[2Wycked]

Guest post at Zerohedge entitled "Is China Doomed?"

Honestly, as much as I read Zerohedge, economics is not a discipline I have much knowledge about.

As such, is this article on point? What does the slowing economy mean for China? Are their demographics really that bad?

I find this fascinating and troublesome, as if China has serious economic issues then the US will most likely have economic issues stemming from that.

Thoughts?

[T and A Man]

Hard to say, forecasting in economics is for the most part a mugs game.

The biggest thing that China bears point out is its demographics, in terms of aging. However this premise is very much framed from a western perspective, and namely retirement. We have arbitrary ages where some of us retire, and we receive income support instead.

Dependents.

However if you do not allow income support, namely you ban 'retirement', then you have no need to offer this income as a benefit.

Likewise, there is large scale focus on malinvestment there, the typical 'bridges to nowhere', where infrastructure is built for some supposed need that may eventuate.

Looking at urban real estate prices compared to wages, it is pretty hard to deny they have a massive bubble.

Industry wise, it is evident they are running out of cheap labour, and energy pressures and 3D printing could see manufacturing revert to being closer to their markets.

The U.S. is potnetialyl in trouble if China wants to avert its own crisis by calling in debt.

But the U.S. can go to war, win and repudiate its debt, squaring its ledger.

For a parable, look at early 1990's 'predictions' of Japan, and of wide off the mark it eventuated.

The U.S has a major benefit in that its southern states have liberal land policies, and this is widely misunderstood and widely understated in terms of importance.

The U.S. populace needs however to overthrow the power of wall street has on domestic policy, until then mains treet are subjects of wall street.

[Samseau]

One thing that seems likely nowadays is repealing the one-child policy. There's a lot of rumors floating around that the next Chinese prime minster will do so, but we shall see.

Otherwise, without some kind of internal growth, the slowing global economy threatens to crush the export based nature of the Chinese economy.

[clever alias]

T and A hit the nail on the head. china has bad demographics but its not really comparable to the west because there elderly are nit nearlt as state dependent as westerners are. chinese have savings rates of around 40 percent for the purpose of retiring whereas the us is like 2 percent.
thay said, theyre having some problems controlling their money. they recently contracted the monetary supply to test the waters and the markets were incredibly volatile which is never a good thing
i wouldnt say doomed, but growth is returning to a long term sustainable rate. nothong grows at 10% per year forever

[Walderschmidt]

(08-13-2013 01:39 AM)Samseau Wrote:  

One thing that seems likely nowadays is repealing the one-child policy. There's a lot of rumors floating around that the next Chinese prime minster will do so, but we shall see.

Otherwise, without some kind of internal growth, the slowing global economy threatens to crush the export based nature of the Chinese economy.

They have not repealed completely - but scaled it back. Since I last visited China, it looks like one must pay around 30,000 Yuan (or some other sum of money) for permission to have a second child.

Wald

[Samseau]

(08-14-2013 12:07 AM)Walderschmidt Wrote:  

(08-13-2013 01:39 AM)Samseau Wrote:  

One thing that seems likely nowadays is repealing the one-child policy. There's a lot of rumors floating around that the next Chinese prime minster will do so, but we shall see.

Otherwise, without some kind of internal growth, the slowing global economy threatens to crush the export based nature of the Chinese economy.

They have not repealed completely - but scaled it back. Since I last visited China, it looks like one must pay around 30,000 Yuan (or some other sum of money) for permission to have a second child.

Wald

I saw rumors that they would allow 2 children per child in 2014 or 2015. Could have a major impact.

[la_mode]

They say China has worse male/female ratios than the US.

When you cancel out the fatties in the US - the US basically is China in terms of ratios.

[Walderschmidt]

(08-14-2013 12:15 AM)Samseau Wrote:  

I saw rumors that they would allow 2 children per child in 2014 or 2015. Could have a major impact.

I think that's most likely - my visit was a couple of months ago.

Wald

[2Wycked]

(08-14-2013 12:15 AM)Samseau Wrote:  

(08-14-2013 12:07 AM)Walderschmidt Wrote:  

(08-13-2013 01:39 AM)Samseau Wrote:  

One thing that seems likely nowadays is repealing the one-child policy. There's a lot of rumors floating around that the next Chinese prime minster will do so, but we shall see.

Otherwise, without some kind of internal growth, the slowing global economy threatens to crush the export based nature of the Chinese economy.

They have not repealed completely - but scaled it back. Since I last visited China, it looks like one must pay around 30,000 Yuan (or some other sum of money) for permission to have a second child.

Wald

I saw rumors that they would allow 2 children per child in 2014 or 2015. Could have a major impact.

So, by the financial component, they are trying keep the poor from breeding and giving the financially privileged a way to produce more children.

From the article, it sounds like China has a significant underclass that is incredibly poor.

I see this in America, as I noted in an article I wrote here, that it isn't so much that the wrong people are breeding, but that the right people are not having kids.

Take the forum - a bunch of aware and intelligent men who are keen on self-betterment. In the long run, that sounds like men who would make good fathers, as they think for themselves and know how to work through personal issues and improve themselves. Given the realities of family law, hypergamy and many other issues, many men who would make good fathers are significantly discouraged. I have taken Family Law in law school - I 100% understand the apprehension any man has starting a family in America.

As for the wrong people having kids, I see this in my poor hometown with all the high school dropouts having kids - usually multiple kids. Those women that "made it" are my age, with no kids and often not even a serious boyfriend.

Oh, yes, the women will make partner or achieve X or Y position at the corporation or government agency. Yet, she will be 32 or 35 and casting about for a child, maybe a husband.

