[ocrenter]

[quote=Myriad]

**Based on what’s happening in Germany and Japan, the real growth rate in China is probably close to 0% at the moment. Orders all falling off a cliff in those countries.[/quote]

That I believe. Late last year there was a lot of talk about 1.6% growth rate. If that was real, then things moving to 0% is not surprising at all.

[ocrenter]

[quote=gzz]OCRenter, Bloomberg’s front page has a long article by a China bear. It is the same stuff from 5-10 years ago, which the author admits he was wrong about.

The basic problem for China is the after effect of 1 child. Two generations of that means one kid can have 4 grandparents and two parents to support with no siblings or cousins. The result is a massive savings rate that isn’t allowed to be invested abroad, so negative real interest rates. Despite being “socialist” they don’t have anything like Medicare or Social Security for the elderly.

When you have negative real rates, you get investments that are profitable for the borrower even though it doesn’t produce positive real returns. Some of that investment has positive social returns. But a lot of it is just pollution and cheap exports of pastic Wal Mart junk.

Despite these issues, they still have plenty of growth ahead due to low wages and a skilled workforce.

Northern EU and Japan have had negative real rates (even negative nominal rates) for a while too. However, it is only slightly negative and only on AAA assets. And they can enjoy much higher rates abroad. China’s “financial repression” puts the average Chinese in the position of saving at 3 or 5%, often in risky assets, with 6-10% inflation. Some goes to impressive and needed infrastructure, but a lot goes to white elephant projects and propping up corrupt state owned enterprises. Or real estate speculators. Or hyperpolluting bitcoin farms.[/quote]

https://www.bloomberg.com/news/articles/2019-01-17/forget-the-trade-war-china-is-already-in-crisis

Thanks for the tip, I believe this is the article you mentioned. I don’t think the author is really saying he was wrong, but merely all signs pointed to a bust but that was delayed by creation of an even bigger bubble.

Lots of points the article mentioned. You touched on it as well, which is the amount of real estate speculation is absolutely unprecedented. I think I read somewhere around 60% of Chinese wealth is locked into real estate, so a real estate crash there would doom maybe even the PRC itself as an entity.

Bottom line is there has to be a reason why such draconian tightening of controls on all aspects of daily life started over the last few years, those in the know understood the country is on very shaky grounds financially and that’s a recipe for revolutions if they didn’t firm up their grip on the populace.

[ocrenter]

[quote=FlyerInHi][img_assist|nid=26741|title=Global Economy in 2030|desc=|link=node|align=left|width=100|height=85]

This what Martin Jacques is forecasting for 2030. We will see if he’s right.
I hope to live in Asia part of the year in retirement so I can experience the changes first hand. Should be very interesting.[/quote]

Brian, when one engage in conversation on China, we need to determine whether we are discussing near-term or future expectations.

Future expectation is for China to become the biggest economy of the world, eclipsing the US. This is basic math based on population size and potential economic growth.

The question is is this future expectation going to come about via a straight line at 6-7% growth rate per year, or will there be significant dips in between caused by policy mistakes and simple systemic incompatibility as the economy evolves.

The CCP needs a straight 6-7% growth trend to justify its existence. It has borrowed heavily at all levels of government as well as some very creative math to maintain that over the last decade. Do you really believe there will be no dips ahead?

[ocrenter]

[quote=FlyerInHi]Lets say you start at 100 at the beginning of year. End of year, at 6.5%, you will have 106.5, or 101.6 at 1.6%. The lies must get bigger and bigger over time to keep up the prior lies.

If China has been lying about economic data for decades, then it really is a paper tiger and will collapse anytime. You must have read Gordon Chang’s book. He’s a frequent commentator on Fox. Everytime i watch a Fox segment on China, I want to ask them how a corrupt, inefficient and collapsing state be a threat to the USA?

Martin Jacques says that after 40 years, we are only at the beginning of China’s transformation; and that the idea of modernity will increasingly be China.
Sometimes I meet people visiting the USA for the first time. There are surprised at how low tech we are especially in our infrastructure and urban architecture.[/quote]

You are falling back to typical talking points by just blaming Opinions opposed to you as Faux News based, or based on commentators that’s Fox News based.

