China's Emergence As A Global Superpower

[Billy T]

Correction:
In various posts I have stated that China's 2009 automotive sales increased by a factor of four over 2007 sales. I no longer remember my source and now seriously doubt that because today's Peoples Daily states that 2009 sales increased by only 52.9% over 2008 sales (and 2008 finished in economic crisis).

Also reported is that China's 2009 automobile sales were 13.6 million units (significantly more that in the US even with the "cash for clunkers" stimulation).

 

[soullust]

Correction:
In various posts I have stated that China's 2009 automotive sales increased by a factor of four over 2007 sales. I no longer remember my source and now seriously doubt that because today's Peoples Daily states that 2009 sales increased by only 52.9% over 2008 sales (and 2008 finished in economic crisis).

Also reported is that China's 2009 automobile sales were 13.6 million units (significantly more that in the US even with the "cash for clunkers" stimulation).

of course they did, for the first time in history the people of a billion population are starting to be able to have something we take for granted hell i am 31 and i already owned 36 cars, and i have three in my yard, my 02 protégé, 1993 trans am, and my dodge Dakota rt.

up until a few years ago most Chinese could only afford bicycles, now they can afford cars, sales will be going up over there for a long time, 13.9 million cars sold, a billion more people soon to try and get one.

 

[Billy T]

To soullust (and any bodylust reading):

To understand both why they are selling more cars than US and why there are more than a billion Chinese go to this link:

http://www.sciforums.com/showpost.php?p=2528166&postcount=194

 

[quadraphonics]

To understand both why they are selling more cars than US

China isn't selling more cars than the US, they're buying more cars than the US.

 

[Billy T]

China isn't selling more cars than the US, they're buying more cars than the US.

That is correct, I am almost sure. I used "selling" as I was referring to the link's alluring lady selling cars but your point is well taken.

I think quite a lot of S. Korean and Japanese cars are exported to China, adding to their "buying" total without any ways near same volume of Chinese cars being exported to add to their "selling"

Thanks for the correction, but again I was not trying to be precise but joke about the good looking sales lady being both why there were so many Chinese and why the Chinese were buying what she was selling (and imports too) more than Americans were.

Here is another "buying facilitating" lady at the Chinese auto show. (I dare not say "selling.")

This model is good looking too but this one is better: http://www.sciforums.com/showpost.php?p=2528166&postcount=194

 

[Billy T]

Progressive Chinese Education:

"... China university associate professor Ma was sentenced Thursday to three and a half years in jail for organizing group sex parties. … The court had heard how the 14 men and eight women met through an online chat room and engaged in dozens of group sexual activities from 2007 to 2009. Some of the parties were held in hotels, while others were held at Ma's residence.

Ma, 53, worked at a university in Nanjing. He admitted the facts, but argued that, as all the defendants were voluntary adult participants, they were not guilty of any criminal activities. However, the chief judge said group licentiousness infringed public order. ..."

From: http://www.chinadaily.com.cn/china/2010-05/20/content_9873183.htm

 

[Billy T]

" Duke Energy Corp. is scouting for new clean-energy technologies in China ... “China is going to set the standard for development and deployment of clean energy,” David Mohler, a senior vice president at Duke, said in an interview May 21 in Beijing. Mohler was among representatives from 24 companies who joined Commerce Secretary Gary Locke on a trade mission to China last week in a bid to increase trade in clean-energy technologies. ...

Duke is working with Chinese companies to help them develop renewable energy or clean technologies that could help it curb emissions. It has already teamed up with a Chinese producer of algae that captures carbon dioxide from smokestacks and turns it into a feedstock for biodiesel fuel. Mohler explored other potential partnerships during the week-long trip in China, he said. “Before we buy it, we also help develop it,” he said. ..."

