With the existence of a US, Canadian, UK, and European mega-threads and increasing interest in Asia, I believe this is a good time to have an Asian Mega-thread.
This thread will discuss politics and business in East and Southeast Asia as a whole. Since TL doesn't have as many Asian members as we do for North American and European, I will gear this thread more towards informing people rather than as a place for discussion and debate.
For those interested, here are a list of sources and their political leanings.
I would like to stress that the political bias in reporting is nowhere near as significant as significant as much of the media in the West, with a few exceptions which are marked with an asterisk. Other than that, most sources I gave I find to be incredibly informative.
As a disclaimer, I also want to point out that I am a support of the Pro-Beijing Camp which means I have a bias in favor for Chinese geo-economic and geo-political issues and I am a staunch supporter of economic liberalism. While there is a ton of Chinese propaganda everywhere these days, especially keyboard warriors from the 50 Cent Party who somehow make it past the Great Firewall, I will do my best to be impartial dispel any myths promoted by pro-Chinese shills.
This section will be used for articles and videos which I think are helpful to understanding Asia, especially in contrast to what happens in Europe and America
I will try to not let personal biases direct this thread, but I cannot stress enough how misguided the people who are promoting the Thucydides Trap are, and possibly dangerous. While Europe and Asia are similar in their military history, the political history is incredibly different.
Another video by David Kang which sums up the limits of international relations. While I dislike the word "Eurocentrism" because of a bunch of unpleasant activists from cultural studies departments, international relation models taught in English speaking universities are completely incompatible with the political reality and history of East Asian politics.
SHANGHAI -- More than a week has passed since the U.S. and China fired the opening shots in what is turning out to be an escalating trade war that has yet to produce any visible winners in either of the world's two biggest markets.
When President Donald Trump's White House initiated 25% tariffs on $34 billion worth of Chinese goods on July 6, China immediately retaliated with a 25% duty on $34 billion of U.S. imports.
Among the items targeted by Beijing are Tesla Motor's electric autos, which are prized items on the mainland. Two days after the tariffs were implemented, a crowd of customers worried about larger sticker prices stormed a Tesla dealership in central Shanghai.
"Once the present inventory is depleted, we will immediately raise the price," said a sales manager. The popular Model S is due to sell by the end of this month, at which point the price will go up about 140,000 yuan ($20,900). "If you don't reserve one now, you will lose out," said the dealer.
Because CEO Elon Musk has yet to build his planned assembly plant in Shanghai, all Tesla vehicles are American imports. Last year, the automaker sold about 15,000 units in China, but the tariffs will likely dent that performance. One person at the Shanghai dealership was worried that the business will hardly sell any vehicles imported past July 6.
A Tesla showroom in Shanghai. The tariff war has taken a direct hit on prices. (Photo by Yu Nakamura) On top of that, the trade war will be asymmetrical. While the U.S. imported roughly $500 billion worth of Chinese goods in 2017, China only took in about $130 billion. Even one round of tit-for-tat tariffs will paralyze exports in both directions. The first casualty of that phenomenon is the interruption of U.S. exports to China.
Tom Adams, founder and CEO of Maine Coast, a lobster distributor in the U.S. East Coast state, will never forget the moment when China authorized tariffs on the seafood on June 16. "I was at home, and it was a blow in the first day," he said
Thanks to China's burgeoning middle class, Maine Coast enjoyed Chinese demand that rose between 20% and 30% annually. The company had just finished a $1.5 million plant expansion when the good times came to an abrupt halt.
"July 1 was when [Chinese] customers started holding off buying from us. Completely ceased," said Adams. The company has set lofty sales projections and "a big part of that growth expectation is China," he added.
Another victim of the trade war is the American soybean farmer. China imported roughly 96 million tons of soybeans last year, making it the largest importer of the commodity. China only produces about 15 million tons of soybeans domestically, illustrating its dependence on imports.
The U.S. is China's second-biggest source of soybeans at 34% of the imports, after Brazil, which ships 53%. The staple is used to make cooking oil and seasoning, and soybean meal is found in pig feed.
Iowa soybean farmer Tim Bardole is now worried about next year's crop. (Photo by Yoko Noge Dean) Now the tariffs have taken the bottom out of U.S. soybean prices, delivering a gut punch to farmers like Tim Bardole. He was already $100,000 in the red last year due to a yearslong slump in cereal prices, and the current predicament has driven him into a corner.
"I'm not sure if I can get a loan from the bank to finance our next year's crop," said Bardole.
In China, there are signs that the country is having a difficult time filling the hole left by the U.S. The local government serving the northeast city of Changchun issued a notice in late April announcing lavish subsidies for farmers who grow more soybeans.
