Spotlight on China’s Growth
I do not expect negative growth, rather a slowdown in growth. Here are some competing views.
Marco Polo China
1/ My take on how Chinese economy will going to perform in 2021 @MacroPoloChina . The main theme is that 2021 growth will be shaped by policy tightening vs consumption recovery.
https://t.co/1b1X7nynO6— Houze Song (@hzsong) January 19, 2021
- My take on how Chinese economy will going to perform in 2021
@MacroPoloChina . The main theme is that 2021 growth will be shaped by policy tightening vs consumption recovery. - Growth target will likely be 5% in 2021, meaning Beijing will not do much to help growth. Meanwhile, addressing risks such as local government debt and property overheating are back on the agenda, and current growth drivers such as fiscal spending and property will be stifled.
- Yet, recovery will eventually pick up steam in the second half as the labor market improves and consumption strengthens. This is because there still exists substantial potential for consumption to rebound.
- At first look, as growth has already surpassed pre-Covid level in the last quarter, it seems an exaggeration to say there remains large potential. Yet, besides recovering from Covid, the Chinese economy is recovering from the economic slowdown in 2018-19.
- Labor market had already been below full employment before Covid, and lost additional jobs in 2020. Cumulatively, ~10 million ln jobs lost since 2018. Because of weak job market, households saving rate is elevated, which has hindered consumption recovery so far.
- Despite lack of policy support, we believe labor market will continue to improve, as China’s labor market has demonstrated remarkable ability to self-heal. For example, in 2019, despite no growth rebound in 2019, migrant employment growth actually accelerated.
- Although policy tightening will cause slowdown in 1H, overtime, continued labor and consumption recovery will help growth to regain momentum in the second half. Chinese economy will likely see a shallow V-shaped growth in 2021
China’s Migrant Labor Market
That chart accompanied Tweet #5 above.
Michael Pettis Views on Chinas Growth
Interesting piece by Houze Song at MacroPolo. He thinks 2021 GDP growth will be around 5% as Beijing focuses on getting risks under control and does little to boost economic activity. That is 1-2 percentage points lower than my expectation and way below everyone else’s. https://t.co/VnQmcOG02Y
— Michael Pettis (@michaelxpettis) January 19, 2021
Pettis estimates 6%-7% which surprises me. I would have guessed Pettis the same as Houze Song.
Song and Pettis
Yes, I guess the key is whether we see most of the rebound in consumption in the first half or the second. I definitely agree with you that most GDP growth expectations for 2021 are likely to be too high, just as they were initially too low in 2020.
— Michael Pettis (@michaelxpettis) January 20, 2021
Thanks to Michael Pettis and Houze Song for the discussion.
What Does China Want?
I believe that is the key question. If China wants 6% it will find a way to pull that off, even if it is a gross distortion of reality.
The risk is the same as always. To achieve growth at any cost China will allow property bubble expansion and lean on State Owned Enterprises (SOE) for growth.
If so, much of the growth will again be malinvestment, with the payback down the line.
Malinvestment adds to perceived growth now but later writeoffs will subtract from future growth.
Mish
China is going to become in one of the most important economic in the world who knows if even more than USA, even thought than covid-19 affect them they still been a relevant part of it, i think that chine could have a better economy is they start to work more with cryptocurrencies link to mintme.com because they have a good relosutions for this year!
Same guy, different spam.
(a) Learn to write
(b) get a life – nobody cares about your crypto fever dreams
Yes the Chinese have a population crunch coming. Japan and Italy are already in, rest of Europe and Korea heading that way. But projections of heaps of cheap labour going to be available in Africa and Islamic countries. Hence the rush to make new friends and influence people and get them into debt traps. What is Europe going to do. Can they match the Chinese influence given Europe (and the US) has a bit of a baggage in those regions due to killing lots of the locals in the past couple of centuries.
also……doing business with Chinese companies usually involves bribes. A coworker once told me about a previous job experience he had were it was a surreal experience walking down the sidewalk to a meeting in Beijing with 300k in cash in a briefcase to give to a CCP member as part. of a deal. He was so scared to lose or have the briefcase stolen.
So stories like this makes me wonder what goes on behind the scenes in those deals Hunter made with China.
Then again…,money talks in politics.
Communist Party hacks aren’t the only politicians who like bags of cash.
Fixed it for you
Whatever the numbers are coming out of China, we know they are fraudulent. The same applies to Russia, Iran, North Korea and a host of other autocratic governments where truth is manufactured.
