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Great Leap Backwards
Different month, same contrast.
The much-discussed divergence between China's outbound shipments and imports was on full display in trade data released Tuesday. Exports grew 8.7% in August, the Party said. That was the briskest YoY pace in 17 months.
The value of those shipments was about $310 billion, the most in nearly two years, and not too far off the all-time high set towards the end of 2021. The figures easily topped estimates.
By contrast, imports barely grew at all, posting a decidedl
“ To reiterate: An autocracy that loses its claim on legitimacy with the people quickly — and necessarily — becomes a dictatorship. Oppression turns to outright tyranny.”
Something to consider before half of my fellow Americans decide that a tax cut or tacit social approval of their worst behaviors, is worth ending our 200+ year democratic experience.
There are plenty of modern appliances/conveniences (stoves, flooring, washing machines, A/C, wifi, computers, etc,) that I am sure many rural Chinese people (35% of the Chinese population) would want to upgrade to, if provided adequate electricity and given the money to purchase such appliances/conveniences.
About ten years ago, one of my kids spent several months traveling in China, and at one point stayed with a family that ran a farm. That home had a dirt floor, no wifi and a barely functioning stove top, no AC. My child was able to stay in touch with me by bartering with the (wealthier) farm family next door by exchanging Mars bars for wifi usage. 🙂
If the Chinese people ever get fed up and say “no” to authoritarian dictatorships, which would clear a pathway for China to become a better/fairer global power with human rights, property rights and rule of law; the USA (including the US work force and the USD) would finally have some serious competition to the top position in global leadership.
Another marginal self-inflicted wound to domestic spending (emphasis on marginal) is the torpedoing of Ant Financial. Ant specialized in collateral-free microloans. They could operate in size because they maintained seriously low reserves (I recall reading the number 3%) against those loans. Jack Ma’s famous last words (last words as a “free” man who seemed to actually be above the law, Elon style) were to criticize banking regulators for their “Pawn shop mentality.” He meant, of course, the requirement that loans be backed by collateral. Then the regulators came down on him and Ant with both feet. Now, Ant is much more like a bank. They keep bank-level reserves, and they’re much stingier with loan issuance. I’m quite sure that has had an impact on domestic demand at the margins.
I get the severe trade imbalance. What I don’t get is the bad attitude about it. Xi is trying for cash flow. His big factories have high levels of operating leverage and need constant throughput to survive so they “just do it.” The exports reported for China had to be bought by folks who felt they were better served buy buying China’s stuff than someone else’s. After all, XI may be a tyrant but he can’t make anyone buy his stuff if they don’t want to. Consider the all-American sale. Nothing Americans like better than a sale. But why are there sales anyway? The reasons are clear, of course, a company made too much stuff, stuff people didn’t like, or bad stuff. No one had to buy any of this “stuff,” but still, they do every single day. My latest sale order arrived last week. I’ve shopped at Temu twice and that was enough. Half of what I got was substandard, but still OK. I won’t go back. Americans have got to stop acting like China’s taking something away from us. They are just having a huge garage sale. In 1982, my wife and I built our dream house, the only house built that year in a county of 150,000 population. We got everything in that house below cost. A 3000 sq’ house wired for $800. Two hundred square yards of top quality carpet you can’t even find today for $40/yard with extra thick padding, laid. When we moved after 30 years in that house there wasn’t a mark on that carpet. We got a $2000 plastering job, real plaster, because the guy had to keep his crew together. Got 800 sq’ of 3/4 inch. prefinished, top of the line, solid oak flooring for $800. Sales happen. Why not Chinese ones?
I would imagine that China has the capability to get money to anyone they want. ifIthey can spy on 1.4 billion people, they can send money to 1.4 billion people.
Mmm, wonder who caused the extreme poverty in China in the first place?
This is material – implications for some US names too. https://www.whitehouse.gov/briefing-room/statements-releases/2024/09/13/fact-sheet-biden-harris-administration-announces-new-actions-to-protect-american-consumers-workers-and-businesses-by-cracking-down-on-de-minimis-shipments-with-unsafe-unfairly-traded-products/
Raising the retirement age and increasing contributions, while probably sensible in the long term, seems the opposite of helicopter money in the here and now. https://www.wsj.com/world/china/for-years-chinese-workers-could-retire-at-50-now-china-cant-afford-it-e7cbd405