. Rising interest rates and the perception of strong market fundamentals are bringing investments to the United States. https://ipe.ro/rjef/rjef1_18/rjef1_2018p167-178.pdf

Posted by: chessboardpiece | Sep 12 2023 18:00 utc | 27

Paul Krugman is an exceptional economist in the exceptional USA... So to him, every Chinese person, and the China economy is yearning to become like the USA - so no need to understand foreign 'stuff'.

Posted by: Eric Blair | Sep 12 2023 18:02 utc | 28

john70 | Sep 12 2023 17:19 utc

You have any proof of this? Cars in China are very expensive. Manufacturers are enjoying large profit margins. Also, not really a country for second hand bargains, or really anything at all

As a general rule of thumb, folks in the UK pay the dollar price in pounds. People in China are paying 50%+ more than the UK does.

There are many other countries that are far easier to obtain luxury cars from. Dubai seizures for example.

Posted by: Some Random Passerby | Sep 12 2023 18:07 utc | 29

Posted by: bevin | Sep 12 2023 17:56 utc | 24

Public support is still sufficient to keep the conflict going. Moreover, the damage done already is extensive and not just in the consequences of the conflict.

The type of propaganda the western world has been subjected to is an extreme form of genocidal racism and neocolonialism. Accuse a targeted group (here the Russians) of horrific fictional crimes to justify against said group horrific actual crimes. And it has been stamped in the consciousness of many in the west and even beyond. The same folks proclaimm their most sincere support for the very people they push to national suicide.

It is incredible that the exact same type of vicious racism that was used against so many people in the last century has become perfectly acceptable by the same liberal vermin that profess to vehemently oppose it. And it has led to the very same expressions of loyalty that so many simple western citizens had expressed towards their colonialist elites in that era. All that has been achieved through a massive propaganda campaign hitherto unseen in scale, scope and inversion of reality.

Posted by: Constantine | Sep 12 2023 18:08 utc | 30

For some reason people listen to Peter Zeihan, one of the most dubious sources on China.
In 2010, he predicted China would collapse by the end of the decade.

Posted by: chessboardpiece | Sep 12 2023 18:00 utc | 27

Well, just to be clear, an economic problem in China does not equate to a collapse of China. Japan has been mired in economic malaise for three decades (and incidentally, China is using more or less the same groth strtegy that Japan used), but there has been no collapse. The media just like hyping collapse because it is spectacular and "newsworthy", but that is not the typical way that aconomies readjust.

Posted by: Comacho in Chief | Sep 12 2023 18:08 utc | 31

Remember the old cowboy movies when the fist fight in the saloon between the good guy and the bad guy would spill out into the street, and the good guy would land a good one, and knock the bad guy down? And then the bad guy would grab a handful of dirt and throw it in the good guy's face? Then taking advantage of the good guy's temporary blindness the bad guy would punch and gouge and kick until the good guy's vision cleared and he finally finishes the fight with a haymaker that lands the bad guy in the horse trough? Remember that? The bad guy is the USA.

Posted by: Risiu | Sep 12 2023 18:12 utc | 32

Posted by: Comacho in Chief | Sep 12 2023 18:08 utc | 31

China's economy keeps on growing. Sure there's a very bad problem with the property sector but other sectors are doing well and productivity growth is strong. I believe China's GDP per capita will be 2x or higher than the world GDP per capita in 2040. What is your prediction for China in 2040 in terms of GDP per capita relative to the world average?

Posted by: chessboardpiece | Sep 12 2023 18:16 utc | 33

B.

Great lead in with that 2013 Krugman piece.

Posted by: Exile | Sep 12 2023 18:17 utc | 34

Posted by: Comacho in Chief | Sep 12 2023 18:08 utc | 31

Zeihan doesn't just make the case for "an economic problem", but presents an image of borderline collapse. And when one has been proven wrong by reality in the most blatant fashion and continues the same tune, then one is not a serious commentator, but a lying hack fulfilling a task.

Posted by: Constantine | Sep 12 2023 18:18 utc | 35

China's biggest problem is the envy of the USA.

Posted by: lester | Sep 12 2023 18:24 utc | 36

Mercedes Benz also makes public transportation vehicles of many sizes. Maybe those are counted among "passenger vehicles" ?

Posted by: Francisco | Sep 12 2023 18:39 utc | 37

Stories about China from the same people who told us Russia is weak and that the vaccines are safe and effective. At this point why pay them any attention at all?

Posted by: ebear | Sep 12 2023 18:41 utc | 38

Remember the old cowboy movies when the fist fight in the saloon between the good guy and the bad guy would spill out into the street, and the good guy would land a good one, and knock the bad guy down? And then the bad guy would grab a handful of dirt and throw it in the good guy's face? Then taking advantage of the good guy's temporary blindness the bad guy would punch and gouge and kick until the good guy's vision cleared and he finally finishes the fight with a haymaker that lands the bad guy in the horse trough? Remember that? The bad guy is the USA.

Posted by: Risiu | Sep 12 2023 18:12 utc | 32

---

When it comes to westerns, I always see Russia sitting in a bathtub. :)

https://www.youtube.com/watch?v=C0aWrDcM988

Posted by: Nobody | Sep 12 2023 18:42 utc | 39

The only economist I'll consider worth reading on China is Michael Pettis. At least he teaches economics in China. Big but, he suspects China may end up going the way of Japan.

Posted by: Peter Pan | Sep 12 2023 18:44 utc | 40

The only economist I'll consider worth reading on China is Michael Pettis.

Posted by: Peter Pan | Sep 12 2023 18:44 utc | 40

---

Another economist running on a hamster wheel.

