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Also they use some horrible construction standards / cut numerous corners.
And everyone wonders why all their cheap Chinese crap breaks in under a year? Would be cheaper to just pay the 50% markup and buy the American made product, but unfortunately, Americans aren't too bright... Must be all the lead in the cheap Chinese products they're so fond of
Your responses smack of political overtones on an economics/finance discussion. Whatever you're smoking, I want none of it.
The OP brought up what's relevant to current events. Last month, China's Manufacturing PMI dipped below 50, second worst reading since 2005. The Shanghai Composite Index is at its 2009 pit. BDI is hovering at the level of November 2008. Nothing to shout about. Yawn.
Politics and Economics are closely intertwined. You ever see the equation for GDP? There's a big, fat, "G" in there for government spending which is nothing more than politics. In fact, the "G" didn't matter than our GDP would immediately take at least a 15% hit (prob more like 20-25%).
Throwing out one off numbers without looking at the greater trend is pointless. Europe was just on the brink of a currency and political crisis until the ECB intervened via backdoor quantitative easing in the form of $500bn+.
Of course Chinese manufacturing was suffering from that. The entire world was.
As I said./ It's not all peaches in China and politically they have a lot to worry about. On the other hand, economically, they're in a strong forward looking position.
Of course Chinese manufacturing was suffering from that. The entire world was.
As I said./ It's not all peaches in China and politically they have a lot to worry about. On the other hand, economically, they're in a strong forward looking position.
As I said./ It's not all peaches in China and politically they have a lot to worry about. On the other hand, economically, they're in a strong forward looking position.
China definitely has a strong initial condition. However, I think continued reliance on exports and manufacturing through housing development will only exacerbate the situation. We made the same mistake with the housing part, and too much reliance on exports leads inexorably to higher labor costs and without a healthy consumer basis - and the social safety and policy nets to sustain it - to keep climbing the quality ladder, you find yourself a pidgeonholed country.
Part of what made the USA such a strong economy, and still does today to be quite honest relatively speaking, is the fostering of consumption and an awareness that people have money to spend, so let's set up a regulatory environment that fosters it. In the 1920s, we had much the same issue with health care costs being saved for "just in case." What came out of that are the insurance industry. What a concept! For pennies of what people were saving before, use a collective of people contributing to a pot for health care services. China doesn't have that.
That's just one example of the things that need to happen in China for them to make best use of their good initial condition of high reserves and low labor costs (still). We are starting to see some of that, but the truth is the communist party isn't really making the moves necessary to really jump start their domestic markets. They should institute reforms like Japan did after WWII and what Korea did after the partition. I totally agree with you that if they can do that what I pointed out are major systemic weaknesses we'll see a rising dragon superpower for the next few centuries. If not, we'll see a whimpering nation instead.
There are about 65 million apartments now in China that are unsold, because peops can not afford them. The average man only earns between 6000-7000 Euros a year, yet the apartments run above that per square meter, which is a little larger than square meter. China is trying to contain the bubble by building cheaper apartments. For 2012 it is expected to build about 7 million low rent apartments. The government wants a gradual, controlled reduction in property prices thereby avoiding a collaps or meltdown. And the only way to o that is by adding additional, cheaper housing.
There are about 65 million apartments now in China that are unsold, because peops can not afford them. The average man only earns between 6000-7000 Euros a year, yet the apartments run above that per square meter, which is a little larger than square meter. China is trying to contain the bubble by building cheaper apartments. For 2012 it is expected to build about 7 million low rent apartments. The government wants a gradual, controlled reduction in property prices thereby avoiding a collaps or meltdown. And the only way to o that is by adding additional, cheaper housing.
Typical Georgist apocalypse of housing speculation looking to eat all the surplus.
As population grows and technology advances, land values rise. This steady increase leads to speculation, as future increases are anticipated. Land values are carried beyond the point at which labor and capital would receive their customary returns. Production, therefore, begins to stop.
Production need not decrease absolutely -- it may simply fail to increase proportionately. In other words, new labor and capital cannot find employment at the usual rates.
Stopping production at some points must necessarily affect other points of the industrial network. Demand is interrupted, checking production elsewhere. Paralysis spreads through all the interlaced industry and commerce. The same events can seem to show either overproduction or overconsumption -- depending on one's point of view.
The period of depression will continue until: (1) the speculative advance in rents is lost; or (2) the increased efficiency of labor (due to population growth and/or improved technology) allows the normal rent line to overtake the speculative rent line; or (3) labor and capital are willing to work for smaller returns. Most likely, all three will cooperate to produce a new equilibrium.* Production resumes in full. After rents begin to advance again, speculation returns; production is checked; and the same cycle repeats itself.
