Comment by ahartmetz
12 hours ago
The Chinese economy is indisputably strong and real, but rumor has it that its reported growth numbers have been inflated in the last couple of years. And why wouldn't they be - there is an autocratic government whose justification is that what they are doing is increasing economic success. No success is not an option.
Yeah basically every single academic and economist knows the Chinese government lies about its GDP numbers and pumps out fake stats. Its the Chinese way.
Personally I'm less and less inclined to believe in capitalism and money as a concept - we've long past moved the concept of money as universal barter, and into strange and speculative theories about how things ought to be valued, with the most valuable things either emerging from immediately unclear value propositions (impossibly valued companies, high-paid jobs that seemingly dont contribute to society) or artificially created shortages (housing, overpriced infrastructure projects due to government regulation and meddling).
If for example, BYD makes a car that's substantially similar between the China and Europe versions, and sells said car for $15k eqv RMB in China, but $30k in the EU, it makes double the revenue for the same 'value'. Even the argument of the EU being generally richer, and thus the car having higher monetary utility doesnt hold - a well-paid EU surgeon wont pay more for it than your average office worker.
So I feel money is increasingly a poor proxy for actual value/wealth etc.
A bottle of water in the desert and a bottle of water in your fridge don't have the same value.
That's only because, for some reason, people have conflated the words "value," "price," and "cost" until the terms are indistinguishable.
But politics isn't involved.
The point of tender is to represent value.
Your water in the desert costing 100 times what it costs where it rains is meant to represent its scarcity here vs over there.
Take cuban dollars vs normal dollar. In there the two tenders aren't proxy for value. Proxy for a political control so that the wealthy visitor pays 10 times, for the same bottle of water on the same shelf.
We are hoarding money to buy many bottles. The chinese are making and filling it while drilling wells that dont seem financally viable. They spoiled their entire bottle buying budget on that? What dumb communist central planners.
Much of the difference in the BYD cost is accounted for by a 27% tariff on the cars, transport and increased costs for warranty and compliance certification costs, as well as likely subsidies in the domestic market.
Of those, you’ll see that only transport costs are a function of “capitalism” the rest is government.
Economists account for the divergence you're describing with a concept known as "purchasing power parity", which does indeed result in a 2x adjustment in Chinese wealth. The intuition is that market exchange rates combine a number of things beyond the purchasing power of comparable goods. For example, if you have a 30 year horizon it makes perfect sense to trade 1 car worth of RMB for 0.5 cars worth of GBP: with the GBP, you can buy a government bond at 5.29% instead of 2.26%, and even with no reinvestment you end up with 1.794 cars worth of GBP vs. 1.678 cars worth of RMB.