But a visit to a village outside of Changchun last month revealed sprawling fields of corn and hardly any soybean to be seen. "We already planted corn when the notice came, so there was no time" to switch to soybeans, said a farmer.
China could expand soybean imports from Brazil or Russia, but even those options would not be enough. At the end of the day, the Chinese will have to meet demand with U.S. soybeans with the tariffs in place, and pass the extra costs to consumers.
The price hikes will hurt ordinary citizens -- something the one-party state seems to recognize. A state media outlet went as far as to say Chinese will "gladly" accept a temporary setback, which sparked online "flaming" of government officials on China's highly regulated internet.
A farm in Changchun, of China's Jilin Province. The government instructed farmers to grow soybeans, but most had already planted corn. (Photo by Issaku Harada) The trade war has grim implications for Chinese employees as well, since the country sits in the middle of the global supply chain. Components and intermediates from Japan, South Korea and elsewhere are pieced together at the "world's factory," which ships out end products to America.
The Trump administration provided a sneak preview of what could come when it imposed emergency tariffs on solar panel imports in January. The impact rippled through China's coastal Jiangsu Province, suspending operations or lowering capacity utilization at a number of solar-power companies concentrated there.
Experts say 2.5 million workers were negatively affected. GCL group employees staged a large protest at a factory July 2 demanding jobs and protection of workers' interest.
In Zhongshan, a city in the south, a mid-tier industrial machinery manufacturer was pressed by U.S. clients to ship all the inventory on hand before the tariffs kicked off on June 6. "I wonder what we'll do from here on out," said an executive.
After being slapped with a U.S. import ban in April, ZTE was left unable to produce smartphones and telecommunications equipment, which nearly drove it out of business. Other manufacturers on both sides of the Pacific are bracing for similar cutoffs to the supply chain.
Of course, U.S. consumers will not be immune. The White House announced Tuesday it is preparing a 10% levy on $200 billion worth of additional Chinese goods, which could go into force in September. Included on the blacklist are daily consumables, and a jump in prices could depress U.S. consumption.
According to a study published in May that was commissioned by the Consumer Technology Association and the National Retail Federation, a then-proposed tariff on $50 billion worth of Chinese imports would cost 134,000 Americans jobs. "Protection is not good for anybody," said Wayne Fredericks, a soybean farmer in Iowa.
With the imposition of 25% tariffs on $68 billion worth of their merchandise trade ($34 billion of exports each), the U.S. and China have fired the first salvos of their trade war.
If one were to borrow a military analogy, the first round of the U.S.-China trade war is either a skirmish or a probing attack, as the amount of the two-way merchandise trade affected by the tariffs is about only 10% of the total U.S.-China trade. But everyone knows that the main battle will be joined soon. Besides the additional $32 billion merchandise trade targeted for punitive tariffs ($16 billion of exports for each country), U.S. president Donald Trump has threatened to retaliate by levying tariffs on all Chinese exports to the U.S. ($505 billion in 2017).
Despite their outward firmness and rhetorical bravado (President Xi Jinping has vowed to "punch back"), Chinese leaders must be deeply worried. The rupture of Sino-American relations in the last few years is undoubtedly a strategically calamitous development few in Beijing anticipated. This is true even though Chinese foreign policy behavior since 2010, most critically its island-building in the South China Sea, bears most of the responsibility for turning the world's most important bilateral relationship away from engagement toward confrontation.
Even Chinese leaders privately acknowledge that the unfolding U.S.-China trade conflict is but part of a much larger geopolitical contest between the two countries.
Now faced with the most difficult challenge since he became the leader of the Chinese Communist Party (CCP) in November 2012, President Xi must decide soon how to mitigate the adverse consequences of not only a trade war with the U.S., but also a protracted Sino-American geopolitical contest that could, in an extreme scenario, descend into another cold war.
The smartest short-term decision Beijing can make is simply to absorb the next round of blows and hold its punches. For instance, if Washington moves ahead to impose 25% tariffs on $16 billion of Chinese imports, Beijing would withhold fire, in the hope of enticing Washington into a ceasefire, which in turn could create an opportunity to negotiate a face-saving way to avoid further and much more costly escalations.
The most compelling rationale behind this strategy of quick capitulation is to protect China's centrality in the global manufacturing supply chain. About 43% of Chinese merchandise trade in 2017 (totaling $4.3 trillion) is, according to the Chinese Ministry of Commerce, "processing trade" (which involves importing intermediate goods and assembling the products in China). What China gains from processing trade is the utilization of its low-cost labor force, factories, and some technological spillover. Processing trade generates low value-added and profitability. For example, Foxconn, the Taiwanese company that assembles iPhones in China, had an operating margin of only 5.8% last year.