Posted by: too scents | Sep 12 2023 18:48 utc | 41

I find it funny that people are dismissing GDP PPP because it is not western centric in the comments.

Even Dean Baker is like give it up, China surpassed the US a while back.

Posted by: Peter Dahu | Sep 12 2023 18:58 utc | 42

I am little confused by the article's title.

Kasandras / Cassandra's curse was that her prophesies were right – in actionable, shattering ways – but that no one would believe her. Isn't the pundits' curse, just the opposite: that their prophesy will prove to be wrong, but that everyone believes them?


Posted by: johnf | Sep 12 2023 18:58 utc | 43

I'm Chinese, living in Beijing atm.

On the topic of saving rates, I am all but certain that the average lower-to-middle class Chinese saves more than their western counterpart. I've been told by someone who works in the NA banking industry that based on personal/family accounts they've seen, near everyone live hand to mouth. Its contribution to the national saving rate, against other factors like wealth inequality I am not sure, but I remember PRC and USA have similar gini indices. David Fishman's conclusions sound right to me. Housing is affordable, even relative to wages outside of big cities like Beijing/Shanghai/Guangzhou. I'm not surprised at all that a cab driver owns a flat.

The Mercedes numbers, contrary to its intended effect, has reinforced the idea that China is indeed still playing catch up to the USA. Because even with a more materialistic mindset, the Mercedes figures PER CAPITA is lower than the USA.

Domestic perception towards the economy has been quite poor. One could never guess from downtown commercial districts, which are still packed with lineups out every storefront. But the activity in less well located malls is indeed rather sparse. My personal interpretation is that this is a combination of necrosis from covid, as well as a natural and permenant slowdown in GDP % growth. I don't see a recession incoming, though, let alone a collapse. I'm guessing a year or two of sub 5% growth, before reaching 6-7% again for however long that will last.

Posted by: Iraeis | Sep 12 2023 19:02 utc | 44

@31 Comancho in Chief, who said: "China is using more or less the same growth strategy that Japan used".

If you mean China is an export-driven, lower-labor-cost economy, and it actually has an industrial policy which it follows... like Japan did.. well, that's true.

But there are some pretty major differences. China:

a. is directly connected to the largest landmass, with the most population on the planet
b. has a much bigger labor force
c. isn't beholden to the U.S. for markets and political support (US needs China more than China needs US). That really hurt Japan
d. has energy and materials resources
e. has already or will soon be world technical leader in ... nearly every commercial endeavor that counts
f. banking is a public utility, not a wealth-extraction mechanism
g. designed and implemented the BRI, which provides for many more decades of materials sources and export markets
h. Borders with and has strong (and increasing) political ties with the most materials / resource-rich nation on the planet

There is a lot of talk about converting China to a consumption-led economy, and as b points out, that might take a while.

China wants to produce a lot, and consume significantly less than what it produces.

China wants to involve as much of its population as possible in product development and entrepreneurship. That was the main high-value function of Alibaba at the outset, and that's likely why Alibaba got so much support early on.

China is a very different culture, economy design, and geopolitical animal than any other country on the planet - at the moment, at least.

Posted by: Tom Pfotzer | Sep 12 2023 19:08 utc | 45

Once you enter the global circulation of capital, no matter how big a player you are, you agree to certain rules and quickly you acquire a stake in maintaining the system. Propaganda is directed at internal populations. Outside of such narratives capital flows do what they do. China has ceded almost all of its symbolic and specific identity to be part of this global culture. It clung to it for a century but it decided eventually to join its enemies than try to beat them. Opposition between China and the US is posturing, but in the in the end their sovereignty, whether political or cultural, is being eroded as we all join one big amorphous global culture: smart phones, ADHD social media, atomisation of working populations, oligarchic grip tightening, Marvel comic reading age, banality, loss of meaning and grey people as far as the eye can see. They dress like us and march to the same boring material milestones: car, house, retirement, death, repeat. They won't rule the world, but who'd want to? Everything since 1789 has been a big disappointment. That's why I don't read news or views (except MoA), just Herodotus and Pindar. When the world was young and wild.

Posted by: Patroklos | Sep 12 2023 19:25 utc | 46

Posted by: Constantine | Sep 12 2023 17:57 utc | 26

No! I know he is a troll , but I am airing out some concerns I have with Vietnam through his comments . As in rhetorical questions.

Yes, I know Vietnam is playing it neutral, but we keep hearing about how it will lease Cam Ranh Bay to the Americans etc. Maybe the new generation can’t remember the war and doesn’t care. It is all about dollars and Barbie movies?

Posted by: Wondrous | Sep 12 2023 19:29 utc | 47

China is escaping the middle income trap and moving up the technology and intellectual property curve in so many industries, the recent ability to circumvent US attempts to strangle China through limiting access to microchips just being one of them. This terrifies Western elites, as so much of their ability to extract wealth from other nations is supported by the domination of technology, intellectual property and global supply chains. China is breaking free of those chains and will provide an alternative source of such goods. Allied with Russia it also cannot be blackmailed through threats of violence. The Western elites desperately want China to crash, instead of just decelerating to 5-6% GDP growth.

Those using Mercedes sales in China as a benchmark may have to change their measure, as the Chinese EV manufacturers are moving up market and (with Tesla as well) taking luxury brand market share. BYD bought out their Denza luxury JV with Mercedes and are now bringing out one new model after another under that brand. Mercedes, and the other German luxury brands, are nowhere in the Chinese EV sales rankings with EV's topping 40% market share by the end of this year. By then, domestic brand market share (which excludes Tesla) will be approaching 60%; domestic brands plus Tesla will be approaching two thirds. The German manufacturers will hardly exist in China within two years.

