Should we be worried about China’s economy?

[happyhoix]

70% of their household money is tied up in real estate, and their property bubble burst. They expected a strong come back this year after 3 hard years of covid restrictions, and that never happened. Their GMP is still good - at 4% (I think ours is at 2?) but there’s a lot of property developers who borrowed a lot of money for estate developments that suddenly aren’t selling, and the loans are getting called.

www.reuters.com/markets/asia/why-is-chinas-economy-slowing-down-could-it-get-worse-2023-09-01/

Is it a good thing or a bad thing for us that the Chinese economy is struggling? 

[djAdvocate]

i think that all you need to look at to know who this benefits is the balance of trade.

[happyhoix]

I saw a conversation on TV with a talking head years ago, when China was first changing their economy from the traditional communist economy to be more quasi free market, and it was very hot. The interviewer asked the expert if the Chinese, as they became more worldly both in trade and in the opportunity to visit other countries would continue to accept the draconian Communist control over their lives, and the talking head said he thought they would - as long as the economy remained hot and everyone felt like they had a chance to get rich, too. If it ever cooled down, though, he felt the Chinese would blame their leaders, and question if communism was acceptable anymore. 

1 in 5 young adults in China are unemployed right now - and China did a horrible job with Covid, imposing stay at home orders for whole cities, without providing any government assistance to offset the financial burdens. And now post covid, the big recovery the government expected has fizzled. So I’m wondering if they will experience some political upheaval, and if that’s good or bad for us. 

[Tiny]

China's had an unemployment problem for quite a few years (pre covid)... or maybe back then I was reading about the warning signs of the unemployment problem coming (prediction of lots of college graduates/lots of young adults joining the work force but no indication of jobs being available in the near future for them to take and that future has arrived).

I know Covid threw a wrench in the works which may have made the predicted high unemployment worse.

in the past I know China tended to pump money into their economy (when things didn't look good) by building more buildings. or something like that. Anyone else remember the stories of newly built but empty Chinese "cities" from before the pandemic?

I'm not discounting the current problems. I think this time China won't be able to build more buildings to fix the real estate problem they've created. Without consumer consumption (effected by the real estate bubble popping) they won't be able to get workers working (less demand for consumer goods/experiences because no one can afford them OR because people are afraid to spend money).   China needs to figure out how to keep it's consumers consuming.  

It will be interesting to see what happens.

There's also the "rice shortage" going on... India and China had bad harvests for the last couple of years and now it's effect is being felt. China actually imports rice... and rice producing countries (like India) are stopping some types of rice exports in order to keep rice prices steady at home. (should be good for American Rice growers/producers. )   China and India (and America) all export a lot of rice to other countries where rice is a staple.   If rice prices go up dramatically - it's going to effect a lot of people (who don't have a lot of money to begin with)  around the world. 

TBH, I think India's economy (which isn't having the same issues as China) hitting a bump would be a bigger threat to America than China's economy. (I read that a couple of months ago when the China real estate bubble started making news. ) Basically , America isn't gonna notice all that much as China's economy hits a bump.


And just an aside - I don't think China is the "bad guy" in the way that older Americans remember it being - but they are still portrayed as a threat.  (I get the patent and stealing of intellectual rights and what not.  I just don't think that it's America and China at the table anymore like it was in the past. ) 

[djAdvocate]

Sept 3, 2023 12:28:30 GMT -5 happyhoix said:

I saw a conversation on TV with a talking head years ago, when China was first changing their economy from the traditional communist economy to be more quasi free market, and it was very hot. The interviewer asked the expert if the Chinese, as they became more worldly both in trade and in the opportunity to visit other countries would continue to accept the draconian Communist control over their lives, and the talking head said he thought they would - as long as the economy remained hot and everyone felt like they had a chance to get rich, too. If it ever cooled down, though, he felt the Chinese would blame their leaders, and question if communism was acceptable anymore. 

1 in 5 young adults in China are unemployed right now - and China did a horrible job with Covid, imposing stay at home orders for whole cities, without providing any government assistance to offset the financial burdens. And now post covid, the big recovery the government expected has fizzled. So I’m wondering if they will experience some political upheaval, and if that’s good or bad for us. 

China is uninterested in the "free market".  they are interested in capitalism as an instrument of the state.

[resolution]

The Washington Post had an article about this today. They are predicting that it won't have a huge effect on US markets if China continues to deteriorate, although it could have a larger effect if they choose to devalue their currency. The link below is a gift article, so it should be free to read for everyone.

wapo.st/47X6yqq

Direct financial links between the United States and China have thinned in recent years, amid a trade war and rising geopolitical tensions. But a deeper Chinese slump could set off a “negative feedback loop,” with sinking stock and bond prices, rising volatility and a soaring dollar combining to sap consumer and business confidence in the United States and elsewhere.

Such a scenario, akin to the fallout from the 2015 Chinese stock market crash, could shave half a percentage point off global growth and 0.3 points off U.S. growth, according to Gregory Daco, the chief economist at EY-Parthenon.

“What matters to the U.S. and the rest of the world is if the China shock is translated into a broad-based deterioration in overall financial conditions,” he said.