From: http://www.bloomberg.com/apps/news?pid=20601087&sid=aH504xbZSGu0&pos=6

Billy T comment: Another clean energy technology US could import from China is "super heated steam"* coal fired power generation. It gets almost 50% more electric power from the same amount of coal.
--------
*High pressure, high temperature H2O above the point where the gas and liquid phases have the same density. (You can not distinguish between them.) I am almost sure this also means that the expansion turbines can be much smaller for the same output power, but their walls must be stronger.

 

[Billy T]

China is internationalizing the Yuan in stages*:

“ The Chiang Mai Initiative (CMI) is a multilateral currency swap arrangement among the ten members of the Association of Southeast Asian Nations (ASEAN), the People's Republic of China (including Hong Kong), Japan, and South Korea. It draws from a foreign exchange reserves pool worth US$120 billion and was launched on 24 March 2010. …” More details at: http://en.wikipedia.org/wiki/Chiang_Mai_Initiative

Billy T comments:These are some of China’s major trading partners. China does not want or need more dollars. Will not invite the USA to participate in a currency swap – that would just in the long run give good Yuan for weak dollars. In less than a decade, central banks will want to hold appreciating Yuan and not so much of their country’s reserves in dropping dollars. The era of US domination of currency reserves is coming to an end. This will be a big blow to Joe American when he can no longer import goods cheaper than US made ones by merely paying for them with pieces of green paper.

ALSO SEE: http://www.bloomberg.com/apps/news?pid=20601087&sid=aeRZNhmx.WO4&pos=4

Where read that South Korea wants even more countries to make currency swap agreements to stabilize global economy and points out that then countries would not need to hold such large currency reserves. For obvious reasons the US is opposed even though it has made several such agreements, especially with smaller South American countries, mainly to help it control the participating country's foreign policy and trade.

 

[nirakar]

China does not need dollars in order to lend to Southeast Asia. China and Japan need to lend to some nation in order to manipulate their currencies downward. Governments that care about their people don't want their nations lent to and their currencies driven upwards unless they can do something highly productive with the borrowed money.

No nation wants an influx of hot money. Presumably Chinese and Japanese lenders to Southeast Asia would not be hot money investors to the degree that Americans and Europeans are.

I don't know that China will be able to find enough borrowers for it's money to enable China to stop lending to the USA. I think China is determined to depress their currency so they must find foreign borrowers. The USA is a deadbeat and will eventually burn China on it's loans but the USA is the only nation (other than 3rd world klepto dictatorships) that cares so little about it's future that it will borrow money recklessly for non-productive purposes. I don't see that China has any choice but to continue to lend to the USA.

East Asia creating tools to protect East Asia from financial chaos sounds intelligent. Critics say the Chiang Mai Initiative is too limited to stop something like the 1997 Asian financial crises from repeating. Critics also say the Chiang Mai Initiative is too limited get rid of the role of the IMF. Other critics say the Chiang Mai Initiative is not a tool that would be capable of stopping something like the 1997 Asian financial crisis even if the scale of the Chiang Mai Initiative was increased.

 

[Billy T]

To nirakar:

A currency swap is not hot money pouring into your country. That can make a surplus of the entering currency (Make your currency more valuable wrt to it which makes it harder for your exporters to export. - Often called the "Dutch disease" after the period when oil / gas was discovered in the Dutch sector of the North Sea. A huge influx of dollars, pounds etc. paying for the oil were buying / competing for / Dutch guilders, making them so valuable that Dutch exporter were closing up, job being lost etc. )

A currency swap is NOT a loan in the usual sense. A currency swap is when two central banks agree to give each other funds in their currency. Hence the name "currency swap." These funds can just sit in reserves and never be used, but if that were the case there still would be some increased stability by diversifying the countries reserves. The main point of the swap is, however, to facilitate trade between the two countries.