Posted by: Roger | Sep 12 2023 19:30 utc | 48

Re: Chinese Saving rate

Posted by: Iraeis | Sep 12 2023 19:02 utc | 44

2 Questions - do middle class Chinese pay off their credits in full every month ? Do middle class Chinese lease their cars ?

Posted by: Exile | Sep 12 2023 19:31 utc | 49

…..pay off their credit CARD…..

Posted by: Exile | Sep 12 2023 19:32 utc | 50

@stones | Sep 12 2023 17:29 utc | 11

I'm not a stock broker. what is SOE?

An SOE is a State-Owned Enterprise, a company that is owned by the state. Examples are Import-Export Bank of the US, Gazprom in the Russian Federation, People's Bank of China, and the EdF (Electricité de France).

Posted by: Cyril | Sep 12 2023 19:36 utc | 51

"The economist and columnist of the New York Times Paul Krugman wrote about China hitting the wall:"

Lrugman, NTIMES, another example of how one is better informed - and has more time for real stuff - if one doesn't even bother.

Posted by: oracle | Sep 12 2023 19:38 utc | 52

"Get state-owned enterprises to share more of their profits with workers." Says the chosen elite, Krugman. Typical American elite bullshit.

The US is only productive in creating disgusting billionaire oligarchs, precisely because all profits earned on the back of workers internationally go straight to the billionaires and only a pittance is offered to the workers so they can merely get themselves fed and get back to work.

Meanwhile, for every billionaire created in the US China provides a number of massive public infrastructure projects around the world which benefit all. They don't have a drug, suicide, homeless or crime epidemic and their youth perform remarkably better academically than the beaten down slaves of the US. In other words, it's a healthy society.

Krugman should take his own advice and advocate for a massive public works program and pay increases for all American workers. Instead, trillions are funneled into the Pentagon to destroy the world and to the billionaires to carry out their whims. His party, the Dems, is busy breaking strike after strike while bragging about their commitment to workers.

Anyone who questions this hard reality is immediately slandered as a traitor or racist, sexist, homophobic.

Us imperialism is a whorehouse. China is the world's future. The chosen few professionals that benefit from the horrors of the US are scared. They know the new world that is emerging has their number and there will be no elite perch for them in China or Russia. Hence their suicidal game of nuclear chicken with China/Russia.

May all the Krugmans of the US be judged by those they trampled underfoot.

Posted by: Ahenobarbus | Sep 12 2023 19:42 utc | 53

Let's not pick on Krugman or any of the other orthodox economists. My late father was an economist and found the orthodox economics he learned did not jibe with reality so he, essentially, told me that economics was mainly bullshit. Over the years I have been amazed that the profession still thrives.

We have to remember that people who write for the NYT or a couple of other publications have synecures which makes them immune to criticism. Many of these columnists have been spectacularly wrong about most things (particularly the NYT) and still their jobs are never in jeopardy as long as they present whatever the Party (he Deep State) line is whether it is economics or anything else. We live in an age where truth and logic are largely forbidden in the official government (which includes the mainstream media). Maybe that will change in the future--the possibility exists.

Posted by: Chris Cosmos | Sep 12 2023 19:51 utc | 54

Paul Krugman is low-hanging fruit. Show me a prediction of his that turned out to be correct and I will show you a bald-faced liar, provided you have a mirror at hand.

Posted by: Monos | Sep 12 2023 19:58 utc | 55

Let's not pick on Krugman or any of the other orthodox economists. My late father was an economist and found the orthodox economics he learned did not jibe with reality so he, essentially, told me that economics was mainly bullshit. Over the years I have been amazed that the profession still thrives.

We have to remember that people who write for the NYT or a couple of other publications have synecures which makes them immune to criticism. Many of these columnists have been spectacularly wrong about most things (particularly the NYT) and still their jobs are never in jeopardy as long as they present whatever the Party (he Deep State) line is whether it is economics or anything else. We live in an age where truth and logic are largely forbidden in the official government (which includes the mainstream media). Maybe that will change in the future--the possibility exists.

Posted by: Chris Cosmos | Sep 12 2023 19:51 utc | 54

Keynesian Economics is bullshit. Unfortunately, the government and their sock-puppets in the mainstream media only hire Keynesian economists. Why? Because Keynesians support massive government expenditures at the expense of sound fiscal policy as a means to foster economic 'growth'.

Posted by: Monos | Sep 12 2023 20:02 utc | 56

Who reads Krugman anyway? I understand he had thinks and agrees with many policies emanating from the sovereign state of Washington DC. But if you look at how he would run his household, it would be exactly like that Chinese taxi driver, saving his money for a good future for his family.

Posted by: Jose Garcia | Sep 12 2023 20:10 utc | 57

In response to
"
Keynesian Economics is bullshit. Unfortunately, the government and their sock-puppets in the mainstream media only hire Keynesian economists. Why? Because Keynesians support massive government expenditures at the expense of sound fiscal policy as a means to foster economic 'growth'.

Posted by: Monos | Sep 12 2023 20:02 utc | 56
"

The same could be said about the MMT folks....they never talk about where money comes from. Michael Hudson can call himself an economist but Krugman is a paid shill for the curtain in front of the God Of Mammon cult of global private finance.

Posted by: psychohistorian | Sep 12 2023 20:20 utc | 58

Posted by: Iraeis | Sep 12 2023 19:02 utc | 44

The Mercedes numbers, contrary to its intended effect, has reinforced the idea that China is indeed still playing catch up to the USA. Because even with a more materialistic mindset, the Mercedes figures PER CAPITA is lower than the USA.