The person that mentioned creative messaging of gdp figures is Kevin Rudd, is he a Fox News contributor? Btw, Rudd also mentioned China itself identified 10 major vital economic reform measures several years ago, 2/10 is the report card on that one…

The source of Taiwanese news report of 1.6% growth and likely negative growth is from an prominent economic professor from the Chinese People’s University. The guy’s lecture online got pulled by China within a day, but went viral in Taiwan.

You were right about China, it was moving in the right direction, then Xi took over and everything started going in the other direction.

Like I said before, when a government bring a country to the lowest of the low, a fast rebound for a few decades is easy. But then if there is no standardized rule of law and general corruption at all level of government, growth can not continue on pace. Was there an attempt to keep the growth going? Of course, that’s why the massive debt driven growth over the last several years. That’s the making of a bubble.

Is China a paper tiger? China is essentially 5 new Asian Tigers standing on top of each other in a Dinosaur custom scaring everyone in sight. The prior Asian Tigers all liberalized at the same growth point, but the 5 new Asian Tigers are trapped in the dinosaur custom and glued to each other and managed by an all powerful Winnie the Pooh. That’s the problem.

[ocrenter]

[quote=FlyerInHi][quote=ocrenter]

I don’t think the trade war will end with Trump, President Pence will be equally if not harder on China. The Dems will not go the other way either come 2020.

Btw, news out of Taiwan is China is facing real GDP growth of 1.6% this year and likely negative GDP next year along with 10 million new unemployed. Things are going from bad to worse over there.[/quote]

I am replying to this from the other thread.

I agree on the anti China sentiment in Washington. It shows how our policy makers are talking from both sides is their mouths. On the one hand, China is a threat; and on the other hand, China cannot succeed because their system is corrupt, inefficient or whatever.

The real fear is that China will succeed and develop an alternative model to the western order, in which case Francis Fukuyama’s end of history will be proven wrong.

A German minister (forgot which one) denounced China’s growing influence but said it’s up to the West to give a more attractive option to any country that wants to do business with China

Do you really think China will go into recession? I know the narrative is that china’s statistics are fake and political. But you can’t lie about growth rates more than 1 year, else the math no longer works and the deception becomes self-evident.

My take on China is that their political model is worse for individual freedom. But their censorship system prevents fake news and irrational populism. Also, at critical stages of economic development (now the 4th industrial revolution) you need large amounts of capital for puclic insfrastructure. Think of what the interstate highway system has done for America, not all good and lots of bad, but it has driven economic growth. The private sector could not have done it.[/quote]

Kevin Rudd in November of this year: “we actually don’t know at the moment what the real growth rate is, when things get really bad on the growth rate, the Chinese statistical claim on the growth rate can border on the creative.”

Also remember why 45 millions of Chinese peasants died during the Great Leap Forward. Starting at the collective farm level there was over-estimate of grain production and granary storage. Moving up to township level, the numbers get padded some more, at the county level, some more padding, at provincial level a bit more padding, so at the end the central government received grain storage and production data that was wildly out of line with reality. Everything was based on central planning, and because central planners planned using hugely inflated data, they didn’t see the shortage coming, the famine happened and people died.

The structural system that was in place then is still in place now. People are promoted based on GDP growth rate. So it pays to cook up the numbers at every level of government. Once the data gets to the central government, it then does the creative statistical game Kevin Rudd describes, the end result is the claim of 6.5% growth rate but actual growth rate of 1.6%.

As for fake news, the People’s Daily and Global Times are the grand daddy of fake news, Fox’s got nothing on them!

[ocrenter]

[quote=flu][quote=The-Shoveler]I am not as sure a recession is coming anytime soon now.

I am thinking if the fed holds here (and communicates such), maybe a deal with China and we could be back in the race.

We will see I guess.[/quote]

I don’t think the trade war will be resolved anytime soon. China can sit it out and hope for a presidential change. China’s premiere can rule indefinitely.

Well unless the Trump side concedes.[/quote]

I don’t think the trade war will end with Trump, President Pence will be equally if not harder on China. The Dems will not go the other way either come 2020.

