Posted on 09/20/2019 1:26:45 PM PDT by SeekAndFind
China's economy is grinding to its slowest levels of growth in decades.
The country's second-quarter growth of 6.2% was the slowest rate seen since it began reporting quarterly figures. The preliminary third-quarter estimate of 6% to 6.5% is the slowest ever forecast.
Though global stock markets have stabilized and trade talks with the US have resumed after a two-month hiatus, China's economy faces trouble from several different sectors, Nomura Research Institute chief economist Richard Koo wrote in a Wednesday report.
A large part of China's economic prowess comes from its ability to provide cheaper labor than other industrial nations at a massive scale. A "triple threat of growth-attenuating factors" could eliminate the country's manufacturing advantage and move critical foreign investment elsewhere, Koo wrote.
Here are the three main threats Koo detailed, and how they could cripple China's economy.
1. The middle-income trap
As China's rapid development has raised the economic tide for its nearly 1.4 billion citizens, wages have risen in turn. This "middle-income trap" jeopardizes the country's low-cost labor market, as manufacturing interest leaves China for cheaper nations, Koo said.
At current wage levels, China's return on capital for manufacturers is nearing levels seen in emerging manufacuring nations like Vietnam and Bangladesh. The US-China trade war could exacerbate this migration and bring "huge negative implications for China."
"That, coupled with the hurdles faced by Chinese-made products in the US and other markets, suggests a meaningful decline in domestic investment is likely going forward," Koo wrote.
2. A soon-to-be-declining population
Demographic data showed China's working population shrinking at the start of the 2010s, and the trend projects a net decline in population starting as soon as 2032, Koo wrote.
The combination of a middle-income trap and a looming population decline is "extremely rare" for a country of China's economic strength
(Excerpt) Read more at markets.businessinsider.com ...
China may have been too quick to pivot from foreign investment to domestic innovation with its Made in China 2025 plan, Koo said, and the trade war could damage the manufacturing industries that drove the Chinese economy for so long.
"The Chinese economy remains heavily dependent on foreign businesses not only for manufacturing know-how but also for overseas marketing and sales," the economist wrote. "In view of that, the authorities should have treated foreign capital far better than they did."
If the country hopes to recover and keep its foreign investment intact, it should come to a trade agreement with President Trump before the 2020 US election, Koo said.
If this is what they’re reporting, then the true figure must be awful. Couldn’t happen to a nicer bunch of thieves. Good.
It could be awful but even if it’s only 3% it’s better than what we’re doing. But on the other hand they are starting from a much lower economic base so of course they grow faster. The standard of living in China is only 1/6 that of the US.
The fourth threat is really the killer. All communist governments in the past have failed because of corruption. The most brutal ones last a bit longer, maybe, but they still fail. China is on the way.
Uh oh. This means liberals will work even harder to get us to lose. When they see victory they work even harder to ensure we lose.
Then this is a good time to negotiate with them.
If every project is subject to a bureaucrats approval, then bribes, threats, and force, (corruption) not added value (profit) become the driving mechanisms of the economy.
Rising prices on their protein staple of pork, and the pig virus which has devastated their production is going to put heavy political pressure from their people to get the tariff issue resolved. Hungry and unemployed people start revolutions.
There’s been a lot of brave talk on FR lately about how bad off China is supposed to be, probably to support Trump’s trade war. But commies don’t have to run for reelection, whereas the USA is uncomfortably close to voting-in a communist takeover if the Democrats win. Trump’s trade war needs to translate into votes, or it’ll do no good. This isn’t going to happen if the tariffs cause people in the USA to start losing a lot of money. Fortunately, any loses from trade restrictions are being offset by free market reforms elsewhere, but this can’t continue indefinitely.
There’s also another massive threat the Left is reluctant to talk about: the massive financial cost of taking care potentially hundreds of millions of people affected by China’s very serious pollution problems. It’s a health cost bill that would either bankrupt the country and/or result in massive early deaths of many Chinese.
The numbers are probably lower than the BS numbers issued by China.
“The numbers are probably lower than the BS numbers issued by China.”
One quick check on the health of an economy is how much energy it is using. If electricity, coal, natural gas and gasoline use are down from where they were when China’s economy was booming then we can guess what the real “growth” numbers are. I would bet they are zero or negative.
Back in the day, the Soviet politburo used the published CIA economic numbers on the USSR’s economy, finding that the CIA was more accurate in estimating from afar, than was what being reported internally.
“China is on the way.”
How long does our Communist government have?
So then what is your solution?
“finding that the CIA was more accurate in estimating from afar, than was what being reported internally.”
Bullcrap. The CIA estimates of the Soviet economy were off by several orders of magnitude.
L
Most were, but Herbs were spot on.
True, but the Soviets had a different type of accountability when numbers weren’t made, so numbers tended to be what politburo could brag about.
“so numbers tended to be what politburo could brag about.”
Or they just flat out lied about them. And no one dared point it out.
L
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