==================================================

Not to contradict, just a footnote: a family member who works in Germany automotive industry told me last year that Mercedes now makes more in China than in the West.

As per {Posted by: Iraeis | Sep 12 2023 19:02 utc | 44} even when slowing down China is still growing strong. At some point this boom cycle will peter out due to basic demographics, but probably not for a decade or two.

I wish we had better news reporting. Out of respect for b I read the Krugman excerpts for first time in years - he's one of the worst. And yet most English-language media from China is over-the-top-one-sidedly-positive. I’ve found nothing in the middle both well-informed and nuanced. Of course we have the same problem in the West; maybe it always has been this way, though my impression is that for a while about a century or so ago there was a more vigorous and insightful free press.

In a nation of 1.4 billion there are bound to be hits and misses, strong and weak, corrupt and stellar. I have seen scattered reports of ghost cities, huge fields filled with unsold electric cars, things like that; maybe fake, maybe not, maybe significant, maybe not. Given the lack of nuanced, trustworthy media, I hardly ever read anything about China these days. Probably assuming the opposite of anything someone like Krugman says is as good a way as any.

Posted by: Scorpion | Sep 12 2023 20:21 utc | 59

@Tom Pfotzer | Sep 12 2023 19:08 utc | 45

There is a lot of talk about converting China to a consumption-led economy, and as b points out, that might take a while.

Yes, indeed. However, I hope China does not follow the western thinking but look into herself to figure out what is the best going forward. IMHO, moving to consumption or so-called service economy is definitely NOT the right choice. Xi recently mentioned that China has to keep a good and healthy percentage in manufacturing because that is the national foundation (in the sense, not the exact words). I wholeheartedly agree. Opinions to think things from Chinese own angles and/or circumstances start to appear like Wen Tiejun and Zhang Weiwei but they are still very rare, especially in social science. A majority of people in social science like economics and finances in Chinese academia are severely influenced by the western if not brainwashed. That includes a lot in high positions such as the former head of PBOC Yi Gang. One commentator elsewhere even said what Yi did as PBOC head in the past a few years was not to China's own interest but amerikkkan and caused significant loss to China. If you look at Yi's background, his education was done in the amerikkka. Few with western educational background in China can escape the "high-influence" by the west. One of the few exceptions is Li Shimo though. The link leads to Li's TED Talk presentation a few years back.

So China will be better off to solve issues by the nature of the issues themselves, not following the western rubbish school of thoughts in economics and finances. Though China does need to understand well inside out about how the west plays the "finance games" without shame and low limits.

Posted by: LuRenJia | Sep 12 2023 20:21 utc | 60

https://www.newyorkfed.org/newsevents/news/research/2023/20230808

I am not an economist. Can someone please help me understand why this is a good thing . . .

Total Household Debt Reaches $17.06 Trillion in Q2 2023; Credit Card Debt Exceeds $1 Trillion

Posted by: Risiu | Sep 12 2023 20:22 utc | 61

@ Risiu | Sep 12 2023 20:22 utc | 61

Well, increased assumption of debt increases GDP. And that’s a good thing, right? ;-)

Posted by: malenkov | Sep 12 2023 20:26 utc | 62

"PPP can only be used to measure countries who are at similar stages of economic growth and have roughly the same economies"

@Comacho in chief #17, #14 etc.

A very peculiar assertion indeed.

The entire scientific purpose of PPP just lies in the (presumed) possibility of a credible comparison amongst widely different economies, both in syncronic and diacronic terms.

Historians just need to use some form of PPP, when producing estimates about economies which never interacted or even co-existed...

Then again of course, difficulties in the choice of accurate weighted averages may render the instrument inadequate.
Or so I imagine as a non-economist...

Also, I am quite puzzled about your statements about the correlation between wealth inequality and propensity to saving.
Does it pertain to the Chinese case, or is it supposed to be valid in general?

Because it is not valid in general.

Finally, at the risk of being extremely rude, I would like to understand why people knowledgeable in field of economy (which again I am not) so often tend to express themselves like "sorcerer's apprentices" or "guru", and almost never as scientists.

Posted by: MoaMetal | Sep 12 2023 20:35 utc | 63

Bloomberg Doctrine. Sometimes it really makes you feel despondent. Below is a brief overview of everyone who has predicted the demise of the Chinese economy over the last 30 years. They turned out to be wrong again and again. For 30 years!
The list is not exhaustive. Anyone who wants to can read this kind of nonsense almost every week

HISTORICAL ECONOMIC PREDICTIONS ABOUT CHINA:

1990. The Economist: China's economy has come to a halt.
1996. The Economist: China's economy will face a hard landing.
1998. The Economist: China's economy entering a dangerous period of sluggish growth.
1999. Bank of Canada: Likelihood of a hard landing for the Chinese economy.
2000. Chicago Tribune: China currency move nails hard landing risk coffin.
2001. Wilbanks , Smith & Thomas: A hard landing in China.
2002. Westchester University: China Anxiously Seeks a Soft Economic Landing.
2003. New York Times: Banking crisis imperils China.
2004. The Economist: The great fall of China ?
2005. Nouriel Roubini: The Risk of a Hard Landing in China
2006. International Economy: Can Achieve a Soft Landing ?
2007. TIME: Is China's Economy Overheating ? Can China avoid a hard landing ?
2008. Forbes: Hard Landing In China ?
2009. Fortune: China's hard landing. China must find a way to recover.
2010. Nouriel Roubini: Hard landing coming in China.
2011. Business Insider: A Chinese Hard Landing May Be Closer Than You Think.
2012. American Interest: Dismal Economic News from China: A Hard Landing.
2013. Zero Hedge: A Hard Landing In China.
2014. CNBC: A hard landing in China.
2015. Forbes: Congratulations, You Got Yourself A Chinese Hard Landing.
2016. The Economist: Hard landing looms for China.
2017. National Interest: Is China's Economy Going To Crash ?

