PeakTrader.com

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PeakTrader said...

Who's better off?

China's per capita real income rising from $500 to $3,000, while U.S. per capita real income rising from $15,000 to $45,000 over the same period?

China gained 500%, while the U.S. gained 200%.

Or, China gained $2,500, while the U.S. gained $30,000.

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juandos said...

Who is better off PT in terms of "real' purchasing power?

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PeakTrader said...

Juandos, in order:

1. U.S. consumers.
2. China's communist elites or middle class.
3. Everyone else in China, i.e. the masses.

http://4.bp.blogspot.com/_otfwl2zc6Qc/TS976gdsJiI/AAAAAAAAO0Q/h45mBi7RuGQ/s1600/permfg.jpg

http://4.bp.blogspot.com/_otfwl2zc6Qc/TS98HmH9R9I/AAAAAAAAO0U/_YEk6UQSdvk/s1600/worldmfg.jpg

PeakTrader said...

The U.S. offshored its low profitable manufactured goods to poor countries, e.g. China, and shifted its resources into high profitable manufactured goods (and into other industries, including emerging industries).

Part of China's manufacturing belongs to the U.S., because the U.S. imports its offshored goods (at lower prices and higher profits):

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The hidden downside of Santa's little helpers
December 21, 2002

"An investigation into the price of a Mattel Barbie doll, half of which is made in China, found that of the $10 retail price, $8 goes to transportation, marketing, retailing, wholesale and profit for Mattel.

Of the remaining $2, $1 is shared by the management and transportation in Hong Kong, and 65 cents is shared by the raw materials from Taiwan, Japan, the U.S. and Saudi Arabia. The remaining 35 cents is earned by producers in China for providing factory sites, labour and electricity."

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The Communists have turned China into the world's biggest garbage dump.

China has been polluting and eroding the countryside at an alarming rate, has imported the worst industries in the world (e.g. oil-intensive industries and industries with declining prices), pays its workers slave wages and then exports at cheap prices, etc.

The Communists have spent hundreds of billions of dollars building impressive facades to hide the massive economic and environmental catastrophes that affect over 95% of the country, while the central government and relatively few communist elites benefit enormously.

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Sorry, China, There Is No Short Cut To Economic Greatness
Jan. 26, 2010

The government that magically managed to report 6-8% GDP growth in the midst of the financial crisis, when its exports were down over 25%, tonnage of goods shipped through its railroads was down by double digits, and its electricity consumption was falling like a rock. It is hard to manufacture 8% more widgets with a lot less electricity...China did not suddenly become energy efficient during the financial crisis.

This is a government that will go to great length to maintain appearances to keep its ideology going. After all, it censors what its citizens may or may not read and imprisons the ones that write anti-government articles.

China will do anything to grow its economy, as the alternatives will lead to political unrest...Since China lacks the social safety net of the developed world, unemployed people are not just inconvenienced by the loss of their jobs, they starve (this explains the high savings rate in China) and hungry people don’t complain, they riot.

The Chinese government controls the banks, thus it can make them lend, and it can force state-owned enterprises (a third of the economy) to borrow and to spend. Also, since the rule of law and human and property rights are nascent in its economic and political system, China can spend infrastructure project money very fast – if a school is in the way of a road the government wants to build, it becomes a casualty for the greater good.

China has spent a tremendous amount of money on infrastructure over last decade and there are definitely long-term benefits to having better highways, fast railroads, more hospitals, etc. But government is horrible at allocating large amounts of capital, especially at the speed it was done in China. Political decisions (driven by the goal of full employment) are often uneconomical, and corruption and cronyism result in projects that destroy value.

Infrastructure and real estate projects are where you get your biggest bang for the buck if your goal is to maintain employment, since they require a lot of unskilled labor; and this is where in the past a lot of Chinese money was spent. This also explains why, in 2009, new floor space constructed was up 100% and residential real estate prices surged 25%. And this explains why they keep building skyscrapers even though the adjacent ones are still vacant.

To make things worse, before the financial crisis and enormous stimulus ($586 billion), China was already suffering from what I call late-stage-growth obesity, inefficiencies that are a byproduct of high growth rates sustained for a long period of time. Though Chinese growth in the past was high, in its late stages the quality of growth has been low.

