Author: UYA

China thinks long-term on financial stability — so should we   [Copy link] 中文

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Post time 2018-7-28 10:37:32 |Display all floors
Jaaja Post time: 2018-7-23 20:20
Yes, but she fails to address the reasons for those differences. Reasons that arise from completel ...

If you remember the 2008 global melt down, was lessened by China.
Many have (including the west) claimed that China saved the world from economic ruin.

China economic strength, is held in place by the policies of the CPC.
Socialism takes president over capitalism.
(not the other way around in the west)
The CPC controls and takes swift action in case of weakness in the economy.
While in the US, it take a lot more time to correct dysfunction.
(doing which, the rich have time to stop such legislation)

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Post time 2018-7-28 10:40:11 |Display all floors
Ted180 Post time: 2018-7-27 22:24
My limited understanding of economics details is obvious. However, my general stance is that consume ...

I think you summed it up very well.
In China, there is a long term goal.
In the US, the goal is until the next election.

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Post time 2018-7-28 15:49:47 |Display all floors
UYA Post time: 2018-7-28 10:37
If you remember the 2008 global melt down, was lessened by China.
Many have (including the west) c ...

Trump is about to take the world to another financial meltdown, all to win the next election!  Sad!

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Post time 2018-7-28 16:34:58 |Display all floors
pnp Post time: 2018-7-28 15:49
Trump is about to take the world to another financial meltdown, all to win the next election!  Sad ...

He is doing this to fuel his self righteous ego.
Doesn't give a crap about the US or the world.
Feels he's privileged over the rest.

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Post time 2018-7-28 20:55:24 |Display all floors
UYA Post time: 2018-7-28 10:37
If you remember the 2008 global melt down, was lessened by China.
Many have (including the west) c ...

China is resilient to global market disturbances, because it is less integrated to the global market than most other countries. For same reason, market disturbances within China have less impact to global system, than similar disturbances in some more developed country would have.

But also for same reason, it is incorrect to interpret that China saved the world from economic ruin. It's not that foreign investors, banks and states could move their wealth to China for safekeeping when rest of the world went to economic recession.

China practises much more protectionism than almost any other country - even DPRK could be considered to be less protectionist, rather it's just so unattractive (economically and otherwise).

Because of this, China only plays part in the globally averaged GDP. In this sense, it is not helping other nations economically, it only helps the numbers look better.

The CPC controls and takes swift action in case of weakness in the economy.


And that is quite contrary to the original title of this thread. Long-term thinking normally indicates that the path ahead is well thought and no swift actions are therefore needed.

But I don't agree that China acts like this. China's strength in long-term planning is actually to not even try to think too long-term, but instead be able to made swift changes dependng on situation. The whole reform era, which still continues, is example of that.

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Post time 2018-7-30 04:20:53 |Display all floors
Jaaja Post time: 2018-7-28 20:55
China is resilient to global market disturbances, because it is less integrated to the global mark ...

I disagree....
China provides significant trade all over the world.
To say China does not have such global influence, is just "wrong".

As this OP points out....
China has a long term policy in place.
Explain, what long term policy does the US have?
Who's economy is growing faster?
Who has one of the lowest poverty rate in the world?
Who has a lower cost of living?
You can't ignore the obvious.

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Post time 2018-7-30 05:50:50 |Display all floors
This post was edited by TruismStrike at 2018-7-30 13:06

This article already reads very outdated just a week later, lacks a lot of context, and the wording of the author suggests Chinese bias. Certainly they are underplaying the Chinese issues while using hyperbole for the American ones.

For starters the US/EU pledged to move towards zero tariffs free trade and have spoken about working together to counter Chinese abusive economic practices in a total turn around from the situation a month ago where EU and US were threatening each other with tariffs. Both have realized there is a bigger fish to fry in China.

"One thing came through loud and clear in President Trump’s press conference Wednesday with European Commission President Jean-Claude Juncker. When they announced an alliance against third parties’ “unfair trading practices,” they didn’t even have to mention China by name for listeners to know who their target was. " - WSJ

China has more tariffs and predatory economic practices than US and EU combined so it makes sense they would figure out it is better to team up.