A country A importer needs country B money to buy goods from B, so he gives his circulating currency to his central bank to get B's currency. He does not need to buy dollars as is the current case. This avoids conversion loss and takes price of the dollar out of consideration. Likewise the seller in county B will not need to convert dollars received into his currency to pay his workers. In the current but disappearing world all trade contracts have their value stated in dollars. About two years ago this ceased to be the case for trade between Brazil and Argentina.

A currency swap is NOT a means by which either country gains control over the other. It does however lessen the control the US has over both.

 

[Ganymede]

Can you conservatives please explain this to me. How come China's communist economy is growing at such a rapid rate?

 

[kmguru]

It depends on what you call Conservatives. If you mean small government, China does have a small government compared to the population size. But if you mean Conservatives who give away the key to exploitation of the citizens to the Corporation (like supreme court's ruling that private companies are like people too!) - Chinese government controls that.

 

[Billy T]

"... The Beijing Bureau of Human Resource and Social Security announced Thursday morning the minimum wage standard will rise by 160 yuan ($23.5), or 20 percent, from the current 800 yuan ($117.3) per month. ..."

From: http://www.chinadaily.com.cn/china/2010-06/03/content_9931395.htm

This will slightly decrease competitiveness of China's exports but a 20% salary step up for those who spend all they earn will significantly increase the percentage of the Chinese GDP that is domestic. Just one more measure China is adopting to end its need to sell to the US - and accept its green paper (mainly Treasury bonds) as if they would have much value 10 years from now.

China is, as I predicted years ago, now trying to spend dollars in its reserves ASAP for real assets (energy, minerals and farm land) in long term, usually paid in full up-front, contracts.

They are buying so much in Brazil, that my newspaper has an editorial about danger of Brazil becoming a colony again. - I also predicted that will happen years ago. When that happens, Brazil will be happy not to be in deep depression as US and EU are but to be a raw material supplying "colony of Asia" (mainly China).

 

[quadraphonics]

This will slightly decrease competitiveness of China's exports but a 20% salary step up for those who spend all they earn will significantly increase the percentage of the Chinese GDP that is domestic.

The two effects are equivalent - there's only one factor involved - so it can't be the case that one of them is "slight" and the other "significant." And the total effect might well be negligible, to the extent that it is compenated by increased unemployment (which is the usual, predictable outcome of minimum wage increases). For every 5 Chinese workers getting a 20% raise, there's likely to be 1 that ends up out of work.

And the change is to the percentage of the GDP that is consumption, not "domestic." It could well be "external," to the extent that the extra income is spent on imported goods. Which it well might be - much of what the poor spend money on is food and energy, both of which China imports a lot of.

When that happens, Brazil will be happy not to be in deep depression as US and EU are but to be a raw material supplying "colony of Asia" (mainly China).

Most people would prefer to endure a depression than become a Chinese colony exploited for their raw materials. I know I would.

 

[Billy T]

The two effects are equivalent - there's only one factor involved - so it can't be the case that one of them is "slight" and the other "significant."

Not true - note I said that those getting the increase were very likely to spend it all. If the same amount of money were given to the better off they would likely save most of it. I.e it would via thier banks etc. be invested or loaned - quite likely to have opposit effect in that it would aid export industry more than the farmer trying to sell his chicken etc. -It make a great deal of difference what part of the population gets the money - the poor will buy more consumptions article. The rich, especialy in a nation with such high saving rate will just invest it and now that mainly means in the more profitable export sector.

And the total effect might well be negligible, to the extent that it is compenated by increased unemployment (which is the usual, predictable outcome of minimum wage increases). For every 5 Chinese workers getting a 20% raise, there's likely to be 1 that ends up out of work.

Not true if one can judge by the effect of Bolsa Familia in Brazil - very modest sums given to the very poor, many of who lived out side the cash econony on their farm - now are buying in the near by town -the "multiplier effect is essentially paying for their modest grants in more taxes on more economic activity - not to mention the longer term benefit of have their children stay in school until age 18, instead of drop out to work in the field when they can barely read and write. Even Bernache noted this when he got the nickname "helicopter Ben" - i.e. most effective stimulus is to put the funds in the hands of the very poor who will promptly spend it all. Thus it seems to me that for each five getting 20% raise one more job will be created. And typically that spending will stimulate domestic consumption, not a camera factory making goods for export. that was the point of my original post.