Posted by: Faraday | Sep 12 2023 20:37 utc | 64

Monos and Psychohistorian and frankly Everyone:

The debate between MMT and Keynesian economics is really a false Hegelian dialectic. The real issue always has been WHO controls a government's currency. THE CENTRAL BANK. For all those who discuss the City of London, the Rothschilds, etc., all comments I agree with, to be true, you will find this of interest.


And for that, my friends, one need only read the Veto Message of one Andrew Jackson on the reauthorization of the Bank of the United States. In THAT ONE DOCUMENT, he explains exactly why he is vetoing this creature. It is an AMAZING document, as it lays out point by point all that is rotten with the Euro/London controlled central banks at the time and why he would not permit that poison to infect this country.

For a frontier lawyer who was prone to violence and drinking, you will not find a better exposition of the rot that has infected the Western capitals and countries for the last 300+ years, poisoning their policies, impoverishing their people, and endless slaughter and war and chaos and misery.

There is a reason that Andrew Jackson was the first President of the United States on whom an assassination attempt was made. The money power is that strong and pernicious. By the grace of God we were free of it, or mostly so, until 1913. We lost the right to all of our income and our productive capacity at that moment.

Similarly, free trade is poison. And the Founding Fathers knew that better than these fools who call themselves economists today. Libertarians, is an ideology for children, dreamers and fools.

Anyway, you can do no better to understand the problem of central banks and monetary theory, and the problem of who controls it now, then read this veto message. It was amazing when I first read it.

Posted by: Johnny | Sep 12 2023 20:52 utc | 65

I am in Harbin, China, right now. Evening festivities along SHJ river, packed restaurants, busy stores, belies the China Doomed narrative.

b is right, facts prove economy, spins don't prove nothing. But what else can the West do beside talking down China?

Posted by: KitaySupporter | Sep 12 2023 20:52 utc | 66

This is a good book by a Chinese economist (colleague of Michael Hudson)

Ten Crises
The Political Economy of China’s Development (1949-2020)

By Wen Tiejun

https://link.springer.com/book/10.1007/978-981-16-0455-3

Posted by: financial matters | Sep 12 2023 20:53 utc | 67

Posted by: Chris Cosmos | Sep 12 2023 19:51 utc | 54

He and his ilk are professional bafflers at the behest of the oligarchs. They lie deliberately and receive a comfortable life in exchange. It's hard to comprehend why one would want to defend them, but there certainly are class reasons that might explain it.

And if he were low hanging fruit, he would be a curse word in the mouth of every worker his dishonest scribblings deceive or injure. Until that day, he deserves all attacks and exposures.

Bourgeois intellectuals like Krugman are the tip of the ideological spear for the ruling class.

He's no Keynesian either. That's a classic dem pose to obscure the warmongering and handouts to the billionaires.

The Dems are excellent public pretenders. They make a fiery speech against injustice to wrong foot you, then demand you take the first offer to ensure there's never a trial.

Anyone still fostering illusions about that right wing imperialist party is painfully naive, totally stupid or knows they are lying.

They spearheaded this war on Russia.

Posted by: Ahenobarbus | Sep 12 2023 21:05 utc | 68

Excellent points about the Chinese consumer, and the things you hear from taxi drivers in Asia are usually honest, direct and accurate.

A few points for the other side. China's property market is a bubble, perhaps the biggest property bubble of all human history. Conservative estimates for total real estate value in China is US$100 trillion, twice that of the US, far bigger than global GDP. Many Chinese saw the housing market as a place to put their savings, which would then continue to grow. That is not going to be the case. There are between 100 and 200 million empty units in China. It's going to take a long time for the property market to regain some kind of balance. I don't doubt that the CCP will get things under control, but it will cause pain. Remember Japan's property bubble. Japan still has not come out of the recession that followed. Two decades. The US is also in a property bubble, and there will be significant pain there as well.

The global economy is heading for a major storm. The wind has already picked up significantly. It's going to be tough to print their way out of this one, for the US and China.

Posted by: Frankie P | Sep 12 2023 21:10 utc | 69

@ Comacho in Chief | Sep 12 2023 17:34 utc | 14

A similar case was recently made on NakedCapitalism by plutoniumkun (with a preface by Yves Smith):

There has to be a very significant transfer of wealth to ordinary citizens through higher wages and better social welfare provision in order to boost consumer spending (one of the few things orthodox and heterodox economists agree on when looking at China). And as for debt – in theory, this is a simple problem to address (i.e. monetize/forgive it in one form or another), but there appears to be an unwillingness to even discuss this option within high level circles in China.

The irony to me is that having studied the Japanese crash intensively, the Chinese may somehow manage to replicate exactly the mistakes the Japanese made. There appears to be a lot of pressure to go for yet more concrete pouring and refinancing of debt as a ‘solution’. This will risk deflation, zombification and/or a greater crisis further down the line.


https://www.nakedcapitalism.com/2023/08/hoisted-from-comments-chinas-unsustainable-unbalanced-growth-model-and-its-current-economic-wobbles.html

All yin and no yang. I believe our host, b, and Mercouris have highlighted the risks of deflation in China, but I'm not clear what their prescriptions are.

