https://www.nytimes.com/2018/03/27/opini...nning.html

I don't think massive government intervention is the way to go. Not sure this editorial isn't a condemnation of our dysfunctional political parties and the author's own administration's shortcomings. But China has made remarkable progress. Countries around the world will notice that.

"President Trump’s attacks on Chinese trade practices may be garnering the headlines, but underpinning that dispute lies a more consequential struggle, between liberal democracy and state-directed capitalism.
Of late, it’s a competition in which the Chinese approach has been delivering the more robust economic result. Indeed, implicit in the ferocity of the Trump administration’s attacks on China’s protectionism is the success of that nation’s economy.
Skeptics notwithstanding, China’s model, which has brought more people out of poverty faster than any other system in history, continues to flourish, as I’ve seen firsthand in a decade of regular visits. Meanwhile, liberal democracy — the foundation of the post-World War II order — is under pressure, most significantly for having failed in recent years to deliver broadly higher standards of living...."

Steven Rattner, a counselor in the Treasury Department under President Barack Obama, is a Wall Street executive and a contributing opinion writer.

China has this huge problem (it has several, but this is one of them that gets little attention). They are totally dependent, for their economy and frankly for their ability to have food to eat, on oil from the Middle East, and they have no way to protect their oil transport routes except to rely on the US Navy. This should be a huge bargaining chip in any negotiations with them. Without us, India basically has the ability to choke China to death.

To Owl#s comment:
Interesting they treat us (and in particular our blue water navy) as the enemy that they seem to do.
Once they have their own blue water counter-force, I would surmise that is when the water will hit the fan.

To OP:
I am not one that sees long term success in Chinese style capitalism. Successful capitalism is fundamentally rooted in rule of law, and in the ability of a populace to have a say in their own government. China, as it stands today, has neither item that is necessary for successful capitalism, imo.

(03-28-2018 11:01 PM)tanqtonic Wrote:  To Owl#s comment:
Interesting they treat us (and in particular our blue water navy) as the enemy that they seem to do.
Once they have their own blue water counter-force, I would surmise that is when the water will hit the fan.

They might have a hard time getting there. Russia tried for decades and never really achieved a blue water capability. I'm personally not quite sure why we seem to be so interested in tweaking their noses in the China Sea. That's going to be their lake, and it's going to be difficult at best for us to win a road game against them inside there. What I think we can do is pretty much keep them bottled up there, and that does seem a useful objective. They are a land power, not a maritime one, and it's going to be a long and expensive process to change that.

India's oil trade route to the Middle East is a lot shorter and they can protect theirs. They can also pretty much deny China's if they so choose. Japan is actually better positioned and equipped to protect theirs than China is to protect theirs. As long as China is totally dependent on a sea route for oil, they are very vulnerable. And until somebody comes up with a practical way to build a pipeline across the Himalayas, or some alternative comes along that can replace oil on a massive basis, or China finds massive oil reserves in the China Sea (their hope), they will remain so. That's over and above their demographic and other internal issues.

It is extremely hard to take away any lessons from China because it was such an underdeveloped labor market and underdeveloped consumer market.

You could do a lot of things that are bad for the economy and still have outrageous growth.

Per Peter Zeihan, China is doing the equivalent of an Obama stimulus package ($800 billion) every 17 days.

China has a big economic problem.

Here's what it is.

Basically, China needs to convert its economy from a 'competing with the bottom' with Bangladesh on low manufacturing costs to an economy that runs on value added manufacturing/services to move beyond lower middle income. By the way, that's a very hard trick to pull off in practice. South Korea basically managed it, barely, but the're the only major economy to do it.

Here are China's problems

1) China's currency doesn't freely trade and its financial markets are not transparent or terribly liquid. This causes China to be a capital leaker (either via required bond purchases to keep their exports running) or through direct capital outflows. China's banks are really f'ed up too, with massive holes in their balance sheets and non-performing loans that would make Japan circa 1991 look good.

2) China's work force is starting to decline, which will make natural growth in the economy slow, will drive up labor costs, and will cause further problems for their 'low cost' manufacturing economy. These problems will get worse in the future.