So, as far as China is concerned your previous president was damn right, wasn t he? Ever since the elections though you could and should ve expanded your biased list with yet another member : The US of fckn A !
I try not to laugh, the U.S. numbers are accurate? They just invented the chained CPI.
This is a different take, but it addresses how a Chinese credit collapse would play out if it did happen. I agree with the author that it is the Chinese propensity for saving that is their greatest strength.
Peter Zeihan….the China part starts at about 17:20. I think he might just be right about a lot of this….and in any case it won’t be long before we know, because he’s talking big changes in the short term…the next ten years.
Haven’t made it through it. But well, him harping on the USMCA as an important deal was disappointing. Really just putting lipstick on NAFTA. And putting any sort of importance on a UK deal… It is not even a rounding point on the US economy. He seems to discount the work that China has put into controlling Asia economically through soft power and gravitates to hard power that the US has had. A fatal mistake.
BTW: The graphic that had Scandinavia being included in the near term armed conflict was pretty amusing.
Zeihan is a little over-the-top, but he makes some good points I think.
Don’t worry we will outpace China once Fed announces it is buying munis later this year.
Food for thought on China.
Just looking at the long term trend…..GDP growth peaked in 2007 and it’s been in a long term slowing trend ever since, just a couple of new peaks…..recovery after 2008 dip….now a new and similar pattern showing up as new post-COVID recovery peak.
That’s stimulus, not real growth. The decline is tapering, but it’s been close to .5%.year for years coming into the pandemic.
The population pyramid in China looks almost as bad as Western Europe. Here’s China.
Western Europe
Japan
Hint: Those all look pretty sucky for the future.
Here’s China in 1980, for comparison. Fairly dramatically different, no?
I think these debt to GDP numbers are probably low….but they’re 3X US levels even by these conservative estimates.
Did somebody say something about US junk bonds being in trouble?
China is trying to get out of the hole by putting Africa in debt slavery for resources. Here’s an interesting chart.
Yes, Djibouti’s debt to China is 100% of GDP.
From the same article.
“The authors also warn that “[d]ebt sustainability metrics are poorer than generally perceived, especially so in about two dozen developing countries that borrowed heavily from China during the boom decade of 2003-2013,” and that “hidden overseas debts pose serious challenges for country risk analysis and bond pricing.”
I think that’s banker speak for “some of this funny money isn’t going to be repaid”
One significant global takeaway from those charts – if you’re a single guy over 80 lookin’ fer love, the prospects are good.
Just when the odds turn really good, nobody cares anymore. lol.
I’ve been thinking that unless China starts bringing young immigrants to their country and treats them good their economic trajectory will resemble Japan’s. I remember in the 80’s the world was the land of the rising sun. Very much no so much today. My college buddies went to Japan to teach english in the mid 80’s for good pay. That was about 5-8 years before Japan’s ponzi markets collapsed. Now my daughter’s college friends are in China teaching english for good pay.
Good stuff. One of China’s tactics a former company i work at encountered. China central bank created a fund where it will loan Chinese company customers below rate loans for infrastructure build outs. pretty much too good to turn down type of loans.
These loans will be hard to pay off and then China takes over the assets in the defaults
Otherwise they customer has to find a loan on the global open market and the rates are much higher
They want to do this with entire African countries. Betting the port in Djibouti is under Chinese ownership soon if not already. The port is the Djibouti GDP.
China has “quietly unveiled an economic strategy fit for a new Cold War”. It aims to become self-sufficient in vital goods and technologies, on the assumption that trade wars with the West will persist and intensify. Foreign trade and investment will continue, but favoring “Sinosphere” partner countries in Asia. “A lot of this is about preparations for a possible war across the Taiwan Straits”
All you’d have to do is put a sea blockade across a couple of choke-points and six weeks later, China’s lights go out hmmm that easy? link to apnews.com
Strangely enough the Soviet Union also wanted to be self reliant. Even stranger, spying became the order of the day. A lot of technology was stolen from the west.
There were some innovations, but many many more were just stolen. Then again, at the end of 1990 it was realized that the Soviet claim of having 25% of the west’s GDP per capita was an outright lie. They only reached 10%.
Anything coming from a dictatorship needs to be taken with a pinch of salt.
China is on too of Covid-19. at least more than the U.S. which puts them on a better projector for economic growth. They’re not rebalancing as they should and China’s growth will ironically be subsidized on the backs of the consumer making them poorer. China just doesn’t seem capable of making the hard choices
There is probably enough demand for them to ship their fly ash-laden gypsum board over here again like 15 years ago.