China in transition: Echoes of Tiananmen. China’s Real Choices for Growth. Yves here. I particularly like this post because Michael Pettis takes some boundary conditions about China and works through their implications. One quibble I have is that he talks of “debt capacity limits.” That depends who the issuer is. The national government could in theory “print,” it has no need to issue debt to fund its activities.
But the constraint on that sort of approach is inflation, and China is trying to cool off inflation without crimping growth too much. Last week’s news was dominated by the sudden but not wholly unexpected removal of Bo Xilai as mayor of Chongqing.After the initial shock wore off, much of the speculation within China has moved on to what his ousting says about the evolution of power and, for economists, how it will affect the reform and rebalancing of the Chinese economy. 1. Notice that all of these options effectively have China doing the same thing: In each case the state share of GDP is reduced and the household share is increased.
Satyajit Das: “All Feasts Must Come to an End” – Fake Goods, Fake Growth? (Part 3) By Satyajit Das, derivatives expert and the author of Extreme Money: The Masters of the Universe and the Cult of Risk Traders, Guns & Money: Knowns and Unknowns in the Dazzling World of Derivatives – Revised Edition (2006 and 2010) Part I; Part II. A significant part of China’s growth has been an illusion. Since 2008, China’s headline growth of 8-10% has been driven by new lending averaging around 30-40% of GDP. Given that (up to) 20-25% of these loans may prove to be non-performing, amounting to losses of 6-10% of GDP. If these losses are deducted, Chinese growth is much lower. The China economic debate is focused on the alternatives of a soft or hard landing. The case for the soft landing assumes that the investment and property bubbles are less serious than thought. Growth comes down gradually, without causing social and political disruptions.
But the end of a cycle of debt and investment driven growth is typically disruptive. Chinoise Exceptionalism… Isolationism is not a given. China Wants to Frack, and Frack Hard. While fracking in the US remains a hugely contentious issue, a lack of groundwater regulation combined with an incredible thirst for energy production has led China to push for a massive fracking boom in coming years. According to a report by Caixin, a white paper released by the Chinese State Council envisions a fracking industry that can extract 6.5 billion meters of natural gas a year by 2015. Supplementary documents dug up by Caixin suggest that China is aiming for that industry to boom to 100 billion cubic meters of capacity a year by 2020.
It's a push led by the fact that China has the world's largest proven shale gas reserves, but production lags far behind the US, which is the world's leader in that regard. It also comes as no surprise. While the Chinese government pushing natural gas isn't surprising, the incredible scale and called-for ramping up of production is. Top image via The World @derektmead. The Canton Fair: The China price. The Macroeconomics of Chinese kleptocracy. China is a kleptocracy of a scale never seen before in human history. This post aims to explain how this wave of theft is financed, what makes it sustainable and what will make it fail. There are several China experts I have chatted with – and many of the ideas are not original. The synthesis however is mine. Some sources do not want to be quoted. The macroeconomic effects of the Chinese kleptocracy and the massive fixed-currency crisis in Europe are the dominant macroeconomic drivers of the global economy.
As I am trying a comprehensive explanation for much of the world's economy in less that two thousand words I expect some kick-back. China is a kleptocracy. I start this analysis with China being a kleptocracy – a country ruled by thieves. (a). (b). (c). This however is only the beginning of Chinese fraud. China has huge underlying economic growth from moving peasants into the modern economy The one-child policy drives massive savings rates This does not work in China. John. Follow up to the China kleptocracy post. The China kleptocracy post has received a lot of comment - mostly favourable. It was my first post to get 100 thousand views. I would like to thank all that commented on it (especially Paul Krugman who was good for about 35 thousand page views). Only a few of those views are from China.
My post was blocked by the Great Chinese firewall.* That said, within China the people who have been in business there for more than a decade were mostly in agreement. The people who have been there a couple of years were less in agreement. Bill Bishop (who I read and respect) was in the less in agreement group. I will not name the people in agreement because many have to live in China. My thesis was (a). Demographics is outside my field of expertise and I received (and expected) most criticism on the demographic point. There was little objection to my argument about limited options for saving in China. Monopoly profits and financial repression are a subsidy from the household sector. John.
Down-Under Hypocrites Bet All on China’s Boom: William Pesek. All in. That’s essentially the message Treasurer Wayne Swan is sending about Australia’s odds-defying bet on Chinese growth. The government’s latest budget pledges to deliver the quickest improvement in the nation’s finances on record -- without specifics about how that will happen. The absence of such detail is telling and can be boiled down to one thing: an even bigger gamble on China’s 10 percent growth and its voracious appetite for Australia’s resources. It’s risky to so fully hitch the hopes of 23 million people to a single nation that’s still developing.
Hypocrisy was in the room last month when Australia rejected a Singaporean offer for its stock exchange. The debate distracted attention from a far bigger takeover happening by stealth: China’s designs on all things down under. The stock market deal would’ve been just a corporate merger, not exactly an affront to Australia’s national identity. Resource Boom There’s even a role for Ben Bernanke. Two-Speed Economy 17th-Century Model.
Reverse mergers? Behind <i>The Rise of the Great Powers</i> China’s imprisoned Nobel Peace Prize winner asks what a TV miniseries can teach us about the direction of the new China. From his new book of essays. Photograph via Flickr by Jakob Montrasio During the early years of the twenty-first century, an initiative toward “great power diplomacy” clearly became one of the objectives of the Chinese government under Hu Jintao and Wen Jiabao. The phrase “rise of a great power” entered the official language and was promoted in the state-run media, in part in connection with a spectacular television series.
The Rise of the Great Powers No list of the major topics in public discussion in China during 2006 can omit the blockbuster production by China Central Television (CCTV) called The Rise of the Great Powers. The group that planned and designed the project included many Chinese scholars who work within the political system but hold values that are liberal and open-minded. But Professor Yuan also pointed out a number of major deficiencies in the series. China coal.