One of the greatest risks China faces in a prolonged trade war with the U.S. is the loss of its processing trade. Even a modest increase in American tariffs can make it uneconomical to base processing in China. Should the U.S.-China trade war escalate, many foreign companies manufacturing in China would be forced to relocate their supply chains. China could face the loss of millions of jobs, tens of thousands of shuttered factories, and a key driver of growth.
However, capitulating to a "trade bully," as the Chinese media calls Trump, is hard for Xi, a strongman in his own right. Worse still, it is unclear what Trump wants or how China can appease him. The terms his negotiators presented to Beijing in early May were so harsh that it is inconceivable that Xi could accept them without being seen as selling out China.
Even if the trade war with the U.S. could be de-escalated with Chinese concessions, Beijing faces another painful decision. The trade war in general, and in particular the forced shutdown of the Chinese telecom equipment maker ZTE after Washington banned the company from using American-made parts have highlighted China's strategic vulnerability from its economic interdependence with the U.S. Before the two countries became geopolitical adversaries, economic interdependence was a valuable asset for China. It could take advantage of this relationship to build up its strength while the mutual economic benefits cushioned their geopolitical conflict.
But with the overall U.S.-China relationship turning adversarial, economic interdependence is not only hard to sustain (as shown by the trade war), but also is rapidly becoming a serious strategic liability. As the economically-weaker party, China is particularly affected. In the technological arena, China now finds itself at the mercy of Washington in terms of access to vital parts (such as semiconductors) and critical technologies (operating systems such as Android and Windows). Should the U.S. decide to cut off Chinese access for whatever reason, a wide swathe of Chinese economy could face disruption.
Xi and his colleagues now must decide on a costly trade-off. If they hope to ensure national autonomy and security, they will have to start a process of technological and commercial decoupling from the U.S. This process is certain to be inefficient since few countries can substitute the U.S. as China's export market and source of technology. Worse, decoupling will further reduce the incentives for each country to exercise self-restraint in their geopolitical competition, thus making conflict more likely.
The last difficult decision Xi will soon have to make is whether to roll back his ambitious -- and costly -- foreign policy agenda. Prior to the rupture of U.S.-China relations and the onset of their trade war, Xi launched a series of initiatives to accelerate China's rise as a global superpower. Among other things, they include an expansion of Chinese foreign aid and the Belt and Road Initiative, a $1 trillion global program of China-financed infrastructure projects. Since one near-certain outcome of a prolonged U.S.-China trade war is a significant decline in China's exports and foreign exchange income, Beijing will need to conserve its forex reserves to defend its currency and maintain its balance of payments. In other words, China can no longer afford such expensive foreign policy ventures.
However, retreating from these projects that are closely associated with Xi would be difficult for China. As they have already incurred huge "sunken costs," scaling down future investments could endanger the value of some existing projects. Politically, such a retreat would be a huge loss of face for Xi. It is hard to imagine that his underlings would risk their careers or personal security to propose such a policy.
A dispassionate analysis of these trade-offs may show that China has more to gain in the long term if its leaders are willing to make substantial, albeit humiliating, short-term concessions before its trade war with the U.S. escalates out of control.
But the costs of the concessions needed to stabilize Sino-American relations go beyond the amount of extra goods China pledges to import from the U.S. or even the perceived loss of face for Xi. Ultimately, China will not only have to give up its state-capitalist model, the root cause of Sino-American trade tensions, but also curtail its geopolitical ambitions and put on hold its challenge to American preeminence.
TOKYO -- The spokesman for Cambodia's ruling party said calling for a boycott of the country's July 29 general election amounts to "an act of treason," while vowing to clamp down on "fake news."
In an interview during a visit to Tokyo, Cambodian People's Party spokesman Suos Yara said "confidence in our party is very high," with 5.3 million supporters registered to vote, or more than 65% of the total. "We will definitely win," Yara said.
The CPP is widely expected to keep its majority in the 123-seat lower house, cementing Prime Minister Hun Sen's grip on power. This is partly because the Supreme Court disbanded the opposition Cambodia National Rescue Party, which had made big gains in the 2013 election, in November.
Sam Rainsy, the CNRP's former chief, has urged his supporters not to vote in the upcoming poll, calling it a "sham."
"The party is dissolved, and you are calling for people to boycott the election. Who are they?" Yara said. "They are just making fake news."