Posted by: begob | Sep 12 2023 21:10 utc | 70

Aaaaannnnd...out of the ashes of defeat DC's Intellectual Uberstench pulls out a round of drivebys. Shooting randomly at players who don't play by (U.S.)"Rules based order".
Disengaging China from U.S. trade is a monumental task since the U.S. never bothered to keep any small scale manufacturing for an emergency back-up.

Posted by: kupkee | Sep 12 2023 21:25 utc | 71

4. He is unperturbed by the prospect of real estate losing value, since he bought his house to live in, and doesn't intend to resell it.

Isn’t that what a house is for? Living in? It’s amazing how many Americans have forgotten that.

Posted by: Lucky Joestar | Sep 12 2023 21:25 utc | 72

Posted by: Patroklos | Sep 12 2023 19:25 utc | 46

Hear Hear!

Posted by: Scorpion | Sep 12 2023 21:25 utc | 73

My cousin owns a investment fund on Wall St. At dinner a few weeks ago I asked him if I should be worried my pension was invested in China. He said first off Pension funds are thieves. Second he looks at charts all day and he felt that it was as bad as it was going to get, and he wasn't worried about China, it was over done

Posted by: Gerard | Sep 12 2023 21:39 utc | 74

Posted by: Frankie P | Sep 12 2023 21:10 utc | 69

There are between 100 and 200 million empty units in China. It's going to take a long time for the property market to regain some kind of balance.

========================================================

Assuming that is not fake news: how does that work in China? Is most of that empty property owned by developers who owe ongoing loan payments to commercial banks and/or the Peoples' Bank? Or do they build with little or no credit?

I think in hyper-financialized US, an overhang that large (10-15 million equivalent) would probably bring various corporations down if they couldn't offload the properties before they start defaulting.

Posted by: Scorpion | Sep 12 2023 21:42 utc | 75

Tom Pfotzer@45

And then there is the fact that the PRC was born in a hard fought revolutionary civil war whereas modern Japan was created by the United States which still garrisons it seventy eight years later.

Add to that the reminder of its dependence that it gave Tokyo in the Plaza Accord and it is fairly clear that we are dealing with two entirely different beasts in Japan and China, the first has been living in a caged zoo while the latter lives in the wild and has done very well for itself and its people.

It is far more likely that Japan will break free and emulate China than that China will re-enter into the imperial bondage it threw off in 1949.

Posted by: bevin | Sep 12 2023 21:45 utc | 76

Re: Ahenobarbus@68: Krugman is ‘the tip of the ideological spear’ of the ruling class. Actually the tip of one of many such spears, but hardly the most delusional. A classmate of mine from the early 1970’s has made a career of predicting China’s demise, becoming quite a popular right-wing pundit. He wrote “The Coming Collapse of China” giving the date as 2011. At the end of 2011 he said he was off by a year—it would be 2012. He has since predicted 2013, 2016 and 2023 as the year for China’s economic demise. Like a cult leader predicting the end of the world, he continues to double down, collecting the adoration and dollars of the Republican far-right. He has testified before US Congressional committees and the CIA, according to his own bio-blurb. For gob-smacking kicks and giggles, or just an opportunity to shake your head in disbelief, here is the screed on China he published yesterday:
https://www.gatestoneinstitute.org/19969/china-military-machine

Posted by: mjh | Sep 12 2023 21:45 utc | 77

China's example of regulating commerce before 'exuberance' leads to recession/depression is being used as a propaganda exercise to extol the US state capitalism model of financial and industrial bailouts paid for by labor.

Posted by: Wilikins | Sep 12 2023 22:00 utc | 78

Sorry about doing it this way, but I've been very busy with work. Actually the project I took on has brought me into contact with some very interesting information I'm sure many here at the bar would get a kick out of. We're talking deep dive NATO and NIH type stuff, but I'm currently bound by NDA so I can't take the risk of saying anything else atm.

Just had a few observations and questions.

Re: Mercedes Benz - IIRC, when I've traveled abroad there are numerous MB models that wouldn't really qualify as "luxury" and sell for less than luxury prices in those markets. Is it possible that whoever is putting those numbers together makes the mistake of grouping EVERY MB vehicle sold into the "luxury" category? Small cargo and delivery vans or police cars for example.

Re: Roger's post mentioning the book in which the majority of the people live underground because they've been scared into believing the air above is poisoned. I don't think it's the same one based on your description, but it's similar to a science fiction series of novels called "Silo" and which were adapted into a series on Apple TV. In that story, the people are living in silos underground with a camera that shows the allegedly desolated outside world with poisoned atmosphere. They are coerced to abide by some totalitarian belief system and are strictly forbidden from questioning the status quo or saying they want to leave, or they will be forced to 'clean' the lens of the camera at which point the toxic air overcomes even the 'space suit' they're outfitted with. I won't provide any spoilers and I am not far along enough to know if the air is really bad or not.

Re: The comparisons to what happened with Japan. Has anyone heard of "Princes of the Yen"? It was a book written by some European economist that was adapted into a pretty widely watched documentary available on YouTube here: https://www.youtube.com/watch?v=p5Ac7ap_MAY The byline is "The Power of Central Banks" and it's been years since I watched it, but IIRC the main gist was that a) Japan was secretly run like a wartime economy for decades and b) the central bankers colluded behind the scenes to make the economy run - until they didn't and Japan experienced the "lost decade" of the 80s/90s.

If anyone has seen it or read the book, could you add on to that either in support of or as a rebuttal to how China's economy and central bank is managed?

