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Apparently in order to maintain growth in 2008, China's government ordered banks to issue credit in the tune of nearly $4 trillion dollars over 3 years, which is almost the size of it's entire economy in 2009. Percentage wise, this is bigger than the US credit expansion during 2003-2007.
Also, there is $10 trillion dollars in circulation in China compared to $8 trillion in the US. Much of that is in real estate, and it appears China is encroaching the same type of housing crisis experienced by the Japanese in the 1980's.
The rising prices are making them unafforadable for the vast majority of locals, which is leaving several sections of vacant infrastructure not being utilized.
Additionally, China is experiencing wage inflation due to their aging workforce, increasing bargaining power of laborers and the difference between wages in college educated workers and low skilled labor, shrinking.
In order to grow its economy China is engaging in something it refers to as "social financing." It basically involves loans from one corporation to another or one depositer to another, with the bank playing the middle man, rather than putting up money.
The debt of companies and households combined amounts to 130% of China's GDP.
So, my question is, since it is getting harder for China to export cheap goods due to rising wages, and it is getting more difficult to grow due to debt obligations, will the US still be able to compete in the forseable future as China cannot sell it's products at relatively cheap prices?
Also, will China eventually become a signficant importer of American goods if the US can begin making quality products?
And finally, isn't it true that once a country copies another countries growth pattern and eventually becomes a 4th level economy, that it must adapt and begin to innovate?
How will this affect China's future?
Is BRIC building relationships and trying to keep wages low, so it can develop nations as trading parteners and then cut the US out of the equation?
Is it economic warfare?
Is Russia using other, more devious methods to stifle the US? It doesn't make any sense why Russia has more oil than anywhere else in the world, but fails to industrialize.
Do they have a power source that doesn't require fossil fuels? Why have they purposely stifled their own development?
Not trying to debate anything, just make some sense of this. Questions on questions.
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Originally Posted by Del Boy
Also, there is $10 trillion dollars in circulation in China compared to $8 trillion in the US. Much of that is in real estate, and it appears China is encroaching the same type of housing crisis experienced by the Japanese in the 1980's.
mkay riddle me this. How can money in circulation be in Real Estate?
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Is Russia using other, more devious methods to stifle the US? It doesn't make any sense why Russia has more oil than anywhere else in the world, but fails to industrialize.
Why would Russia want to copy US? Is that the basis of your question?
They already threw out the bankers. Might be smarter than US.
Besides towards the part of "devious methods to stifle the US . . ." Seems we tend to harm ourselves. If they wished US ill, why would they want to stop US?
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Do they have a power source that doesn't require fossil fuels?
Guess you have heard of various Nukes . . . .
Not a grand plan, but Russia has them.
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Why have they purposely stifled their own development?
Growth for the sake of Growth is what cancer is all about.
"in circulation" means it is not stored in a bank or investment institution, as opposed to freely moving.
Russia is cursed by their political system and corruption. In theory, they could sell the oil on the world market, while encouraging a renewable resource based infrastructure internally.
As far as growth goes, the only way to alleviate poverty is through either growth or wealth redistribution. Take your pick.
To answer the original question, The US is already benefiting form China's slowing growth. Add to that manufacturing efficiencies, import tariffs, shipping expenses and time to market and the tide may well be turning. Not to mention the shift in the US to lower wages. Let us hope we can continue to gain momentum!
I'm not an expert, but I did just polish my crystal ball, so...
I think what China is going through is akin to our Roaring '20s. They are in an economic bubble and will have their Crash of '29 at some point. It can also be compared to what happened with Japan. There was a time when everything you bought said "Made in Japan" on the bottom. Then there were the Asian Tigers (Taiwan, Singapore, Hong Kong) who went through the same thing. I suspect India will be next, or maybe Bangladesh. I've seen a lot of stuff coming from there lately.
But just because China will crash does not mean it will disappear. Japan and the Asian Tigers eventually recovered somewhat and are still a major economic presence.
More specific answers:
Yes, I think China will still be competitive with labor costs. They still have a lot of surplus labor.
They will not become a significant importer of US products because they will retain their current tariff on imports.
It will not have to innovate. It can just continue stealing our ideas.
BRIC aren't specifically trying to cut out the US or keep wages low. They are just trying to build their economies.
I mnay cases soe coutnries have savings rates that mean they have to find places to invest the money. Japan for instance has huge deficit but that ,ney is owned to japanese not forengers.China and Japan are out two bigesst lenders . One danger mnay worry about is both have agig popualtions form different reasons and they have invested much of that meny i US treasuries and will be cashig i on it for retorement of the aged i time that may not be that long from now.
As far as growth goes, the only way to alleviate poverty is through either growth or wealth redistribution. Take your pick.
*only* is a pretty limiting options. And even the entire premise that or growth OR wealth redistribution would seriously alleviate poverty may not be so sensible. The world has seen a fair amount of both at various times and places, and still has an awful lot of poverty.
Maybe let's think those through?
If one were to attempt infinite growth (on a finite planet), which is what endless growth has to turn out, as the exponent must be over 1 . . . it would have to consume everything, ensuring poverty for everyone.
Might be the same on redistribution? Even when poor folks work, many stay poor, so where does their money go out of circulation to? It goes to the Top.
Wealth is (and has been) being "re"distributed up to the top. Accumulating as it were.
So if one wanted to alleviate poverty, how about we just help the poor folks keep what they make and earn?
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Not to mention the shift in the US to lower wages. Let us hope we can continue to gain momentum!
So, my question is, since it is getting harder for China to export cheap goods due to rising wages, and it is getting more difficult to grow due to debt obligations, will the US still be able to compete in the forseable future as China cannot sell it's products at relatively cheap prices?
Manufacturing has already started shifting to other, cheaper countries.
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Originally Posted by Del Boy
Also, will China eventually become a signficant importer of American goods if the US can begin making quality products?
China's middle class would have to continue to grow, and the US currency would have to depreciate against the Chinese Yuan. Currently, they keep the Yuan pegged to the dollar.
But, Chinese do prefer American made products. Even they know their products are garbage.
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Originally Posted by Del Boy
Is Russia using other, more devious methods to stifle the US? It doesn't make any sense why Russia has more oil than anywhere else in the world, but fails to industrialize.
Russia has a lot of internal problems.
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