He said the government would "keep the openness of the election," brushing off concerns about voter suppression and a crackdown on the media. He pointed to widespread use of Facebook and other social networks as evidence of free speech.
"We only prohibit one [thing]," he said. "You cannot [spread] fake news." Those who violate the rules, he added, "have to be responsible."
Suos Yara, spokesman for the Cambodian People's Party, speaks to the Nikkei Asian Review on July 11. (Photo by Wataru Suzuki) The decision to dissolve the CNRP drew criticism from the U.S., which suspended some aid to Cambodia's government and military, and imposed sanctions on the commander of Hun Sen's security detail. Other countries, including Japan, have called for a fair election.
Yara said a "transparent, free and fair election" is important but stressed the "legitimacy [of the election] lies on our people, not on a foreign power."
Some say deeper political and economic ties with China have made Cambodia more confident about resisting international pressure. At times, this has led to disharmony within the Association of Southeast Asian Nations. Cambodia appeared to side with China on the South China Sea territorial disputes, for example.
On this subject, Yara said, "Some international problems are not ASEAN problems, they are bilateral problems."
China is a "good friend" of Cambodia, he said, and both countries "respect each other's sovereignty."
"We did not say no to Japan, the U.S. or Europe. You want to come to the Cambodian market? It's free and open."
On July 15 2018 10:54 Sermokala wrote: Why don't I hear or see much of Indonesia compared to India and china?
A lot of it is because things in Indonesia got overshadowed by what was happening in Malaysia. Plus, Indonesia's politics are not as clear cut as politics in Malaysia, China, or India.
Things in Indonesia are heating up as the Islamists are becoming more popular against the secular president, Joko Widodo. Joko has invested hundreds of billions of dollars on infrastructure to improve transportation in Indonesia and to lighten traffic, but a lot of the projects are behind schedule and they have caused more congestion. However, seeing how divided the Islamists are and the huge disappointment in Malaysia, I don't see them winning anytime soon, but what worries me is that Jokowi will pull an Ali Bhutto by Islamizing the country in order to appease the hardliners.
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Shares in ZTE jumped on Monday after the Trump administration cleared the path for the Chinese telecoms giant to restart operations.
US commerce secretary Wilbur Ross on Friday lifted an order that had denied ZTE from purchasing critical equipment from the US after the company paid a $1.4bn penalty following a breach of North Korea and Iran-sanctions.
The seven-year ban was put in place in April and had effectively halted the Shenzhen-headquartered company’s operations.
But the decision to allow the resumption of US technology sales to ZTE, which came after Chinese President Xi Jinping discussed the matter with US President Donald Trump, remains controversial in Washington with Republicans slamming the deal as a concession to Beijing.
“ZTE should be put out of business,” said Marco Rubio, a Florida senator. “There is no ‘deal’ with a state-directed company that the Chinese government and Communist Party uses to spy and steal from us where Americans come out winning.”
On Friday, Mr Ross said the department will “remain vigilant” and “closely monitor ZTE’s actions to ensure compliance with all US laws and regulations”. The ban was lifted after ZTE placed $400m in escrow at a US bank, which was in addition to the $1bn penalty ZTE paid in June.
The company’s stock rose as much as 7.4 per cent in early trading in Hong Kong, to its highest since mid-June. But it remained 41.3 per cent off where it was trading before the ban was announced in April.
ZTE also last week announced sweeping changes to its management team as part of the settlement with the US.
PHNOM PENH -- Cambodia's ruling party won big in Sunday's general election, which despite calls for a boycott from officials of a forcibly dissolved opposition party had a higher voter turnout than the previous national election, back in 2013.
After polls closed at 3 p.m., the National Election Committee announced that 82.17% of the nation's 8.3 million registered voters had turned up to vote. The NEC revised the rate from an initially announced 80.49%.
Five years ago, 70% of eligible voters showed up, barely giving Prime Minister Hun Sen's Cambodian People's Party a victory against a suddenly formidable Cambodia National Rescue Party.
But this past November, the CNRP was disbanded by a controversial Supreme Court order that left no viable contender to challenge the CPP.
The ruling party secured more than 120 seats in the 125-member National Assembly, the most the ruling party has won in any election, according to a senior CPP official who has seen party-tallied election results. The National Election Committee has yet to announce official results.
The CPP also dominates the senate, the upper house of Cambodia's parliament, and Sunday's electoral victory allows it to cement one-party ruling for the next five years.
"A victory without a contest is a hollow one," former CNRP leader Sam Rainsy said in a statement from France. "This senseless victory does nothing to resolve the political crisis that Cambodia faces as a result of the regime's totalitarian drift over the last 12 months."