Posted by: Tom_Q_Collins | Sep 12 2023 22:27 utc | 79

Michael Hudson often makes fun of Paul Krugman as being perpetually wrong and frankly stupid. Krugman is a performer of "Junk Economics", the neoliberalism that gets everything wrong.
MMT could better explain Chinese thrift as postponing consumption, which I believe Bernard points out.

Posted by: Tedder | Sep 12 2023 22:30 utc | 80

"The same could be said about the MMT folks....they never talk about where money comes from. Michael Hudson can call himself an economist but Krugman is a paid shill for the curtain in front of the God Of Mammon cult of global private finance."

Posted by: psychohistorian | Sep 12 2023 20:20 utc | 58


That's all MMT folks have talked about for 30 years . Where money comes from. I honestly don't know where you have been.

They are the only ones who have mapped it out and tell the truth.

https://gimms.org.uk/2021/02/21/an-accounting-model-of-the-uk-exchequer/

Posted by: Echo Chamber | Sep 12 2023 22:39 utc | 81

So many people in the public eye who are supposed to know something are absolute clowns. You'd think a finance guy like Krugman would have the basic understanding that the saving rate = the investment rate.

Posted by: Figleaf23 | Sep 12 2023 22:43 utc | 82

@ Gerard | Sep 12 2023 21:39 utc | 74

The problem with investment in Chinese securities is the very real possibility that they will all be delisted from American exchanges, thus rendering them worthless for all practical purposes.

Just as has been done with Russian securities.

Posted by: malenkov | Sep 12 2023 22:46 utc | 83

"The same could be said about the MMT folks....they never talk about where money comes from." -psychohistorian | Sep 12 2023 20:20 utc | 58

What? The whole essence of MMT is about where the money comes from. MMT says money should come from the government directly, rather than from a central bank as debt.

Posted by: Figleaf23 | Sep 12 2023 22:47 utc | 84

Excellent commentary b,


You have certainly put Krugman in his place.


The way to measure China's private sector savings in their own currency is the size of the deficit and the national debt that's what they represent.

The deficit is the private sector surplus and the national debt is the surplus that has been swapped for government bonds.

Then you have all the savings they have held in foreign central banks in foreign currencies and foreign bonds. What they earned via exporting.

The Chinese deficit is nothing unusual because of the pandemic and the Ukraine war. 7.4% of GDP.

The national debt is 76.9% of GDP.


No sign whatsoever of a severe savings glut. Remember part of that are foreigners who also save in the Chinese currency and Chinese bonds. Not just the locals and Chinese population.


It is just the Chinese sectoral balances moving around under these circumstances and Germany who also exports their way to growth sectoral balances are moving around also.

The government sector, the private sector and trade balance always balance out to zero. This helps to get an understanding below.

https://billmitchell.org/blog/?s=Sectoral+balances


Most countries sectoral balances are moving about due to the pandemic and Ukraine war.


Posted by: Echo Chamber | Sep 12 2023 22:53 utc | 85

The last weeks saw a coordinated assaults on China stock market, currency, and economy by many politicians (including Biden and Yellen), "economists," journalists, fund managers, bankers and Internet bloggers from many countries. The media gloom-and-doom talk is part of the financial and economic warfare waged by the Federal Reserve to make sure that Chinese economy "explodes" before US.

The funny thing is that even though China economy may not be as good as it was a few years ago, and China is working hard to transition to a higher value manufacturing (e.g. electric vehicle, semiconductors, civilian airplanes, AI, ship-building, etc), she is still doing better, much better, than any of the major (and not-so-major) economies in the world like US, EU, Japan, Korea, India, etc. The Chinese exporters are extending their competitiveness everywhere and every sector. I suggest those who "worry" about Chinese debt crisis, real-estate overbuilding and consumers confidence continue to hide their heads in the sand while Chinese companies grab market shares from their western counterpart.

Posted by: d dan | Sep 12 2023 23:06 utc | 86

As the trade surplus decreases in China and Germany you will see the other sectors react. The government sector and private sector balances will adjust.

As they must balance out to zero.


Norway is another good example as they normally run big trade surpluses.

https://billmitchell.org/blog/?p=2418


Better to walk before we run


https://billmitchell.org/blog/?p=7864


Question 2 in the Quiz.


https://billmitchell.org/blog/?p=51013

Posted by: Echo Chamber | Sep 12 2023 23:06 utc | 87

Posted by: d dan | Sep 12 2023 23:06 utc | 86


Nail on head.


China is moving away from very large trade surpluses and trying to solve the issue of meeting local Chinese demand and a more Chinese consumer orientated economy. It won't be easy but made their intentions very clear.


Posted by: Echo Chamber | Sep 12 2023 23:11 utc | 88

Even Wikipedia now has it.

https://en.m.wikipedia.org/wiki/Sectoral_balances#Sectoral_balances_description

Wonders will never cease.


Of course Krugman totally ignored it and why he never saw the financial crash coming. Those That did use the sectoral balances approach saw it coming before anyone else.


Posted by: Echo Chamber | Sep 12 2023 23:25 utc | 89

@ Echo Chamber and Figleaf23

MMT is a theory that does ASSUME that all money comes from the government but never discusses our current PRIVATE FINANCE reality and ways to transition from here to there or frank discussions about the social incentives inherent in a God Of Mammon cult led social system.

China is making it so there is talk about sovereign public banking now instead of the subject not being discussed in polite MMT circles. I posit that the China/Russia axis is going to defeat the God Of Mammon cult and zombie nations within the mist of empire will have the opportunity to take back their countries from the global money mafia and join the multipolar world. The seed of folks to make that happen exist as is shown in the Wall Street On Parade posting......humanity just needs the collective will based on a clear exposition of the bad social incentives inherent in a private finance based social system.