  While we loosen financial regulation to achieve faster short-term growth, China is tightening regulation to contain bubbles and achieve sustainable

You can't really compare the regulatory environment between the two; the regulations Xi is imposing and those the US is getting rid of still will leave the US the far more heavily regulated of the two. Also, the US has all the data because it is so much more regulated. China even relies on American data for its own accurate economic calculations/forecasts above its own... China can't even regulate itself properly at this point because it doesn't have the data infrastructure to keep tabs the way the US does.

    "Last year, President Xi Jinping himself called for a multi-year regulatory effort to reduce leverage and curb risk taking, citing financial stability as one of the three great challenges to China’s long-term prosperity. "

Kind of irrelevant since he has also enacted new measures to increase corporate lending; while at the same time defaults on those cooperate loans is at an all time high...

"Chinese corporate bonds have defaulted at a record rate in the past six months, yet this week China unveiled a new stimulus program designed to encourage even more corporate borrowing." - WSJ

Chinese regulators have imposed toughened policies for risk management, governance, and loss recognition for nonperforming loans.

They really have to. On top of the continuing shadow banking problem, the record corporate loan defaults, the decline in the Chinese stocks and yuan trade,  the housing bubble has continued to grow, more ghost cities have been built and of even worse quality. They have entire cities built in 2015 already totally falling apart after 3 years and are empty. And someone took out a loan to invest in that!

"But while U.S. stocks approach all-time highs and the dollar grows stronger, Chinese stocks are in a bear market, down 25% since January. The yuan had its worst single month ever in June, and is well on its way to a repeat this month." - WSJ

"But in truth, debt levels are too high in both countries. China’s biggest challenge is corporate debt, constituting 160.3% of GDP, compared to 73.5% in the U.S."

So China has over TWICE the debt to GDP ratio in corporate debt, not taking into account the real estate bubble and the shadow baking debts which together are probably more together than even the corporate debt given real estate in over 30% of China's GDP. SeekingAlpaha estimates the potential debt of the two together is around 67 trillion!

"The Chinese total debt load (public and private) is estimated to be a staggering 300%+ of their GDP." -seekingalpha

"By some estimates, real estate makes up 30% of Chinese GDP. Real estate represents 50% of the nation's outstanding debt, which represents at least 250% of Chinese total GDP." - SeekingAlpha  

Let's also not forget the USD is also the chief global reserve currency. Which massively impacts the rate and ease at which each pays for the cost of borrowing. A direct GDP % comparison doesn't do the danger of China's position justice since it more economically affected by the central government running short on funds vs the US government and doesn't have the luxury of being the global reserve currency that effectively subsidizes their cost of borrowing.

Ours has hovered in the 2-3% range. Wage growth in China has been strong, while real wages for the majority of American workers have stagnated, fundamentally challenging our consumer-driven economy.

Well the US just grew at 4.1% in the last quarter so out of date.

It tries to make a big point about wage growth but that is simply wrong. Globalization has placed a hard cap on the ability to grow wages in developed countries for lower middle class citizens and below because of international labor competition. They already get a LOT more than any Chinese does for the same kind of work.

But wages have without a doubt grown for anyone in the top 40% of the US workforce; wages have grown at about 4% overall on average in the US in the last year and it's just that the wage growth in the US is concentrated in skilled/fecundated workers because of globalization reasons.  None of this is because on any inherent weakness in the US system.

Likewise Chinese wage growth was easy when it was at the bottom of the economic ladder because of globalization. But wage growth has slowed in CHina because globalization becomes a force that acts against wage growth for unskilled labor past a certain point. And the more it grows the harder it will be to employ people and offer trademark cheap Chinese prices.

Over-leveraged companies will struggle to repay that debt as interest rates rise.

Wow whoever wrote this is ignorant... no country on the planet has as much cashed saved up as corporate America. They will be totally fine... especially with the tax cuts they just got.

he global economy is already starting to slow.

No it is not; China is slowing but the world overall is in the midst of the greatest recovery since the 1980s without any doubt. 2017/2018 had/have global GDP growth rates of 3.2% and 3.1% respectively which are the highest rates since 2011.  

read this news an hour ago.
now it is gone from western media.

Probably because it was already outdated, low quality, or from a biased author.

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