China dream alive and kicking (economy ripe for collapse)

The New Australian ^ | June 2002 | S.P. Seth

[TigerLikesRooster]

Re #19

We are talking about the numerical proportion and its impact. Yes, China is a large economy. I am just saying that 20% of Chinese economy, the export sector, is more crucial than the number 20% suggests. It is where most of net hard currecy comes out. The domestic sector may be big in numbers but they may not have robust foundations. As you may know, the pace of development in economy is not uniform along all sectors. Export sector is usually most competitive, and other sectors are slowly catching up, such as finance. It is natural in an economy like Chinese. You cannot change everything overnight at the same speed across the board. Especially, if Chinese financial sector is weak, external financial shock can inflict serious damage in Chinese economy, or any other economy in East Asia.

[185JHP]

Do you know the (possibly apocryphal) story about how Cut & Shoot, TX got its name? Your post made me picture a Chinese tot saying "We better get out of here, Mama, there's gonna be some fightin' and starvin'!"

[Truthsayer20]

"OTOH, street level free market capitalism is simply raging out of control. Its pretty cool actually. Everyone wants to start a business, everyone wants to get rich. The average man in the street is a hard core capitalist."

Sounds like my kind of place. I'll bet in many ways China has a more Capitalistic culture than we have.

[TigerLikesRooster]

Re #20

As a matter of fact, S. Korea's exposure to America these days is 20 % of all export volumes. Chinese portion is increasing, eclipsing American portion. It is true that, at the moment, the prevailing thought is that China will continue to grow as she did in last decade or so. But we all know that, even the growth comes in waves. Japan had its near-linear growth up until 1990, and stalled. S. Korea and other Asian contries went into same serious downturn in 1997. America claimed that it does not suffer problems of these economies. But it created its own financial bubbles bigger than any previous bubbles combined. In later part of 90's, China and America were the rage. But as in previous economies, the projection of growth is based on the assumption that it will contiune the same pace as previous years. We all know that it peaks at some point and retreats. S. Korean and Japanese businessmen suffers from the same euphoria as American businessmen, "China will grow unabated." They will push and push until they hit a wall. The same thing happened regarding America until quite recently. Businessmen all over the world could not imagine the American economy runs into serious problem. Businessmen are just susceptible to hypes and group-think as any ordinary folks.

[voa-davidk]

Did you know that about 1 or 2 years ago the Los Angeles Times had an article decrying the possibility of Capitalism in mainland China , saying that capitalism would bring vast amounts of pollution ( in essence an ecological nightnmare ) to China with it's billions of people.

Not surprising from the commie LA Times , eh ? - voa -davidk 7/13/02

[AIG]

I do not doubt what you say, but so what? Exports are a proven strategy to develop one's economy. Look at Japan, Korea, TAiwan, etc. All export-based economies for the most part. But China's got a large domestic economy too which is growing so that's an additonal attraction about China that other E. Asian countries don't have as much.

[AIG]

Sure, all economies hit their saturation points, but with just a $1,000 per-capita GDP, China's still got a long way to go. Every economy's got its growth curve and China is still in the exponential growth phase while America, Japan, Europe, etc. hit their maturity phases long ago. China's just got a lot more room to run.

[TigerLikesRooster]

RE #26

I am not talking about Chinese economy in the future when its domestic economy is well-established. But its domestic economy now. Any serious financial crisis can damage both domestic and export sectors. With sound financial sector and no state-sector bleeding the rest of economy, China can have self-sustaining domestic economy. But I do not think China is there yet. Hence, the vulnerability.

[AIG]

It's hard to move from a 100% communist to 100% market financial sector very quickly. Even despite China's banking problems, foreign investment in China this year will be the highest it's ever been. I remember during the 1997 Asian financial crisis also that China was about the only economy in the region not to be affected due to the non-convertibility of its currency. It would seem that China's economy is more insulated than vulnerable to external shocks.

[AIG]

Probably what holds China back from reforming its banking sector more quickly than otherwise is that those banks are needed to continue to provide money to China's state sector, so that workers are not laid off in a too-quick manner. If workers are laid off at a moderate rate, then China's overall economy can absorb them. But if workers are laid off too quickly, China's overall economy can't absorb them so there might be social unrest, which doesn't serve China's long-term interests or America's.

