Chinese bloggers are writing backwards or vertically to avoid censor software. (more)
Paul Krugman writes that the liquidity trap includes:
In this situation, America has too large a supply of desired savings. If the Chinese spend more and save less, that's a good thing from our point of view. To put it another way, we're facing a global paradox of thrift, and everyone wishes everyone else would save less.The problem is that since China has embraced export capitalism, or become a Tiger nation on the Japanese model, it has increasingly exported to Americans buying cheap trinkets from Walmart on credit. China itself is not turning into a consumer based economy, it is a state sponsored export economy, in the same way Japan, Hong Kong, Indonesia, Malaysia etc are. I think this graph came from Barry Ritholtz's site:
adam : I dunno cam. While the two largest economies in the world, the US and China, being caught in a creditorial embrace is not healthy for anyone, I don't think it's right to describe China as an state-driven export economy in the same way say Malaysia is or Taiwan was in the 70s. It's just too big. At that size of global trade an economy can't run on external trade alone, it becomes it's own centre of gravity. Certainly it relies on exports, but so does, say, Germany. Would you say Germany is not a consumer economy? Plus, try standing on Nanjing Lu in Shanghai (which incidentally has a GDP per capita of Portugal) and saying that ...
I know that a liquidity trap exists but the idea that an economy of China's size - including all the housing, food, banking, internal transport etc that implies - is somehow like a Naomi Klein caricatured Free Trade Zone, where only international companies exist and none leave assets, is just ridiculous. Incidentally the Chinese stock market does higher volumes that the US, with extremely strict currency controls.
Furthermore if you look at the very graph you cite, it's not linear at all - consumer spending is going up in every recession (89, 2000) as discretionary income drops.
Sorry I think I've jumped in a bit hard, but I've been seeing this in a lot of articles now, not just from yourself, and it just doesn't ring true with the numbers or story on the ground. The liquidity trap is not because China's economy is devoid of domestic demand, it's because of the long term monetary policy of the People's Bank of China, and it will have to be resolved by central banks.
China, like the other Tiger Nations, is predominantly a mercantilist nation whose prosperity is heavily dependent on export growth to the United States and Europe; both of which have thrown in the consumer shopping towel and are dealing with righting their household balance sheets to minimise the effects of debt.
As Gary Sauer-Thompson notes this has left China with industrial over-capacity and no real state based policy to deal with it. The United States is not much better. It has a financial sector which is currently at over capacity and instead of allowing it to contract as capitalism and free markets would demand, instead taxpayer money and government policy has allowed the financial sector to remain larger than what the current economy requires.
Australia has required on the 'decoupling' thesis for its hopes of avoiding any slow down in growth. Barry Ritholtz writes;
Can China expand enough to make up for the contraction in US and European demand given that the two economies are more than six times the size of China? The answer to that last question is an emphatic no. The decoupling theory was that loss of the US consumer would not matter to the commodity producers like Canada and Australia or the manufacturers like China and Japan. How could any economist have thought that? Many did.Unfortunately the US's consumption as built upon unsustainable cheap credit, which led to an over capacity of malls, which was were then filled with cheap trinkets and wares from China, Japan and other manufacturing nations. With the collapse of American consumption, so goes the factories of China as Chinese consumption and choice of goods is nothing like what Americans buy. Until the US consumer gets on top of personal debt the global economy will not pick up pace again. The United States consumer remains the wealthiest on the planet and with the most fickle demands for what they want in life. China, Japan and the other mercantilist nations cannot change that fact - and at the moment the US consumer is tapped out of money on a national scale.
Times Online writes, "The credit crunch will ensure that China becomes the world's largest economy within a decade, up to 11 years earlier than previously expected, it is forecast today."
Except China is a mercantilist economy that sells predominantly to the US; the credit crunch means that the US is not buying trinkets from China anymore.
This article describes some of the economic and political issues facing China. There seems to be little incentive for the Chinese economy to become a consumer based one, rather than a mercantilist Tiger economy based on making products for the wealthy US consumer - who is a bit tapped out at the moment. (more)
Dave Bath : The Economist said that China would be selling more to asian economies than western before too long (I think 2020 was their guess), and trans-himalayan trade is booming: India and China will soon be each other's largest trading partner.
When trans-himalayan trade gets between 30 and 40 per cent of the trade for both India and China, China will be able to jettison the US dollar, if not before.
The Beijing Olympics often seems to be seen as solely a propaganda victory for the Chinese Communist Party. It certainly is that, but it can also be seen as a realization of the goals of liberal nationalist movements that preceded it, such as the May the Fourth Movement. In Wang Zheng's Women in the Chinese Enlightenment she interviews women who seized the new opportunities suddenly available in the early twentieth century to build independent lives. One such as Lu Lihua, a physical education teacher and school principal. (more)
adam : Actually it gets even more obscure than that - Chinese bloggers will use elaborate visual rebuses which can't be automatically detected at our current level of tech.