Btw, news out of Taiwan is China is facing real GDP growth of 1.6% this year and likely negative GDP next year along with 10 million new unemployed. Things are going from bad to worse over there.

[ocrenter]

btw, a great youtube on the chinese housing bubble:

[ocrenter]

[quote=FlyerInHi]Another great talk by Kevin Rudd.
The gravest danger for China is the middle income trap and the non-implementation of market reforms they had identified for themselves.
The trade war may cause China to implement their own reforms, ironically benefit them.

https://youtu.be/AUx2AYAVwGc%5B/quote%5D

I finally got around to watching this. The guy’s got some decent viewpoints. I will say the West’s assumption on China’s eventual liberalization is based on an apple to orange comparison. The West looked at S.Korea and Taiwan and assumed China would go that way as well, but forgot China is essentially Europe unified by the Nazi. One will not be assuming an unified Europe under the Nazi regime to liberalize, will they?

China’s got too many excuses to not liberalize, country is too big, development too unequal, regional differences too great, so on and so forth. The bottom-line as Kevin Rudd pointed out, it is an authoritarian regime aimed at preservation of that authoritarian order.

Honestly, for the good of China, all Chinese people, and the world at large, BREAK IT UP!

[ocrenter]

[quote=flu]

I sort of regret paying off my 2.5% 15 year mortgage early. A 2 year CD is now at 3% a 5 year CD well above that. If i left the same money in such such a laddered product, it would have been free earned interest. Many of you that kept with your ridiculously low 15 and 30 year fixed loans when rates were around 3% are going to make out like bandits. You won’t be able to rent out a comparable home these days at comparable monthly costs, so what motivation would you have to sell?[/quote]

same reason I resisted paying off my 2% student loan…

[ocrenter]

[quote=FlyerInHi][quote=flu]

You won’t be able to rent out a comparable home these days at comparable monthly costs, so what motivation would you have to sell?[/quote]

True, the high rents are holding up the market.
But values are based on transactions and investor transactions are drying up with inventory going up.

A jobs led recession will cause rents to drop. With a recession coming, I wouldn’t buy until 1 year after the recession is announced.[/quote]

impending recession seems to be the sentiment. which can be self-fulfilling.

[ocrenter]

[quote=henrysd]The SALT effect on urban California housing is certainly exaggerated. For people in NJ and NY with 3% property tax, they are hurt big way for almost all home owners. But for California, it is much more limited. We have only 1% property tax and many people wrongly claim Mello-Roos as part of property tax deduction in the past.

The SALT restriction mostly affects (assuming 2 income family here):
1) Very high earners like those make $800K or more a year. Those people were able to deduct all SALT expenses in the past without triggering AMT. They had 39.6% normal tax rate, so their effective tax rate before AMT was higher than the AMT rate of 28%. The new law would strip their ability to deduct SALT.
2) Middle middle class stretching themselves to buy homes at 5 – 6 times of their annual income of $120-200K. They were able to deduct all SALT expenses in the past without paying AMT. They have around 15 – 30K worth of SALT expense, but only allow 10K now.

For upper middle class (those make $220-600k annually), SALT restriction has zero effect. Those people were paying AMT tax in the past, so SALT expenses were not allowed anyway. Actually the removing of AMT in those income range in the new tax law tremendously increases their after tax income. This creates a plus factor for housing demand.

For low middle or lower income class, it is unlikely they have SALT above 10K. Even if it is above, it will be by small amount. I know people bought homes 20 years ago locked in low property tax and living on not-so-much income, they may be hurt in other aspect of tax change, but not much with SALT deduction.[/quote]

well put. thanks.

at risk of thread-jack, this may perhaps accentuate the financial benefit of mello-roos early payoff.

[ocrenter]

[quote=FlyerInHi]ocrenter, you focus on “freedom” because you want Taiwan independence.

I focus on wealth and development. China is perfecting mass production which has given us a world of plenty. With public infrastructure, China knows how do build fast. It’s precisely the competition with the West that China is helping develop the world. I mean look at Addis Ababa. Ethiopia used to be a basket case but it’s now a fast developing country thanks to trade with China.