3) China's labor force is highly immobile, with severe constraints on labor mobility. This is largely related to the Hukou residential system, which prevents the free flow of labor. That system exists for largely non-economic reasons.

4) China's innovative culture has never really developed. Even when China applies its capital surplus to BUY foreign technology/services companies, the higher value added jobs have remained overseas.

5) China's environmental problems are significant, and have real consequences for their economy. The most developed part of China has as much water per capita as Saudi Arabia. The air is severely polluted and much of the water used by Northern China is so polluted it cannot be used for many industrial purposes. These problems are creating further constraints on China's ability to develop. And these problems will likely get worse in the near term

6) China has developed a nascent consumer market, but it is still woefully underdeveloped. Less than 60 million Chinese live in a household with a PCI at PPP of 10,000 USD or more. Part of the reason why that market hasn't grown much recently is because of the constraints on mobility.

7) China's economy is being developed, to a greater and greater extent, by central government stimuluses, such as infrastructure investments. These can grow an economy (and have to a certain extent). However, a significant portion of those investments are not being optimally deployed.

8) Intellectual capital flight - China exports its talent and repels foreign talent. Part of that is the lack of freedom in China. Part of it is the corruption. Part of it is the lure of the developed world. Their education system has also not been able to comprehensively compete with world caliber universities either.

In short, China will be an economic and military power. But the arc of growth has slowed down and they're having real problems getting it started up again. China's form of 'capitalism' WAS winning when it competed with Bangladesh or over priced developed world competitors, but that's pretty much all played out now. China's 'capitaliism' might have some severe problems going forward.

(03-29-2018 06:06 PM)Tom in Lazybrook Wrote:  4) China's innovative culture has never really developed. Even when China applies its capital surplus to BUY foreign technology/services companies, the higher value added jobs have remained overseas.

Per a friend in the tech sector, his higher ups were hiring a lot of Indians and Chinese for programming because they could blow the tests they had out of the water and they were cheap. What they soon learned was that they were outstanding for grunt work because they had been drilled and drilled to memorize so much, but they were a total bust coming up with new solutions and innovations because their education system didn't tolerate deviating from the teaching script.

If you discourage trying different things you aren't going to innovate.

(03-29-2018 06:06 PM)Tom in Lazybrook Wrote:  China has a big economic problem.

Here's what it is.

Basically, China needs to convert its economy from a 'competing with the bottom' with Bangladesh on low manufacturing costs to an economy that runs on value added manufacturing/services to move beyond lower middle income. By the way, that's a very hard trick to pull off in practice. South Korea basically managed it, barely, but the're the only major economy to do it.

Here are China's problems

1) China's currency doesn't freely trade and its financial markets are not transparent or terribly liquid. This causes China to be a capital leaker (either via required bond purchases to keep their exports running) or through direct capital outflows. China's banks are really f'ed up too, with massive holes in their balance sheets and non-performing loans that would make Japan circa 1991 look good.

2) China's work force is starting to decline, which will make natural growth in the economy slow, will drive up labor costs, and will cause further problems for their 'low cost' manufacturing economy. These problems will get worse in the future.

3) China's labor force is highly immobile, with severe constraints on labor mobility. This is largely related to the Hukou residential system, which prevents the free flow of labor. That system exists for largely non-economic reasons.

4) China's innovative culture has never really developed. Even when China applies its capital surplus to BUY foreign technology/services companies, the higher value added jobs have remained overseas.

5) China's environmental problems are significant, and have real consequences for their economy. The most developed part of China has as much water per capita as Saudi Arabia. The air is severely polluted and much of the water used by Northern China is so polluted it cannot be used for many industrial purposes. These problems are creating further constraints on China's ability to develop. And these problems will likely get worse in the near term

6) China has developed a nascent consumer market, but it is still woefully underdeveloped. Less than 60 million Chinese live in a household with a PCI at PPP of 10,000 USD or more. Part of the reason why that market hasn't grown much recently is because of the constraints on mobility.

