Comment by toomuchtodo
2 months ago
With China's real estate sector stagnating (because they've built enough housing for future demand to an excess, broadly speaking), all of that capacity is moving towards clean energy manufacturing.
https://en.wikipedia.org/wiki/Made_in_China_2025
https://thediplomat.com/2024/04/how-china-became-the-worlds-...
The doubts about the size of the investment in that Wikipedia article are funny. It's a bit like "We cannot afford to invest in education", but the Chinese are saying "We cannot afford not to invest in education" (Famous quotes, it's more about R&D here). China's leadership is probably terrified of falling into the middle-income trap. It might be the biggest issue on their minds right now. At least I am watching from the sidelines, wondering "Are they gonna make it?".
Education has always been important in Chinese culture.
You could say it's central to their culture. Sort of goes for most Asian cultures, the education of children is something Asian parents will sacrifice greatly for.
3 replies →
Not democratized education, to my understanding. Rural china has never had the sort of broad access to education that exists there now (and is still rapidly developing).
That's pretty blatantly false. Mao had a very large number of China's teachers executed during the 1960s, which set the entire nation back two generations in education (at least). The teachers - along with many other enlightened peoples - were murdered for being so called Capitalist intellectuals.
Pretending "always" for anything related to China, you can be sure their elaborate history will prove you wrong.
> terrified of falling into the middle-income trap
Not really, there's 2 middle income traps:
1) the ACTUAL trap / thesis - countries fail to educate / upgrade workforce enough to move up supply chains to generate high income employment to bring up income, the TRAP is lack of advancement, to which PRC is basically the LEAST trapped country in the world, pursuing industrial development in all high end sectors. Issues is PRC being highly developed in every sector = still not enough high end jobs for 1.4B people.
2) the economic middle income trap, for last few years, PRC consisitly a foreskin (low single %) below world bank definition/revision of upper income, people need to ask why that is? IMO it's because PRC DOESN'T WANT to be definitionally upper income to play up developing status, and lose related perks. It would be absolutely trivial for PRC to revaluate FX by a few % and cross nominal USD high income and take a huge victory lap, but they don't.
The reality is "hiding strength" is going ot be increasingly hard with time - PRC per capita is being brought down by 600m low income. The TLDR is bottom 4-5 quantiles, i.e. 40% very undereducated population who got left behind during modernization and generates about only ~5% of GDP. They skew old and will eventually phase out of stats (die) in next couple decades, and numerator is going to be increasingly high educated new cohorts working high income. Low/high income divide is largely generational, the future educated populations are going to be in disproportionately high income high skill jobs i.e. PRC is replacing 200m subsistent farmers with 200m tertiary workforce. If most of the 2 bottom quantile dies by 2050, PRC per capita will nearly double to medium high income simply doing nothing, with PPP to rival upper-high income if they hold on to production. Short of unforseen catastrophe, it's statistic inevitability.
That's without mentioning FX, i.e. PRC securing enough economic clout = eventually ability to flex the FX lever to multiply nominal GDP faster than actual growth.
600m generating 5% of GDP sounds crazy. Any source to back that up? What % of people are doing manufacturing? The American bull case is that China collapses because these 600m people die off and take their lead in manufacturing with them meanwhile the US is already at the top and continues to absorb the best people in the world hopefully sustaining their growth.
1 reply →
Me too! My guess is 2031, but it'll feel hollow
- Definition of this is 12,000 2011 USD, BLS says thats 17,600 2024 USD. Looking like 2024 closes at a little under 13,000 24 USD. If we calculate out the 6% CCP standard GDP growth rate, it'd take 5 years
- GDP is not very likely to grow at the formerly-real 6% per year moving forward. Population peaked, trade is now a tailwind instead of a headwind, GDP per capita at 13,000 is 0.5x Russia and 2.5x India, and we're in year 2 of a deflationary crisis that's barely being held off, if it is, and is characterized by an significant oversupply in housing stock that'll take years to run down. So I'll tack on 2 years, make it 7 years, 2031.
https://news.ycombinator.com/item?id=41664312
Pretty sure clean manafacturing is still part of that middle income job.
Those millions of unemployed youth didn't go through the gaokao to work in a BYD factory, it's the "useless" white collar jobs that everyone wants but there is short supply of. And the often unpredictable clampdowns on those industries don't help.
> China's leadership is probably terrified of falling into the middle-income trap
I feel like it's more of a case of how do they get out of it, rather than avoid falling into it, at this point. The demographics are shit and the country isn't particularly attractive to immigrants, nor (unlike, America and Canada, and honestly most of Europe, despite what the right wing say) do they really have room for more immigrants.
The whole "demographics" scare about China is clear nonsense. Even if that becomes true, it will take 25 to 30 years for it to manifest, because China consumption is in a growing curve. The current young working population is more educated and productive than ever. And China still has hundreds of millions of people to be included into its consumer and labor market in the poorest areas. So don't hold your breath about a "demographics" problem for China, it will take decades for this to happen if ever at all.