[/quote]

Freedom/basic human right vs wealth/development are not mutually exclusive. China is simply scaling up the Asian Tigers model, but with a twist, which is stifling the next stage of development, aka social and political liberalization. Ethiopia is too early to tell, but it is essentially following the same Asian Tigers model. The question here is does it continue with the China model of perpetual totalitarianism?

[quote=FlyerInHi]

Myriad, are we really afraid of the China model? It we really do believe in our heart of hearts that a government lead model is bound to failure, then we have nothing to fear.

If we believe that policies do work, then we should come up with development policies of our own. If we give a better deal, then countries around Asia and the world will naturally follow us.

[/quote]

The China model is concerning because it takes what previously worked quite well, aka the Asian Tigers model, and twisted it into a perpetual authoritarian model. Authoritarianism is dangerous because personality cult is important, as is the need to always find foreign scapegoats, which leads to wars.

[quote=FlyerInHi]

As far a selling technology to China, what do you propose we sell to China other than agriculture to balance trade? The natural economic order is for more advanced economiies to sell higher tech. So by refusing to sell our highest technology to China, we are violating a fundamental economic law — maybe for good national security reasons, but still against good economics. So the trade deficit is of our own making.

[/quote]

the trade deficit will exist with or without China. reason is simple, manufactured goods and textile are simply cheaper in developing countries. The question is knowing China’s ultimate goal is to push a totalitarian nationalistic worldview with eventual global dominance, do you still allow the trade deficit with China, or do you move the trade deficit to other developing economies that pose far less threat.

[quote=FlyerInHi]
I hate to say it, but the ball is our court to provide an alternative to China. If don’t want countries to fall into Chinese “debt traps” then we should give them grants. All talk, no action.

PS: when our large banks lent billions to Latin America in the past, causing economic and currency crises, was that debt traps? Unfortunately, we never saw highspeed rail and beautiful airports as a result.[/quote]

you are on point on this one. we got complacent and overextended with the middle east wars. We invented the Asian Tigers model and we should have pushed it harder. Instead we fought wars after wars because of our dependence and addiction to middle east oil. I will say this, China construction is really shoddy, it falls apart very quickly, we are talking just 2-3 years. So don’t get too enamored with the fanfare and propaganda. It isn’t all that rosy.

[ocrenter]

[quote=FlyerInHi]ocrenter, lets say you are right. If people are fleeing China, does it not follow that China will implode on its own like the Soviet Union?
Do you believe that Trump’s trade war is about “freedom” or “human rights”? It’s about forcing Xi to abandon China 2025; you know, social engineering that cannot possibly work.[/quote]

People are not fleeing China. RICH people are fleeing China. As for China imploding. That’s hard to say, but the fear of imploding may have been the reason for the tightening grip since Xi came on board. Trump’s trade war has nothing to do with freedom or human rights, he doesn’t care about that. The trade war is because China is trying to challenge the US’s Unipolar world.

[quote=FlyerInHi]

Everything that China has done and is doing has been tried before. You have to recognize China’s successes where other countries have failed at the same things.

Like the NYT story says, we, the West, are still waiting for China to fail.[/quote]

Reason for China’s success is you had Taiwan/HK exporting their know-how, Japan’s ongoing investment and contribution, and the US keeping its market open for Chinese exports. Interestingly ALL 3 major players that led to China’s success are routinely vilified within China.

[quote=FlyerInHi]
About the Singapore model, it’s not about copying a city State.
Lee Kuan Yew Singapore with “Asian values” regardless of ideology.
China is doing “Capitalism with Chinese characteristics”. Capitalism in this case not meaning totally private ownership or initiative, but using capital/money to achieve development goals. It’s the logical continuation of “to get rich is glorious.” The “freedom” and “democracy” we cherish in the West are secondary to money and wealth in Asia, at least until they catch up to the West. I think they are correct because money is freedom.[/quote]

This Asian Values BS is ridiculous. This is essentially a stereotype that justifies the withholding of civil liberties to 1/5 of humanity.

