The China Thread

[Zanza]

I read articles on Chinese government institutions being overburdened with debt and having too little revenue sources besides land sales. That would put their ability to raise capital into question. On the other hand, with deflation, they can just print money I guess.

[Admiral Yi]

Time to dump my tencent shares.

[HVC]

Not available in my area. What's going on now?

[Admiral Yi]

Dude says China's going to melt down, much worse than US 07.

[Josquius]

To be fair haven't we heard that every year since Tiananmen?

[crazy canuck]

China melting down is just now becoming news for some people?

[crazy canuck]

To be fair haven't we heard that every year since Tiananmen?

You may have missed that time between 1989 and 2020 when China became the manufacturer for the world

[PJL]

China isn't going to melt down. It's just going to be Japan 2.0 with it's massive debt overhang due to it's inflated property boom going bust. Expect years of low inflation and growth (relative to China) to follow, but it will muddle through.

[Barrister]

The problem with trying to forecast about China is the government is so opaque about it's statistics and finances.

It could melt down.  It could just go through a "lost decade", or any of a number of other scenarios.  We just don't know.

[Josquius]

China isn't going to melt down. It's just going to be Japan 2.0 with it's massive debt overhang due to it's inflated property boom going bust. Expect years of low inflation and growth (relative to China) to follow, but it will muddle through.

Trouble is Japan became very rich before everything went pear shaped.
The last 3 decades weren't marvelous... But they were OK. People weren't exactly starving en masse, opportunities to really thrive were low but they got to live fully modern lives in a meritocraticish system.

China... Had not reached such a high position before the property bust. Its people aren't treading water at the top of the world but from an on paper pretty Meh position which in reality is far worse for most.

Another issue to consider with China - the past 2 decades building boom with riddled with corruption. The more the years pass the more likely major buildings will fail critically. Providing yet more human suffering and controversy.

The only sensible path for China does seem to be to double down on the oppression since actually making people content is moving off the table for them.

[Sheilbh]

The other side of Japan becoming a leading developing country when there was a property bust and China not is that there was limited return on money in Japan flowing into infrastructure, manufcaturing, other capital intensive uses because Japan was already at the cutting edge.

I think with China there's still a lot of capacity to "catch up" so I'm less sure that's doomed to failure (with all the risks and caveats).

I also think there's still a fair bit of output legitimacy for the Chinese system, even if it definitely took a battering with zero covid and the end of covid measures.

[Zanza]

The other side of Japan becoming a leading developing country when there was a property bust and China not is that there was limited return on money in Japan flowing into infrastructure, manufcaturing, other capital intensive uses because Japan was already at the cutting edge.

I think with China there's still a lot of capacity to "catch up" so I'm less sure that's doomed to failure (with all the risks and caveats).

China certainly has limited return on capital investment. They have not just overbuilt real estate, but also e.g. railways. The state railway company has close to a trillion dollar debt. Their manufacturing industries are overproducing demand which means additional investment will be tough to amortize.

[Sheilbh]

I agree and it is diminishing - but for all the comparisons with Japan in 1989, I think that's a really big difference. The gap between China and a highly developed country is still quite large and there is still space to "catch up" - acknowledging that there are diminishing returns.

Also I think the debt is real, I think the lack of domestic demand is a problem (although that depends on the ROTW's response too) - but I'm not sure how much what would be serious issues in a normal market economy matter in a Communist party state when the party sits on the board of every company, as well as the regulators and the local government and the lenders and the state etc.

Totally agree on BBoy's point about how to work out what's going. One metric is perhaps that China imports basically all of its energy, iron and other raw materials - and from what I understand those have been really volatile since 2020 (like the rest of the world), but China's demand is basically still steady or growing.

[Josquius]

The other side of Japan becoming a leading developing country when there was a property bust and China not is that there was limited return on money in Japan flowing into infrastructure, manufcaturing, other capital intensive uses because Japan was already at the cutting edge.

I think with China there's still a lot of capacity to "catch up" so I'm less sure that's doomed to failure (with all the risks and caveats).

I also think there's still a fair bit of output legitimacy for the Chinese system, even if it definitely took a battering with zero covid and the end of covid measures.

I'm not so sure.
China has already built every viable high speed line and more besides - some of their constructions have been a massive waste.

A lot of Japan's 90s infrastructure spending was wasteful and corrupt... But China is on a whole different level for that sort of thing than Japan.

Another potential pain point for China - the world pivoting away from them due to recent behaviour.
Where Japan in the 90s was still seen as high tech wonderland with its products in demand. China is stuck in Japan's 1960s position of producer of cheap tat, it not worse, even in the developing world distrust of Chinese products is simmering

Though people have been predicting the end of China since before the boom it does seem to be coming off the tracks a bit lately.
It won't be crashing into nothingness but it will be shifting into something quite different. Less threatening economically but far more liable to do something stupid

[Razgovory]

I had Chinese food for lunch!