12 replies →
China scaling and efficiency is really something else. it seems they've latched on to something that works better than even democracy and capitalism
They’re certainly good at building.
Actually utilizing that capacity is something else entirely; there are factories less than ten years old shuttering due to overcapacity. https://www.nytimes.com/2024/04/23/business/china-auto-facto...
And the rush to subsidize more capacity is a big contributor to local government debt burdens in China, which is estimated to leave Chinese debt to GDP at 117%.
You are never going to get exactly the right amount of capacity, so the question is whether you want to err on the side of too much or too little. Too little might often be more efficient, but there are undeniable strategic benefits to having too much. The events of the last few years have taught us all some painful lessons about the hidden costs of JIT and lean. China might have got the balance wrong, but they aren't prima facie wrong.
58 replies →
China’s debt load fluctuates if you consider just the central government, local governments, and SOEs owned by either the central or local governments. Then you have private sector debt. SOEs are where a lot of china’s shadow debt comes from (localities ask SOEs they control to fund public projects of their own books), this is what pushes China’s debt load over 100%.
4 replies →
In the US this model is called venture capital - build lots of things knowing lots will fail.
It's a model that creates big winners and lots of losers.
Ironically of course the other alternative is central planning which is a hallmark of communist economic systems.
> estimated to leave Chinese debt to GDP at 117%
Japan is 264%, Singapore 168%, the US 129%, France 112%, Canada is 107%, UK 97%, Germany 66%, Australia 22%, Afghanistan 7.4%, Kuwait 2.1%.
A debt ratio isn't particularly useful to know on it's own.
Not a great take - those factories are foreign owned ICE car factories. Hyundai basically underestimated how fast China's EV transition would be.
That's good news for China, full speed domestic EV production.
10-year old ICE car factories idling is a sign of success in their transition to NEV.
> China has more than 100 factories with the capacity to build close to 40 million internal combustion engine cars a year. That is roughly twice as many as people in China want to buy, and sales of these cars are dropping fast as electric vehicles become more popular.
Efficient yes, generates good quality of life for the average citizen? Not as much. Plenty the west can learn from China on how to do large public works though.
Quality of life for average citizen improved must faster in China that in the US during the last 40 years.
[flagged]
Chinese government in general doesn't just "get" a factory. They need to compensate private owners too if they need to use their land. But the state owns every piece of the land (it's a bit more complicated than that, especially not true for rural where collective ownership is a big thing).
IMO, labelling governments as "authoritarian" sometimes gives an inaccurate outlook. The government is not a single person that just orders other people around and magically gets nods everywhere. It's an organization and you can expect all kinds of messy and chaotic stuffs in it.
I have lived under both "kinds" of governments and I feel the democratic ones have a lot of "authoritarian" elements in it too, especially nowadays when national security touches everything. And surprisingly it is way more effective than the "authoritarian" government I lived in.
Liberal governments also implement unpleasant decisions, for example: paying subsidies for solar panels, electric vehicles, banning good old cheap lightbulbs, banning cheap plastic bags, cheap cars etc.
2 replies →
This factory is being built by BYD, not the government, and not a state-owned enterprise.
It's being built because BYD anticipates massive growth in demand for electric vehicles, not because of some arbitrary mandate.
BYD is known for its ruthless price-cutting and drive for efficiency, so they're a very bad example to illustrate government bloat.
2 replies →
> Basically, Chinese government wants a bigass factory and they will get a bigass factory because literally fuck you.
And what's the difference from the US government when it wants a bigass factory?
Isn't the difference that the US also wanted China to build bigass factories? They got too good at that.
2 replies →
No, it's when an authoritarian government wants something they'll get it. And by get it I mean "they'll take your house, ignore any local environment concerns and possibly just demolish entire villages and generational livelihoods".
Everyone seems to have some "oh how great it is they just get things done" as though they haven't diligently turned up to complain about some development application of the local council.
Yeah, sunshine and rainbows I suppose provided you're thousands of miles away.
6 replies →
> it seems they've latched on to something that works better than even democracy and capitalism
Wouldn’t this just be plain old fashioned authoritarianism? America can latch on to this too, and we might based on how the Trump admin turns out.
No. One required component is plain old fashioned oversupply of labor. America doesn't have that because all employable people are too rich. China also has an oversupply of skilled labor like engineers, in part because the threat of poverty is a strong motivator to get rich. America also lacks that which you can see in capable young people doing arts degrees with no thought to their future income because it doesn't matter - they'll still live comfortably even on minimum wage.
21 replies →
If the Trump administration (or the Biden administration) tried to enact an industrial policy like China, I think they would fail. It's not easy, and plenty of authoritarian governments fail at it.