There are about 65 million apartments now in China that are unsold, because peops can not afford them. The average man only earns between 6000-7000 Euros a year, yet the apartments run above that per square meter, which is a little larger than square meter. China is trying to contain the bubble by building cheaper apartments. For 2012 it is expected to build about 7 million low rent apartments. The government wants a gradual, controlled reduction in property prices thereby avoiding a collaps or meltdown. And the only way to o that is by adding additional, cheaper housing.
Interesting stuff. I was just in China with my wife visiting her family, and have been perplexed at how they are pulling things off over there. My wife's brother has a job earning a very average/standard wage there, which ends up being about $10,000 USD per year, maybe slightly under that. He is getting married soon and he and his fiancee are buying a new apartment that is still under construction. The cost on that is just over $200,000 USD! Apparently that is pretty standard for new homes there, even though the average worker is earning about what he is earning.
The older generation Chinese are huge savers, proven by the fact that my wife's parents are able to give large sums of money to their kids to help pay for things, even paying for a large chunk of this home for their son. But where will things go as more time goes by and things continue to get more expensive? Wages certainly won't rise fast enough to catch up (as you can see they are already wayyy out of whack), so once that older generation is gone and their money is spent, how will the future young people pay for these expensive things? They will find they are really hurting financially.
Interesting stuff. I was just in China with my wife visiting her family, and have been perplexed at how they are pulling things off over there. My wife's brother has a job earning a very average/standard wage there, which ends up being about $10,000 USD per year, maybe slightly under that. He is getting married soon and he and his fiancee are buying a new apartment that is still under construction. The cost on that is just over $200,000 USD! Apparently that is pretty standard for new homes there, even though the average worker is earning about what he is earning.
The older generation Chinese are huge savers, proven by the fact that my wife's parents are able to give large sums of money to their kids to help pay for things, even paying for a large chunk of this home for their son. But where will things go as more time goes by and things continue to get more expensive? Wages certainly won't rise fast enough to catch up (as you can see they are already wayyy out of whack), so once that older generation is gone and their money is spent, how will the future young people pay for these expensive things? They will find they are really hurting financially.
No wonder they cannot afford their own production. Does that look like a good middle class market? That's like being a furniture polish salesmen in a society that can only afford a roof.
Interesting stuff. I was just in China with my wife visiting her family, and have been perplexed at how they are pulling things off over there. My wife's brother has a job earning a very average/standard wage there, which ends up being about $10,000 USD per year, maybe slightly under that. He is getting married soon and he and his fiancee are buying a new apartment that is still under construction. The cost on that is just over $200,000 USD! Apparently that is pretty standard for new homes there, even though the average worker is earning about what he is earning.
The older generation Chinese are huge savers, proven by the fact that my wife's parents are able to give large sums of money to their kids to help pay for things, even paying for a large chunk of this home for their son. But where will things go as more time goes by and things continue to get more expensive? Wages certainly won't rise fast enough to catch up (as you can see they are already wayyy out of whack), so once that older generation is gone and their money is spent, how will the future young people pay for these expensive things? They will find they are really hurting financially.
You mentioned the older generations were huge savers. Any idea if they have better earning potential in there time relative to inflation? Seems to me the Chinese are starting to understand the facts of the matter though. Wages increased 20% over there last year. If this continues for another 10 years, you may see a huge influx of jobs back to the U.S., or to other, even cheaper wage nations. China is not efficient enough to warrant such extreme wage increases for long. Especially considering the consumer market there likely can not replace the consumer markets crumbling elsewhere.
You mentioned the older generations were huge savers. Any idea if they have better earning potential in there time relative to inflation? Seems to me the Chinese are starting to understand the facts of the matter though. Wages increased 20% over there last year. If this continues for another 10 years, you may see a huge influx of jobs back to the U.S., or to other, even cheaper wage nations. China is not efficient enough to warrant such extreme wage increases for long. Especially considering the consumer market there likely can not replace the consumer markets crumbling elsewhere.
So you believe that China will stay making bull**** trinkets and throwaway electronics for the US?
As they grow their economy will diversify.
Low value added manufacturing and assembly work was brought it because it had the potnetial (and did) to create vast numbers of jobs very quickly. In fact, the US made it possible in order to contain the wage-price spiral of the 70's. In effect, the US began to export some of its inflation in exchange for a more debt based economy. Kind of ironic?
As the need for massive job creation subsides to a more standard pace of job creation (the Chinese population will level off around 2030), the Chinese economy will begin to move toward more value added job creation and internal service consumption.
This is not certain but it's a natural growth dynamic if China does continue to improve. Before you run you have to walk.
Do not look at this from an American centric POV. The global dynamic is ever changing and I'm afraid that many Americans are caught up in the past of a post WW2 dominant America.
At one time America was a bit player in the world as well who manufactured low end goods.
Last edited by wawaweewa; 01-07-2012 at 11:57 AM..
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