7) China's economy is being developed, to a greater and greater extent, by central government stimuluses, such as infrastructure investments. These can grow an economy (and have to a certain extent). However, a significant portion of those investments are not being optimally deployed.

8) Intellectual capital flight - China exports its talent and repels foreign talent. Part of that is the lack of freedom in China. Part of it is the corruption. Part of it is the lure of the developed world. Their education system has also not been able to comprehensively compete with world caliber universities either.

In short, China will be an economic and military power. But the arc of growth has slowed down and they're having real problems getting it started up again. China's form of 'capitalism' WAS winning when it competed with Bangladesh or over priced developed world competitors, but that's pretty much all played out now. China's 'capitaliism' might have some severe problems going forward.

The environment is a problem for health, not for their economy.

And the labor mobility laws are ignored by many. It allows for some abuse of employees. On top of that, many companies will move at the drop of a hat. So they can find labor with 1.4 billion people.

It's disgusting how many have become infatuated with the idea of a benevolent Chinese dictatorship.

I believe it would be a huge misstep to trust China and any of their economic numbers. They are a closed communist system with a very real ability to manipulate data, reporting and outcomes to reflect everything they want. The Chinese system encourages if not incentivizes mediocrity, inefficiency, lying and even theft.

It is not as if history has anything to teach us about the Chinese economy.

(I wonder if Rattner counts those killed in the numerous Chinese economic and environmental disasters, the 15 million people killed by the Great Famine, and the 2 million killed by the Red Guards as "lifted out of poverty.")

(03-28-2018 10:17 AM)bullet Wrote:  https://www.nytimes.com/2018/03/27/opini...nning.html

I don't think massive government intervention is the way to go. Not sure this editorial isn't a condemnation of our dysfunctional political parties and the author's own administration's shortcomings. But China has made remarkable progress. Countries around the world will notice that.

"President Trump’s attacks on Chinese trade practices may be garnering the headlines, but underpinning that dispute lies a more consequential struggle, between liberal democracy and state-directed capitalism.
Of late, it’s a competition in which the Chinese approach has been delivering the more robust economic result. Indeed, implicit in the ferocity of the Trump administration’s attacks on China’s protectionism is the success of that nation’s economy.
Skeptics notwithstanding, China’s model, which has brought more people out of poverty faster than any other system in history, continues to flourish, as I’ve seen firsthand in a decade of regular visits. Meanwhile, liberal democracy — the foundation of the post-World War II order — is under pressure, most significantly for having failed in recent years to deliver broadly higher standards of living...."

Steven Rattner, a counselor in the Treasury Department under President Barack Obama, is a Wall Street executive and a contributing opinion writer.

The author is someone is who is simply enviously of the autocratic nature that Xi wields in China. One would think that Trumps' election would disabuse people desire for such a system for fear of the wrong kind of person coming into power.

China is injecting into its economy the equivalent of Obama's "stimulus" every 17 days. It's really hard not to get growth with that approach--and impossible to sustain it.

(04-02-2018 05:26 PM)vandiver49 Wrote:  The author is someone is who is simply enviously of the autocratic nature that Xi wields in China. One would think that Trumps' election would disabuse people desire for such a system for fear of the wrong kind of person coming into power.

There has ALWAYS been a segment of the US population that wants a "benevolent" dictator. From those who wanted Washington to take power, to those who supported Jackson and his flipping off the Supreme Court and threatening to invade South Carolina, to those who embraced Wilson and joined the second klan making it a viable political party for a time, those who would have happily seen FDR pack the court while others backed the Business Plot. The people who backed Nixon to the bitter end knowing he was a crook.

These people always exist and their numbers increase any time there is the perception of crisis or decline.

In the 80s they said the same things about Germany. In the 90s it was Japan. Now it is China. China is will take longer to fail because of its size but is so corrupt, it will undoubtedly fail.

(04-03-2018 02:14 PM)arkstfan Wrote:  

(04-02-2018 05:26 PM)vandiver49 Wrote:  The author is someone is who is simply enviously of the autocratic nature that Xi wields in China. One would think that Trumps' election would disabuse people desire for such a system for fear of the wrong kind of person coming into power.