[Cacique]

btt

[AdamSelene235]

Sounds like my kind of place. I'll bet in many ways China has a more Capitalistic culture than we have.

Its another planet. Pity about the government, it simply must go.

Anyway once they ditch the Party, stand back for a massive deflationary shock state side, especially unskilled labor and manufacturing-wise.

It will probably take them another 20 years to match our technology, if they play their cards rights. Right now, they haven't figured out how to make a car engine that runs more than 30,000 miles (no small task).OTOH, labor is so cheap and folks are so enterprising, you don't need to. At 20,000 you just pull over into an alley, and some budding young capitalist will happily tear the whole car down on the sidewalk and rebuild it that day. Tax-free of course. The communists simply haven't managed the degree of mindless tax obedience that the IRS has.( The fiscal burdern of government is currently 2X lower in "Communist" China than in the US).

[TigerLikesRooster]

Re #30

Chinese government tried to push too fast ahead while holding onto vast territory and population. Apparently, the expectation of population and some ruling class is running ahead of what can be realistically done. It is the case of "Chinese irrational exhuberrance". People and institution do not change as fast as equipment and factory do.

[AIG]

What exactly are you talking about? I'm in China now and I don't see any signs of any imminent collapse. On the contrary, China's a lot more vibrant, thriving, and optimistic these days than most other places in the world. When I walk down a Shanghai street, it even makes Manhattan look slow and boring by comparison. On a fundamental economic basis, China's got all the ingredients to become an economic superpower -- labor, land, infrastructure, brains, capitalist culture, etc. Sure, China's economic path won't be a straight line up, but in developing economies do usually grow faster than already-developed countries because the big per-capita gap between these two classes of countries causes aggregate economic demand in developing countries to be that much more greater. As we speak, China is the #1 market in the world for cell phones, will hit #2 in PC's by next year, is #1 in elevators, light bulbs, air conditioners, refridgerators, and is predicted to be #2 in cars by 2010 and #1 by 2020. Ask any major corproation today where their fastest growing market is and it's likely to be China. The First World's markets for many products are already saturated so China's growing demand is the best thing in the world.

[TigerLikesRooster]

Re #34

If you asked the same questions to people in Thailand and Malaysia around 1994 and 1995, they would have answered the same way. More vibrant than ever. No sign of any danger in horizon. I have no doubt that things look the way you described in the streets of Shanhai. That was the way it looked in Seoul in 1996 and in NYC in 1999. All the troubles were behind. Only the bright future. But I knew that Korea was having some problems starting 1994. It was the matter of time. It hit eventually, in the way worse than I expected. I thought that America will be in trouble after 1996's Greenspan's "Irrational Exhuberance speech. Looks can be deceiving. It does not take a financial genius to figure it out as long as one is not blinded by hypes.

[Dec31,1999]

[AIG]

Having a financial crisis here and there doesn't mean the country as a whole is going to be down forever. Since the bottom of the Great Depression, US GDP has risen almost 200-fold and the Dow has also risen by about 200-fold. Instead of paying attention to financial crises here and there which are inevitable but not fatal, you have to look at the long-term trends given the resources a country has.

[AIG]

Probably, 20-30 years ago, Korea's per-capita GDP was the same as China's today. But in 2-3 decades, look at how far Korea has come. If anything, China's got everything Korea has in terms of exporting capability but also a much larger domestic market. Politically, most E. Asian "tigers" followed a one-party, authoritarian path of economic development as well. Given a choice between democratic Russia and India and authoritarian E. Asia, it's obvious which path China prefers.

[Dec31,1999]

Do you doubt that China is the biggest market for cell phones now? You don't have to trust China's figures. You can trust Nokia's. The Koreans are particularly big in China's cell phone market these days, incidentally.

Slavery gives a nation obvious advantages.

[piasa]

Someone posted on this forum that the Chinese will assign 400 people to milk a single cow and report full employment

Let me guess... they called the legislation that authorized the hiring of the 400 government milkmaids the "Dairy Security Bill" and touted it as a legislative victory over potential Himontereyjacking and other forms of cheese terrorism.