Asian societies such as Japan and S.Korea and Taiwan are thriving with democratic values, yet a totalitarian city state half the size of LA keep getting brought up as the ultimate case for Asian Value. WHY??? Because it fits the narrative of China. And meanwhile a model that is working well for 200 million Asians are tossed off to the side, once again, because China finds that model to be inconvenient. But China apologists like yourself will continue to push the Singapore model, and completely ignore the Taiwan model, the S.Korea model, or the Japan model. Taiwan and S.Korea and Japan proved they can get rich, be glorious, and still have civil liberty and freedom. Try looking into that, will you?

[ocrenter]

[quote=FlyerInHi]Points well taken, ocrenter.

So now, either China democratizes or fails? If those are the 2 options, then we got nothing to worry about.

Taiwan is actually now stagnating and experiencing a brain drain to China.

I think the model for China is Singapore — ultra capitalist in some ways, and a nanny state in many other ways. And the amazing thing is that Singapore does it with government spending at 18% of GDP. I believe if there’s a real estate crash in China, they will roll over the non performing assets into a Singapore style public housing.

Singapore hosted ASEAN last week. Hank Paulson was there. I watched some speeches and interview with PM Lee Hsien Long.[/quote]

Actually Taiwanese businesses know China really well, most are fleeing China in droves. They see the bubble bursting and they are abandoning ship.

Singapore as a City State used as a model for the world’s biggest country by population? That’s a tough one.

China did not have to democratize now. They could have continued slow and gradual liberalization. Again, Taiwan generated a very viable playbook: repressive regime gave way to benign authoritarian government with sham local elections, grip on speech loosen up gradually over time, sham elections get a little more fair and more national and consequential elections are then added. Soon President is elected indirectly via representatives, after that direct election of the highest office of the land.

This playbook could have been implemented in HK and Shanghai locally. After all, they invented the very pragmatic one country two systems policy. They could have set a standard where if a province or metropolitan region reaches a certain gdp per capital or educational level, they earn some level of local election and so on. Had that been implemented, Taiwan would likely get sucked into the orbit very quickly.

The opposite is true, things are getting much more authoritarian. American and other foreign expatriates are reporting that the crack down on personal liberty is very real, the restrictions are getting worse, and the government interference on daily speech is casting a shadow on everything. The grip is getting tighter and Taiwan sees that and is running the other way. The US is looking at this and realizing China is not following the post war playbook followed by Japan, Taiwan, S.Korea… this is turning out to be a repay of Hitlers’ Germany or Imperial Japan. Trump maybe the one starting the trade war, but both parties are on the same side on this one.

[ocrenter]

[quote=FlyerInHi]The NYT has a whole series on China.
It’s pretty objective even though sometimes they fall back on stereotypes that they want to avoid

The land That Failed to Fail
The West was sure the Chinese approach would not work. It just had to wait. It’s still waiting.
https://www.nytimes.com/interactive/2018/11/18/world/asia/china-rules.html

The American Dream is alive. In China
By JAVIER C. HERNÁNDEZ QUOCTRUNG BUIThe New York Times
Mon., Nov. 19, 2018
Imagine you have to make a bet.
There are two 18-year-olds, one in China, the other in the United States, both poor and short on prospects. You have to pick the one with the better chance at upward mobility.
https://www.thestar.com/news/world/2018/11/19/the-american-dream-is-alive-in-china.html%5B/quote%5D

The answer to the question of why China grew so fast is Taiwan. Which is well covered in the NYT article. Without Taiwanese and HK businesses coming into the vacuum and injecting economic know-how in the late 80’s, the take off would not have happened so quickly with minimal roadblocks.

One way to look at China’s rise was that China was so economically depressed when it first opened up it really have had no other way to go but up. China’s CCP got so much praise for China’s rapid growth, but if you think about it a bit, they totally destroyed all prior economic vital signs and had the country at near flat line, then when the patient came back alive they are now the heroes??? As for the economic playbook, they essentially just borrowed the same playbook used by Taiwan, and since Taiwanese businessmen were able to bridge the gap given the same linguistic and cultural base, they were able to replicate and copy the same growth Taiwan experienced in the 70’s.

Now Taiwan has created a great playbook for democratization for China to plagiarize and copy as well, free of charge. Problem is China doesn’t want to play that game because they see themselves as the KMT within Taiwan, which is now decimated and marginalized.

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