This is drawing on a whole classical art tradition of complicated visual puns. But the reason the Great Firewall works is actually due to large numbers of human censors - the software just acts as a productivity tool.
adam : (Screwed by your comment length / preview retry rules again tonight btw)
cam : No worries. Think I know the issue. Haven't been able to upload it as I don't have internet at home (haven't for a while now and wont yet for a week or so). Such is the luddism of changing houses.
cam : It is like Avo's example of human gold farmers in WoW. It cant be cheating as they are legitimate human users. The current mob I am with had huge issues with one of their features being used to spam. They actually had to block/blocklist human behaviour to get on top of the spam. Counter intuitive, but it worked.
adam : Cheers.
When we moved into this place timing turned out such that the cable internet switch on happened before the furniture arrived. We had a laptop, a fridge and an air mattress for the first half a week.
That might have been taking minimalism a touch too far - I was pretty glad to see the bed arrive ...
cam : Yeh the other place in AZ had the mattress arrive the next day and the futon two months later :/ I slept on a mattress on the floor for too long it seemed. We just had the floors here lacquered (they are polished concrete) so the house is in complete disarray and I am spending my friday nights (like now) in internet cafes that have free wifi with a cup of coffee.
Long article by John Mauldin on the geopolitical position of China makes a key point about China's geography using some cool alternative maps. By envisioning the high rainfall inner provinces as an island he emphasises the extraordinary density and isolation of the Han heartland. The normal map of China looks like a big chook - this version looks rather unhealthy. (more)
cam : China has not been doing too well from your chicken analogies. Once amputated, now emaciated.
Via calculated risk, Asian countries are reducing their subsidies for oil in an effort to lower demand. (more)
cam : Pundits like Zakaria argue that this maybe better done by a strong arm dictator who is enforcing capitalism; ie Pinochet-style, but in this instance the collective recognition of it being the right policy meant that liberal democracy handled it well.
I wonder why many assume that liberal democracy is often best added after capitalism when a strong arm has finished implementing those policies.
There is that individual wealth threshold that Zakaria quoted, IIRC it is about 3K per capita, where liberal democracy becomes more stable after that is reached.
Don't know.
Naomi Klein makes a spray in rolling stone:
Remember how we've always been told that free markets and free people go hand in hand? That was a lie. It turns out that the most efficient delivery system for capitalism is actually a communist-style police state, fortressed with American "homeland security" technologies, pumped up with "war on terror" rhetoric.It is rubbish. China is the current world's factories. For a while it was Mexico, but technologies like SPC (statistical process control) and TQM/TQC/6Sigma remove any connection between location and quality. China is what Detroit was at the beginning of the 20thC. (more)
The Yellow River (Huang He) has a long history, as far back as BC, of causing political instability when it broke its banks in flood. Consequently the harmony of river defences have been a strong source of political strength in Chinese history. Whether that extends to weather control or not is a different issue, however, the Chinese believe they will do for rain and spectator sports where their other state-based attempts at controlling nature have failed. (more)
Several reforms were introduced during Wudi's reign of the Han Dynasty between 141 and 87 BC which are completely familiar to modern political watchers. Wudi introduced a merit system for the Chinese civil service which was similar to how Doc Evatt established a professional foreign affairs department in the 1940s. Wudi recruited small numbers of the best people from around the country and then sent them to a special academy. In Australian foreign affairs this led to competing policies of international liberalism and power politics (realpolitick).
The professional Chinese Civil Service also had competing policies, which again, would be no stranger to a modern political system. It was between the modernists and reformists. (more)
adam : There are modern elements but I don't know that it's liberal as such. For one thing it's worth noting that the Han dynasty's constitutional settlement was a synthesis of Legalism and Confucianism sometimes referred to as Imperial Confucianism. One way to view it is the realpolitikal Legalist techniques were required to rule an agrarian empire, but people had no real reason to support the leadership without the public morality offered by the Confucians.
It's one of the first great political arguments, whether government exists for the benefit of the rulers or the people, and the Confucians won, but it wasn't unqualified. Mencius and Confucius had highly idealised views of eg the way military power stemmed from moral power which sadly don't hold water when you have a barbarian horde on your doorstep.
cam : I actually didn't write it in the article, but when I was typing it I was thinking that a historian only trained in recording/interpreting modern liberal politics would have an easy task describing that episode of Chinese history in liberal terms (which is what I did).
I will probably do the same creative misinterpretation when I write an article on Chinese iron production and the market technologies they used (ie early capitalism) to establish what was only over-taken by 18thC European industry.
