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Chinese economy

mark94
Arizona
The Chinese economic model, developed in the 1980s, and implemented beginning in the 1990s, is simple and flawed. China decided it would use its huge, cheap workforce to become the manufacturer to the rest of the world. That simple strategy has let them grow around 8% per year for decades.

Here are 4 flaws

1. They never built a mining or energy or agricultural base to supply raw materials. They rely on imports for their raw materials. If the world ever turned against them, say in retaliation to military aggressiveness, the Chinese economy could be shut down in a matter of weeks.

2. At some point, the excess cheap labor in China was going to disappear. That’s happening right now with companies moving their manufacturing to SE Asia and India.

3. Building a modern economy from scratch, especially in a centrally planned economy, requires massive capital. Eventually, the debt burden would be unsustainable. China has also hit that point with total debt about 3 times the GDP

4. The model required China to steal manufacturing jobs, leaving developed countries with high unemployment and an economy based only on services. No country can, or should, allow itself to be hollowed out in this way simply to get cheaper goods. The USA has awakened to this threat and is fighting back with tariifs and trade demands.

Bottom line, the Chinese economic miracle is coming to an end, with or without Trump. It will be devastating to China but will cause a lesser disruption in the US.

11 comments

Latest

CC99
•
6 years ago
Whether its about to suffer a regression or not, their economy has ballooned so much since the 1990s that you can't really say it was flawed. They managed to lift something like 70% of the population out of poverty compared to before. From this point on, they have much more room to create a plan B than they did before.
Lone_Wolf
•
6 years ago
Interesting thing about China is they are a cashless society and the government can track just about everything it's citezens do. A lot can be done with all that data.


In the 70's everyone thought Japan was taking over. This decade it was supposed to be China. We'll have to wait and see.
mark94
•
6 years ago
China has implemented a social credit score for all its citizens. The government monitors all activity. Post something negative about the Chinese government and your score is lowered,

Right now, over 20 Million Chinese have lost their right to fly on airlines because of their score.
mark94
•
6 years ago
China does have a much-hyped Plan B called the 2025 project. They wanted to dominate high tech manufacturing ( semi conductors, cell phones, etc ) the same way they now dominate low-tech manufacturing. They are using the same illegal methods to accomplish this including theft of intellectual property, cyber theft, and driving western companies out of business.

If China is allowed a monopoly on high tech manufacturing, it’s game over for the West.

The most visible brand involved in the 2025 project is the massive cell phone manufacturer, Huawei. It’s products, especially 5G infrastructure, have back doors to facilitate Chinese espionage.
shadowcat
•
6 years ago
If the Chinese manufacturing ever dumps, Wal-Mart will be in serious trouble.
twentyfive
•
6 years ago
Does this mean fireworks won’t be available this year for the Fourth of July, those unpatriotic Chinese ;)
Mate27
•
6 years ago
One thing that makes the US different than all other countries, capitalism.

Each citizen is incentivized to try and better their life , whereas in other countries you’re incentive is to go along and fit in. Not necessarily conducive to risk taking.
mark94
•
6 years ago
For China to take the next step economically, they need an innovative workforce. With 24/7 monitoring of their actions and social credit scores, I don’t see that happening.
crazyjoe
•
6 years ago
China is stacking lots of gold.
BGSD3100
•
6 years ago
What happens if China's economy craters, though? Look at Greece when they tanked a few years ago and the impact that had on the rest of the world. Greece hasn't been relevant on the world stage since Alexander the Great died in 323 BC. So what happens when a true power player like China goes bust?
mark94
•
6 years ago
The question is how severe and sudden will the China collapse be. Twenty percent of their homes are empty, having been purchased as “ investments”. If this bubble collapses overnight, it could be catastrophic to the Chinese.

Some countries, like Australia, that have a large part of their economy tied to China will be hit hard. Real estate in Australia is already dropping in prince.

I think a China collapse would have a modest impact on the US. We only export about $100 Million of goods to China, much of it agricultural. Maybe it kicks us into an economic downturn but nothing catastrophic.
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