Posted by: psychohistorian | Sep 13 2023 0:01 utc | 90

Any good Keynesian knows that the government is the consumer of last resort. In a bonafide recession in which citizens refuse to spend, the government must step in and spend to stimulate economic activity. Krugman surely knows this, which is why his recommendation to hand out money is so puzzling.

Posted by: Rob | Sep 13 2023 0:13 utc | 91

LOL at the latest propaganda from Reuters

Macro Matters category
Japan corporate mood sours on fears of China-led global downtown: Reuters poll

Maybe they read this piece and wanted to stick another foot in their mouth....Reuters poll.....grin

Posted by: psychohistorian | Sep 13 2023 0:14 utc | 92

Posted by: Ahenobarbus | Sep 12 2023 21:05 utc | 68

Damn right Krugman is no Keynesian. It must become clear to all those who profess to champion Keynesian capitalism: it was the neoliberals that destroyed Keynesianism and not any socialists or even social-democrats.

Moreover, this is quite significant in confronting the narrative of the liberals (those who usually adopt the progressive stance in social mores but are other wise every bit as similar as those they denounce) in political terminology. Their beloved DNC (and its closest equivalents) is a hardcore neoliberal party and therefore they are no centrists at all but every bit as right-wingers as many of the conservatives who they label as rightists.

A successful demolition of this narrative will hammer the notion that there is a neoliberal uniparty, not just in the US, but in the entire western world and its closest appendages. It will also disabuse many leftists of their delusions about "the lesser of two evils", a canard that has been used with spectacular success by the pseudo-progressive faction of the neoliberal right.

Frankly, I have seen libertarians who, despite their attachment to a fantastic, self-regulating market utopia, have been consistently opposed to imperialism, warmongering and fascistic authoritarianism, unlike the run-of-the-mill liberals who stand for precisely all that with all the attendant sugar-coating and virtue-signalling.

Posted by: Constantine | Sep 13 2023 0:31 utc | 93

Posted by: Rob | Sep 13 2023 0:13 utc | 91

Krugman's recommendation is a slimy attempt by a neoliberal slimeball to insinuate that the ChiComs do not adhere to their professed socialist values, whereas the US under Biden is more socially sensitive. A typical inversion of reality by the liberal human detritus.

Posted by: Constantine | Sep 13 2023 0:34 utc | 94

b wrote: "How is giving checks ...to people who are saving instead of consuming supposed to increase their consumption? I would presume that it would rather increase their savings.
______________________________________________

Let me put it like this- you'll never make it as an economist with that sort of rational thinking.

The real issue is what are people saving for? Saving is a response to the belief that what you are saving will be scarce (or at least more scarce) in the future than it is now. If you want people to save less then you need to make them believe they won't have future shortage.

In the USA the big crises of the Great Depression was that as bad as things were in the 1930's people expected things to get much worse and thus hoarding money was a natural response to that belief. That natural response made the depression much worse than it would otherwise be. When one person spends another person earns. So when lots of people stopped spending in the 1930's lots of people also stopped earning.

It is my belief that in the US Social Security was what ended the depression. It made people believe that they would not someday starve unless they hoarded their money and so they started spending instead of hoarding. When one person doesn't spend that means another person doesn't earn.

Krugman's belief that businesses invest savings is just another example of how clueless he is about economics.


Posted by: jinn | Sep 13 2023 0:45 utc | 95

Economics in the West now is the functional equivalent of theology a century or two ago: it serves to justify the system.

Posted by: Lysias | Sep 13 2023 0:52 utc | 96

@chessboardpiece
A lot of those Mercedeses which were bought in China were moved to Russia.

Posted by: john70 | Sep 12 2023 17:19 utc | 8
---------------------------------------------------
You may be correct, but what is your source? Is it just shit from the top of your head? Or do you have sources to back it up?
We are all waiting here.

Posted by: Ed | Sep 13 2023 0:56 utc | 97

The entire scientific purpose of PPP just lies in the (presumed) possibility of a credible comparison amongst widely different economies, both in syncronic and diacronic terms.
Posted by: MoaMetal | Sep 12 2023 20:35 utc | 63

Not only is my assertion not "peculiar", it isn't even atypical. Read the wiki entry on this under "issues"--it explains it well enough for now.

I didn't understand your next comment, so I cannot respond to it--sorry.

Posted by: Comacho in Chief | Sep 13 2023 1:04 utc | 98

Covid was a bioweapon attack on China that not only failed but backfired. Methinks our lords and masters here in the West are increasingly desperate.

Ten years or so ago, if the US had been willing to accept that China was now Number One, I think China would have been willing to allow the US a soft landing. After all, they are realists. Avoiding a war would have been worth a lot. But now I doubt if any such deal is possible. Anyway, the people in power in DC are incapable of seeking such a deal.

Posted by: Lysias | Sep 13 2023 1:04 utc | 99

China is a very different culture, economy design, and geopolitical animal than any other country on the planet - at the moment, at least.

Posted by: Tom Pfotzer | Sep 12 2023 19:08 utc | 45

The most expensive words in the english language are "This time is different"

I honestly don't know what else to tell you--this view that China is going to go up forever has now become a religion and no logic is going to change any opinions of the "true believers", just like I still have to listen to people around me fervently proclaim with absolute conviction that Ukraine is winning and Russia is about crumble in the face of the might of a bunch of untrained and unarmed cannon fodder.

But reality will and must assert itself eventually, and when it does it will be fascinating to watch how people on both issuews justify their incorrect forecasts without actually ever admitting that they were wrong.

Posted by: Comacho In Chief | Sep 13 2023 1:13 utc | 100

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