Most people would prefer to endure a depression than become a Chinese colony exploited for their raw materials. I know I would.

When many in US are going hungry in a depression, I suspect you will change your POV. I.e. you and many others will be happy that the US as good agricultural potoential and can also export at least food stock to Asia. - sort of be a colony of Asia in this area at least.

Sorry do not have time to fully edit as must go to bed now but think you will get may point.

 

[quadraphonics]

Not true - note I said that those getting the increase were very likely to spend it all. If the same amount of money were given to the better off they would likely save most of it.

The comparison being made there was between the pro-consumption effect of increased minimum wage, against the anti-consumption effect of increased unemployment (which is a direct consequence of increased minimum wage). Neither of those involves the rich - it's the working poor that get the wage increase, and also the working poor that get the unemployment. Which is to say that raising minimum wage does little to redistribute income across class lines - what it does is redistribute income amongst the working poor. So the effect is, if anything, a decrease in consumption, as the now-not-quite-so-poor save a bit more of their income, while the now-jobless have nothing to spend at all.

Thus it seems to me that for each five getting 20% raise one more job will be created.

The working poor in China do not make enough money to stimulate that much employment - that's why they're an export-oriented economy in the first place. You'd have to boost the incomes of those 5 workers by at least an entire order of magnitude before it would add up to the sort of demand-per-job that underpins Chinese industry (and which is driven both by developed markets, and currency manipulation designed to exaggerate this effect).

When many in US are going hungry in a depression,

That's extraordinarily unlikely to occur. The US produces way too much food for people to go hungry, depression or no. Unless said depression is another dust bowl or similar agricultural disaster, of course, but your predictions of currency/financial collapse are in another realm entirely. Indeed:

the US as good agricultural potoential and can also export at least food stock to Asia.

Which implies that the US has plenty of food, and so won't be going hungry.

 

[Billy T]

"... The general consensus among this trusted cadre of experts -- myself included -- is that China's strong economic growth environment will remain vibrant for many years to come. In fact, in my many years of traveling to China, I've never seen locals as prosperous as they were during this visit. Whether it was the jam-packed restaurants or fully-booked hotels, China has fully discovered their prosperity -- domestic consumption is on the way higher, much higher ..."

From: http://asia.investorplace.com/asia-...sting_100604-part7.html?sid=BQ3292&en=1400306

To quad:
Note the bold above. You are postulating from text book theory, and sometimes it is true, that higher salaries reduce employment; however rarely is that true if the salaries are increased ONLY at the lowest income / subsistence level people. (China increased only the minimum wage.) Again, like the above facts in bold, you are ignoring the FACTS which I cited, such as those about the actual real world experience of Bolsa Familia in Brazil with aid to the extremely poor or Helicopter Ben's observations as to how to most efficiently stimulate economic growth (least cost for the most expansion).

When it comes to something as complex as human behavior and economics, your text book theory ain't worth a hill of beans if it is contradicted by real world facts.

Quad: " The US produces way too much food for people to go hungry, depression or no. "

Again look at the facts. Even now many are gong to bed hungry in the USA - How much food the US can produce is not the point. The point is how much can the hungry buy!

The depression I am predicting follows a collapse of the dollar. Then much of the US food production will be sold, to those who can pay for it, and they are not necessarily Americans then. With dollar collapsed, and China booming, who do you think will bid higher for Canadian wheat? Who will be able to afford the oil they need to run their economy on? The US will be selling food to China, just to buy the oil it needs to keep alive its badly designed (for the high energy cost era) suburban infrastructure society.