For example, in an echo of past Chinese government asset-allocation decisions, China built the largest shopping mall in the world, the South China Mall, that is 99% vacant, years after construction. China also built a whole city, Ordos, in Inner Mongolia, on spec for million residents who never appeared.

The inefficiencies are also evident in industrial overcapacity. According to Pivot Capital, Chinese excess capacity in cement is greater than the combined consumption by the US, Japan, and India combined. Also, Chinese idle production of steel is greater than the production capacity of Japan and South Korea combined. Similarly disturbing statistics are true for many other industrial commodities. The enormous stimulus amplified problems that already existed to financial-crisis levels. China is a less shiny but more drastic version of Dubai.

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PeakTrader said...

Rising median ages for the U.S., Japan, Germany, and China suggest slower future economic growth in those countries.

China's median age has increased sharply over the past 10 years, because of its one-child policy. It increased from below 30 in 2000 to over 35 in 2010. It seems, China will age without acquiring much real per capita wealth.

The U.S. median age is about 37, which increased slightly since 2000. Both Japan and Germany had sharper increases in median ages since 2000. Japan's median age is about 45 and Germany's median age is slightly above 44.

Remarkably, Uganda's median age is 15.

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PeakTrader said...

The Chinese work harder than Americans. However, that's what happens when spoons instead of shovels are used, and worthless "pyramids" are built.

The Chinese are helping the U.S. become an even bigger economy, because it exports a huge proportion of its output.

In 2007, U.S. per capita income was $45,000 and China's per capita income was $2,000. If the U.S. gains $700 and China gains $300 for each $1,000 in trade, then U.S. income (or living standards) rises less than 2% and China's income rises 15% (however, unfortunately for China, when social costs are included, the U.S. may capture all the gains in trade).

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China's hot economy surges 10.3 percent in 2010
January 20, 2011

Average incomes for citydwellers rose 11.5 percent in 2010 to 21,033 yuan (about $3,200). Rural per capita income surged nearly 15 percent, but at 5,919 yuan ($900) it lags far behind.

Recent surges in costs for food and other basic necessities are hitting many families, especially those living on lower incomes.

"My pension is just 1,700 yuan ($260) a month, and even if it has been raised a bit, it cannot catch up with rising prices," said Ji Minlin, a 62-year-old retired bicycle factory worker who said she and her friends were combing supermarket for bargains.

"I do hope prices, especially food prices, won't rise anymore," she said.

http://finance.yahoo.com/news/Chinas-hot-economy-surges-103-apf-1380086867.html?x=0&sec=topStories&pos=7&asset=&ccode=

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PeakTrader said...

After a lot of activity spinning the economy's wheels over the past two years, China won't (or really can't) give us a tow.

Obama seems to believe a moped with a lawnmower engine can pull a Cadillac SUV out of the mud.

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China has very little arable land, either for growing corn or raising cattle:

Shrinking Arable Lands Jeopardizing China's Food Security
April 18, 2006

A survey released last month by China’s Ministry of Land and Resources revealed that the country has lost 8 million hectares, or 6.6 percent, of its arable land in the past decade.

As of November 2005, China had approximately 122 million hectares of arable land, covering 13 percent of its territory. This amounted to 0.27 hectares per capita, less than 40 percent of the world per capita average, one-eighth the U.S. level, and one-half the Indian level.

Most of the land being lost to construction in eastern China is higher-quality agricultural land...Remaining farmlands are also suffering from pollution and soil erosion...one-sixth of China’s total arable lands are polluted by heavy metals, and more than 40 percent are degenerated due to erosion and desertification."

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PeakTrader said...

17 Facts About China That Will Blow Your Mind

"Chinese GDP could overtake the U.S. in less than 15 years."

China could create even more massive environmental damage, continue to treat its workers as expendable, export about half of its economy (while blocking imports), and build many more empty buildings, houses, and cities to surpass U.S. GDP within 15 years.

China will continue to be a poor country over the next 15 years, while the U.S. continues to reap the benefits of hard working Chinese, who will be "spent" by the time its one-child policy causes a huge retired class living in the world's biggest garbage heap.