You have the have-nots having kids, while the haves not breeding. You could call it the privileged appropriating the wombs of the disprivileged, but the reality is that the school system is going to be further stressed with more kids born without fathers that have crappy mothers and older, career women giving birth to kids with disorders because they wait to 39 to give birth to a kid that is born with developmental disorders.

I hear Zerohedge talk alot about economic collapse, but I have the suspicion America will wallow through weak growth through the years but will be destroyed by social collapse. The social conservative in me wins out over my hunches as an economic libertarian, but still, the demographics for America do not look good - the same in China.

[Walderschmidt]

I think that China is in the more advantageous spot. Sure, demographics don't look good - same as in the US. What the Chinese do have is a functional society - their society can weather and spring back from economic collapse.

In contrast - I believe the US in decline, in the middle of a cascade if you will, and it won't take much to set off the next set of chips to an impending disaster. The US, in my mind, does not have a society cohesive and strong to weather much.

Wald

[Samseau]

(08-14-2013 12:57 AM)Walderschmidt Wrote:  

I think that China is in the more advantageous spot. Sure, demographics don't look good - same as in the US. What the Chinese do have is a functional society - their society can weather and spring back from economic collapse.

In contrast - I believe the US in decline, in the middle of a cascade if you will, and it won't take much to set off the next set of chips to an impending disaster. The US, in my mind, does not have a society cohesive and strong to weather much.

Wald

Yep. More importantly, China is a monoculture tied together by thousands of years of history. Family bloodlines are also very strong in China.

Compare that to the fractured, divided multiculture of America, where the races naturally segregate themselves.

You have to ask yourself: what's holding America together?

It's just the dollar. The dollar is our bond. But if that dollar loses it's value, what loyalty will Americans have toward each other?

[Walderschmidt]

(08-14-2013 01:01 AM)Samseau Wrote:  

Yep. More importantly, China is a monoculture tied together by thousands of years of history. Family bloodlines are also very strong in China.

Compare that to the fractured, divided multiculture of America, where the races naturally segregate themselves.

You have to ask yourself: what's holding America together?

It's just the dollar. The dollar is our bond. But if that dollar loses it's value, what loyalty will Americans have toward each other?

Exactly.

Should collapse occur the lines will be arranged around race and victim classes.

There is no more America - the Emperor has no clothes.

Wald

[clever alias]

the two child policy is already in a state of flux with the gov oscillating from light to no fines to forcing 8 month pregnant woman to abort and be forcibly sterilized.
you probably wont see a wide sprwad immediate repeal. probably a trial run in a few provinces followed by ccp double speak. whenever the ccp us in a tough spot they do nothing

[TopPanda]

Spent 4 months living in China earlier this year.

Pollution is a serious issue, but it can be addressed (i.e. like the UK in the 1950's - 1970's). The problem is that Chinese people just don't give a shit about their environment. I saw this from the little kids dropping rubbish in the streets to the older people dumping paint in my local river (one day the river was red!!!).

The bigger problem is that China is "selfish". It takes but does not give.

In the longer term, the ASEAN nations can team up and take away all of China's industry and its service industries.

China has 1.3 billion people, but most are so poor they're not going to be responsible for a consumer miracle.

I was living in Guangzhou where the many apartments are pretty much fully occupied by economic migrants, but there were plenty of white elephants, like a shopping mall in Dongguan with an apparently closed ferris wheel on top. Plus stuff built for the Asian games in 2010 was falling apart in 2011.

[Wadsworth]

China isn't doomed, the West is doomed.

The unsustainable birthrates in the West are well documented.

Countries like China embracing cultural progress will probably only further doom the West. China has massive social upheaval ahead, the numerous liberal social movements that have occurred in the West have yet to occur in China (and they will). As the standard of living increases in China, Chinese people will increasingly refuse what is comparatively slave labor. Western economies will increasingly have less and less incentive to 1) outsource to China, 2) buy from China.

China will do fine, but the cost of living in the West will increase as a result. All while the falling birthrates only doom an increasingly stagnating economy. The unsustainable nature of our system will rapidly become apparent. Can't say for sure of course, but I think the West is in trouble.

[Lou pai]

In order to be bullish on China you have to be bullish on the US. Being long China is basically buying a call option on the US. Most people do not realize that China is just as dependent on us as many say we are on them due to our debt. Also if you look at many Chinese companies they are frauds and you can see this based on the amount of reverse mergers that fail and are convicted of accounting scandals. China also has major issues with demographics and environmental sustainability. Lastly they have a pretty big shadow banking system.

[CactusCat589]

Quote:

Lastly they have a pretty big shadow banking system.

That's a potential killer. On paper, they have $3 trillion in foreign exchange reserves to throw around, but a banking collapse would eat most of that $3 trillion up through recapitalization.

China and U.S. is a perfect example of the destructive nature of competitive devaluation. Our government is pressuring the Chinese government to allow the renminbi to appreciate (which they have done, but only within a narrow band) in order to allow the dollar to fall in value. But the Chinese have invested a trillion to help the U.S., so allowing that to happen means taking billions in losses through the devaluation of their dollar-denominated assets (ie treasury securities).

Japan and the oil exporters have leveled off on their treasury purchases, but interestingly, China was still buying more as of the July 2013 update from the Department of the Treasury:

http://www.treasury.gov/resource-center/...ts/mfh.txt

This will hold until China overtakes, if it ever does, the U.S. as OPEC's biggest customer: http://online.wsj.com/article/SB10001424...43602.html

It's fascinating to see the effects of the petrodollar, it makes a lot of things make more sense. For example, the Department of Energy's original mandate was to cut our reliance on foreign oil, but our oil imports actually increased since its inception.