I noticed that mass media usually report *youth* unemployment for China, whereas for other countries an *overall* unemployment is typically reported. That is also the case in this blog. Is there a reason for this? Shouldn't we be comparing apples-to-apples
Very interesting! By the way I went to see the China exhibition currently showing at The British Museum today for the second time. If for any reason you goto London before the exhibition finishes on 8th October I definitely recommend it https://www.britishmuseum.org/exhibitions/chinas-hidden-century
Fed tightening and PBoC inflating should help their export industry. What infrastructure to invest in? I would consider moving factories westward to ease unemployment for those areas. Complete the BRI westward towards Central Asia and Russia as well as to Pakistan and Iran for delivering finished goods from the western Chinese provinces. But honestly if China is reaching post-industrialization, they may need to move in the footsteps of Japan, S. Korea, and the US -- that is less reliance on exporting goods and more towards exporting services. $0.02 :-)
Interestingly, a week ago I was sitting next to a fellow whose family business is the construction and operation of hospitals, and he told me that the firm had received a large loan from the government for five hospitals - as part of a major expansion of healthcare spending.
"Although China nominally has universal health coverage, it’s actually pretty patchwork and subpar"
Can you name a large, universal healthcare system anywhere that isn't subpar? My friends in the UK, Canada, and France all complain about their healthcare systems (mostly waiting periods, especially Canada). Only tiny Singapore has somewhat pulled this off, and it isn't free to use.
"It’s also something China is just going to have to do anyway. A huge cohort of Chinese people in their 50s is about to enter old age"
I wonder if this isn't overblown. The "live forever" tradition of the WEIRD is just that, historically weird. Are we sure the Chinese people will demand the kinds of expensive, last-year-of-life care that is bankrupting most of the Western universal systems? A mostly rural (as China still is) culture rooted in Confucian / collectivist values may well choose differently than ours. At 73, maybe Grandma needs morphine not chemo. (Even in America, many families are quietly making the same choices, just not talking about it. I know of what I speak.)
"if you lower the amount of time that young people have to spend taking care of grandma and grandpa, you free up young people for more productive work."
Perfect example... only someone from a WEIRD country would say this. In every other culture in the world, caring for Grandma isn't an economic decision. It's a ethical one.
Great column. Insightful. Contributed to my elementary education.
The options you offer here as best fixes for China regarding GDP, growth, debt structure, productivity, short- and long-term aftereffects, etc., seem to me to coincide nicely with, for instance, Pettis' analysis of the relationship between debt and growth in economies with different characteristics (specifically China and the US) , in https://carnegieendowment.org/chinafinancialmarkets/86397.
I barely understand all the relationships invoked here, or in Pettis' analysis, but it seems to me that his conclusions about the eventual growth path of China's economy are not optimistic, in view of the apparently fictitious wealth underpinning China's current GDP value.
I think there's room here for more analysis from you.
Don't the Chinese already save too much and therefore the effect of helicopter money might be muted? When I saw the title I thought one of the recommendation you were going to make was to flip the switch from real estate and infrastructure focused investment to a full on consumer economy. This would be a suggestion from from the Pettis/Klein camp. Thinking it through, one of the reasons for the high savings rate is the relatively thin safety net, among other things. Perhaps a knock-on effect of investing into healthcare would be to lower up the Chinese consumers propensity to save.
China already has world class healthcare ... for top party officials. Significantly expanding that would eliminate one of its major 'class' based benefits. Similar to the restrictions on migrant workers when they leave their home province, enforcing various class distinctions is vital for the powerful to remain above the others. They don't let go easily.
Xi is not just an awful leader, but an awful leader at a pivotal time. China needed a leader to promote domestic demand, expand migrant worker rights, and really harness green energy (not shunt it while burning coal). All that Xi cares about is consolidating personal power, so that's all we'll see.
China doesn't need more subsidies for demand; it needs fewer subsidies for supply. As long as 30%+ of GDP is earmarked for construction and real estate regardless of profit, the rest of the economy will be weighed down automatically.
In most countries, expensive subsidies are for consumer goods, so the waste shows up as inflation. In China, the expensive subsidies are for state-affiliated land development. That makes the waste show up as unrepaid loans.
As Michael Pettis observes, all China's mid-ranking elites are implicit beneficiaries of these shady-accounting financing arrangements. So the leaders stand to wreck their own political clients if and when they cut off the money flows.
Demand subsidies might help at the margin. But China's real trouble is its existing subsidies, the politically crucial subsidies, in supply.
There may come a time soon when a similar article could be written about America, substituting for "real estate" "the stock. private equity, private credit and real estate markets."
However, the ratio of Household Net Worth to GDP is historically high, even after moderating somewhat recently. Occam's razor explanation: asset values have not adjusted to a higher interest rate regime. (sorry for the long link!)
China having lower taxes than the USA and Japan is…news to me. I’m surprised for some reason but not sure why.
I noticed that mass media usually report *youth* unemployment for China, whereas for other countries an *overall* unemployment is typically reported. That is also the case in this blog. Is there a reason for this? Shouldn't we be comparing apples-to-apples
Very interesting! By the way I went to see the China exhibition currently showing at The British Museum today for the second time. If for any reason you goto London before the exhibition finishes on 8th October I definitely recommend it https://www.britishmuseum.org/exhibitions/chinas-hidden-century
https://kathleenweber.substack.com/p/are-the-united-states-and-china-at
I just wrote my first sub stack post in response to Noah's July 7 post on China. I hope you'll check it out!
https://www.noahpinion.blog/p/china-at-the-peak
Fed tightening and PBoC inflating should help their export industry. What infrastructure to invest in? I would consider moving factories westward to ease unemployment for those areas. Complete the BRI westward towards Central Asia and Russia as well as to Pakistan and Iran for delivering finished goods from the western Chinese provinces. But honestly if China is reaching post-industrialization, they may need to move in the footsteps of Japan, S. Korea, and the US -- that is less reliance on exporting goods and more towards exporting services. $0.02 :-)
Interestingly, a week ago I was sitting next to a fellow whose family business is the construction and operation of hospitals, and he told me that the firm had received a large loan from the government for five hospitals - as part of a major expansion of healthcare spending.