There has ALWAYS been a segment of the US population that wants a "benevolent" dictator. From those who wanted Washington to take power, to those who supported Jackson and his flipping off the Supreme Court and threatening to invade South Carolina, to those who embraced Wilson and joined the second klan making it a viable political party for a time, those who would have happily seen FDR pack the court while others backed the Business Plot. The people who backed Nixon to the bitter end knowing he was a crook.

These people always exist and their numbers increase any time there is the perception of crisis or decline.

One of those is not like the others at all-Nixon.

(04-05-2018 10:35 AM)bullet Wrote:  

(04-03-2018 02:14 PM)arkstfan Wrote:  

(04-02-2018 05:26 PM)vandiver49 Wrote:  The author is someone is who is simply enviously of the autocratic nature that Xi wields in China. One would think that Trumps' election would disabuse people desire for such a system for fear of the wrong kind of person coming into power.

There has ALWAYS been a segment of the US population that wants a "benevolent" dictator. From those who wanted Washington to take power, to those who supported Jackson and his flipping off the Supreme Court and threatening to invade South Carolina, to those who embraced Wilson and joined the second klan making it a viable political party for a time, those who would have happily seen FDR pack the court while others backed the Business Plot. The people who backed Nixon to the bitter end knowing he was a crook.

These people always exist and their numbers increase any time there is the perception of crisis or decline.

One of those is not like the others at all-Nixon.

Nixon was a unique case. Mostly bluster on cracking down on protestors, more liberal than most politicians yet seen as a conservative. Anti-communist who thawed relations with communists.

Oh yeah a crook.

https://www.realclearpolitics.com/articl...36913.html

One aspect of Chinese capitalism:

that Chinese theft of American intellectual property costs between $225 billion and $600 billion annually.



"...After a recent seven-month investigation, the Office of the United States Trade Representative found that Chinese theft of American intellectual property costs between $225 billion and $600 billion annually. The true costs are probably even greater, unbalancing the fairness of the free market in the United States itself...."

To Owl#s:

In terms of oil and China, I guess there is a huge correlation between the Chinese militarization of the South China Sea, Spratly's, etc., their declaration of their economic interest zone to include all of the Sea, and the estimates of oil reserves there.

bullet:

One thing that is overlooked is that a typical ascendent power is that they are a net thief of intellectual prowess and property. The United States, up until the early 1900's, was considered by the then powers-that-be to be a major thief of IP and technologies. Only when US advanced to the forefront of IP leadership did the US actually strengthen its stance on IP protections.

Look for China to do the same as they come into the front ranks of research and development.

(04-26-2018 10:21 AM)tanqtonic Wrote:  To Owl#s:

In terms of oil and China, I guess there is a huge correlation between the Chinese militarization of the South China Sea, Spratly's, etc., their declaration of their economic interest zone to include all of the Sea, and the estimates of oil reserves there.

Unquestionably. But as you well know, potential reserves are not proved reserves, and proved reserves are not producing reserves, and it can take decades to navigate those gaps.

China’s best case is not going to be energyself-sufficient for close to a century. NAFTA is energy self-sufficient today.

It’s time to leverage that to our advantage.

(04-26-2018 10:21 AM)tanqtonic Wrote:  To Owl#s:

In terms of oil and China, I guess there is a huge correlation between the Chinese militarization of the South China Sea, Spratly's, etc., their declaration of their economic interest zone to include all of the Sea, and the estimates of oil reserves there.

bullet:

One thing that is overlooked is that a typical ascendent power is that they are a net thief of intellectual prowess and property. The United States, up until the early 1900's, was considered by the then powers-that-be to be a major thief of IP and technologies. Only when US advanced to the forefront of IP leadership did the US actually strengthen its stance on IP protections.

Look for China to do the same as they come into the front ranks of research and development.

I doubt that they change. They tilt the playing field towards themselves. Its time for the west to just say no:

https://www.ft.com/content/740c34e4-47c1...ac3b9ee271