Silly programs like the corn to alcohol will of course be scrapped to make more efficient use of the farm land, to earn the badly needed "hard currency" like the Chinese yuan, for which oil is sold when there are even more printing press dollars existing with little value. Very inefficient farm programs, like feed lot cattle fattening will be a thing of the past.

 

[quadraphonics]

Note the bold above. You are postulating from text book theory, and sometimes it it true, that higher salaries reduce employment; however rarely is that true if the salaries increase are given ONLY at the lowest income levels.

The textbook theory - which has been tested against actual reality - is that increases in minimum wage do increase unemployment.

Again, like the above facts in bold, you are ingnoring the FACTS which I cited, such as those about the actual real world experience of Bolsa Familia in Brazil with aid to the extremely poor or Helicopter Ben's observations as to how to most efficiently stimulate economic growth (least cost for the most expansion).

All of those cases amount to transfers of money from wealthier (i.e., higher savings-rate) sectors of the economy, to poorer (i.e., lower savings rate) portsion. That, indeed, will increase consumption and decrease savings.

Raising minimum wage doesn't work like that, since it doesn't transfer wealth across class lines. Instead, it transfers wealth mostly within the lower classes, and so doesn't improve consumption. The effect of minimum wage laws is to put a basic floor on the level of work and payment that members of the society can expect, at the cost of increased unemployment - it doesn't stimulate the economy, or increase consumption, absent some other additional policies (if China compensates the people this will drive out of work, then that will end up looking like a wealth transfer. But the wage increase on its own doesn't do that, and the wealth could be transferred without the minimum wage hike). Its purpose is social cohesion and stability, not economic performance or composition.

What is holding down Chinese consumption is structural factors like currency manipulation and a central planning strategy aimed at investment in export-oriented sectors. Until that changes, China is not going to become a consumption-driven economy. Measures like wage increases are not basic policy reversals, but concessions to social stability required to maintain the massively imbalanced strategy of heavy investment in the coastal export industries. China has been very explicit that they will not accept any dramatic, sudden changes in that strategy, hence the pegged yuan and continued funnelling of cheap loans to politically-connected coastal exporters. Consumption-led economies do not grow as quickly as export-led ones, and it seems to be their view that they will require high levels of growth for some time to come.

 

[Billy T]

... Raising minimum wage doesn't work like that, since it doesn't transfer wealth across class lines. Instead, it transfers wealth mostly
within the lower classes, and so doesn't improve consumption. ...

You are getting silly now so I did not read further. Last time I looked factory owners, paying the higher salaries, were not within the lower classes

You even contradict yourself in the immediately prior two sentences:

...
All of those cases amount to transfers of money from wealthier (i.e., higher savings-rate) sectors of the economy, to poorer (i.e., lower savings rate) portsion. That, indeed, will increase consumption and decrease savings....

Make up your mind. Do the funds for higher minimum wage come from the higher level of the lower classes or from the wealthy of society!!!

 

[quadraphonics]

You are getting silly now so I did not real further. Last time I looked factory owners, paying the higher salaries, were not within the lower classes

The factory owners will not end up paying more overall. They'll make up for the increased salaries by hiring fewer people - they have a strong incentive to increase efficiency, since a 20% hike in payroll costs will make many of them unprofitable. Likewise, the prospect of reduced profits will result in that many fewer businesses being formed or expanded, thereby cutting into employment.

Of course, it may be that many Chinese businesses will be happy to operate at a loss, since they have political connections which will ensure continued loan support at favorable rates. The state-controlled banking system there has demonstrated a profound appetite for non-performing loans to politically-favored businesses that prop up employment. In which case, it will have the effect of transferring wealth to the lower classes, but at the price of further entrenching unproductive companies and undermining the balance sheets of the banks. And that isn't the sort of thing that healthy consumption-led economies are made of.

So, it's one or the other: there's either no net wealth transfer produced, or it comes at the price of systemic dysfunction (and so, eventually calamity).