"Although China nominally has universal health coverage, it’s actually pretty patchwork and subpar"
Can you name a large, universal healthcare system anywhere that isn't subpar? My friends in the UK, Canada, and France all complain about their healthcare systems (mostly waiting periods, especially Canada). Only tiny Singapore has somewhat pulled this off, and it isn't free to use.
"It’s also something China is just going to have to do anyway. A huge cohort of Chinese people in their 50s is about to enter old age"
I wonder if this isn't overblown. The "live forever" tradition of the WEIRD is just that, historically weird. Are we sure the Chinese people will demand the kinds of expensive, last-year-of-life care that is bankrupting most of the Western universal systems? A mostly rural (as China still is) culture rooted in Confucian / collectivist values may well choose differently than ours. At 73, maybe Grandma needs morphine not chemo. (Even in America, many families are quietly making the same choices, just not talking about it. I know of what I speak.)
"if you lower the amount of time that young people have to spend taking care of grandma and grandpa, you free up young people for more productive work."
Perfect example... only someone from a WEIRD country would say this. In every other culture in the world, caring for Grandma isn't an economic decision. It's a ethical one.
Great column. Insightful. Contributed to my elementary education.
The options you offer here as best fixes for China regarding GDP, growth, debt structure, productivity, short- and long-term aftereffects, etc., seem to me to coincide nicely with, for instance, Pettis' analysis of the relationship between debt and growth in economies with different characteristics (specifically China and the US) , in https://carnegieendowment.org/chinafinancialmarkets/86397.
I barely understand all the relationships invoked here, or in Pettis' analysis, but it seems to me that his conclusions about the eventual growth path of China's economy are not optimistic, in view of the apparently fictitious wealth underpinning China's current GDP value.
I think there's room here for more analysis from you.
Do you think that the trend of Western companies leaving China will continue to accelerate or stay at the same pace?
Don't the Chinese already save too much and therefore the effect of helicopter money might be muted? When I saw the title I thought one of the recommendation you were going to make was to flip the switch from real estate and infrastructure focused investment to a full on consumer economy. This would be a suggestion from from the Pettis/Klein camp. Thinking it through, one of the reasons for the high savings rate is the relatively thin safety net, among other things. Perhaps a knock-on effect of investing into healthcare would be to lower up the Chinese consumers propensity to save.
Let's hope they indeed choose healthcare over military, which is another plausible area for government spending
China already has world class healthcare ... for top party officials. Significantly expanding that would eliminate one of its major 'class' based benefits. Similar to the restrictions on migrant workers when they leave their home province, enforcing various class distinctions is vital for the powerful to remain above the others. They don't let go easily.
Xi is not just an awful leader, but an awful leader at a pivotal time. China needed a leader to promote domestic demand, expand migrant worker rights, and really harness green energy (not shunt it while burning coal). All that Xi cares about is consolidating personal power, so that's all we'll see.
Tiny typo: There are 4 parents for the couple with 8 grandparents, not 2.
China doesn't need more subsidies for demand; it needs fewer subsidies for supply. As long as 30%+ of GDP is earmarked for construction and real estate regardless of profit, the rest of the economy will be weighed down automatically.
In most countries, expensive subsidies are for consumer goods, so the waste shows up as inflation. In China, the expensive subsidies are for state-affiliated land development. That makes the waste show up as unrepaid loans.
As Michael Pettis observes, all China's mid-ranking elites are implicit beneficiaries of these shady-accounting financing arrangements. So the leaders stand to wreck their own political clients if and when they cut off the money flows.
Demand subsidies might help at the margin. But China's real trouble is its existing subsidies, the politically crucial subsidies, in supply.
There may come a time soon when a similar article could be written about America, substituting for "real estate" "the stock. private equity, private credit and real estate markets."
True.
However, the ratio of Household Net Worth to GDP is historically high, even after moderating somewhat recently. Occam's razor explanation: asset values have not adjusted to a higher interest rate regime. (sorry for the long link!)
https://fred.stlouisfed.org/graph/fredgraph.pdf?hires=1&type=application/pdf&bgcolor=%23e1e9f0&chart_type=line&drp=0&fo=open%20sans&graph_bgcolor=%23ffffff&height=450&mode=fred&recession_bars=on&txtcolor=%23444444&ts=12&tts=12&width=718&nt=0&thu=0&trc=0&show_legend=yes&show_axis_titles=yes&show_tooltip=yes&id=BOGZ1FL192090005Q_GDP&scale=left&cosd=1987-10-01&coed=2023-01-01&line_color=%234572a7&link_values=false&line_style=solid&mark_type=none&mw=3&lw=2&ost=-99999&oet=99999&mma=0&fml=a%2Fb&fq=Quarterly&fam=avg&fgst=nbd&fgsnd=2008-02-01&line_index=1&transformation=lin_lin&vintage_date=2023-07-22_2023-07-22&revision_date=2023-07-22_2023-07-22&nd=1987-10-01_1947-01-01