The self-exiled politician, together with other former CNRP members, had been calling on supporters to abstain from voting. The camp's "clean finger" campaign, a reference to the practice of staining the tip of the index finger with ink after voting, was aimed at undermining the legitimacy of the CPP's assured victory, as well as the legitimacy of Hun Sen himself, who will be extending his 33-year reign by another five years.
Hun Sen had slammed anyone choosing to abstain from voting as "destroying democracy." All the while, his party had been handing out cash and other incentives to push voters to the polls. The government ordered employers to give a three-day paid holiday, through Monday, so workers could return to their hometowns and vote.
The CPP also used threats to get people to vote. Its tactics have led some observers to question the electoral process.
"Regardless of the voter turnout, it's difficult to characterize [the results of an] election that is widely considered not to be free or fair as legitimate," said Courtney Weatherby, a research analyst at The Stimson Center. "There are many reports on the ground of voter intimidation, and that was surely a significant factor in bringing the people to the booths."
Phil Robertson, Asia deputy director of Human Rights Watch, pointed to "significant systematic intimidation" by the CPP, which issued threats to people considering not voting through local councils and workplaces. Some people, for example, were pressured by their employers to come back from the three-day holiday with their fingers stained.
The intimidation could have led to an increased number of blank or void ballots, Robertson said. "People who were afraid that if they did not have the ink on their fingers, they would face retaliation that could hurt their families and their lives, had to make a pragmatic decision."
NEC Chairman Sik Bun Hok said the results show that democracy is strengthening in Cambodia. "The people really understand their duties and obligations and know how to exercise their rights to select a leader," he told reporters.
The NEC is largely made up of CPP members.
Some critics are pointing out that the number of registered voters dropped by more than 1 million from 2013 despite the country's population having grown. The actual number of voters increased by 100,000 from half a decade ago. "They could be playing with numbers," Robertson of Human Rights Watch said.
Cambodia now moves on from the electoral process with a ruling party that has virtually unchallenged power.
Vannarith Chheang, an associate fellow at ISEAS-Yusof Ishak Institute, said the CPP's reform and anti-corruption efforts could slow down. "The ruling party may be complacent with no opposition," he said. "If we can see new faces in the new cabinet that will be formed, then we can say that the next five years will be a better future."
The international community has been watching Cambodia's democratic process. China, the country's largest investor, is likely to quickly endorse the election results. Western countries that pulled funding for the election may react with sanctions which could threaten the Cambodian economy's 7% per year average growth rate.
The European Union, an important importer of Cambodian garments and rice, has threatened to scrap preferential tariff arrangements for Cambodian goods.
On July 30 2018 23:33 Silvanel wrote: Stapling Fukuyama's name on any prophecy for me instantly lowers its credibility.
It's a damn shame that the End of History will forever taint Fukuyama because his true magnus opus is Origins of Politics Order + Political Order and Political Decay which gives an alternative and more proper analysis to why society developed to Guns, Germs and Steel.
But in regards to Chinese debt, as Igne said, everyone has been talking about it for a long time and even though the short sellers on China humiliated themselves the debt is still there and it's still a problem.
On July 31 2018 01:26 Starlightsun wrote: I think this thread is a great idea. Wish I had more to contribute.
Thank you. Seeing how this thread is going towards information rather than debate like the US, UK, and EU threads. If you have any questions or need any resources on a specific country or background information, I will make a post gathering articles, videos, podcasts, and TL;DRs on that topic.
if the debt is mostly corporate debt, in the event of a crisis couldn't Beijing just takeover any corporate debt itself, propping up any businesses it deems worthy of survival? who owns that debt anyway? the chinese government?
On July 31 2018 05:26 IgnE wrote: if the debt is mostly corporate debt, in the event of a crisis couldn't Beijing just takeover any corporate debt itself, propping up any businesses it deems worthy of survival? who owns that debt anyway? the chinese government?
I checked the biggest (truck) automotive companies in China a while ago. Out of top 6 that I checked 6 was owned by the Chinese government directly or through holding companies. So in many cases company debt = government debt with one layer of removal.
On July 30 2018 23:33 Silvanel wrote: Stapling Fukuyama's name on any prophecy for me instantly lowers its credibility.
It's a damn shame that the End of History will forever taint Fukuyama because his true magnus opus is Origins of Politics Order + Political Order and Political Decay which gives an alternative and more proper analysis to why society developed to Guns, Germs and Steel.
But in regards to Chinese debt, as Igne said, everyone has been talking about it for a long time and even though the short sellers on China humiliated themselves the debt is still there and it's still a problem.
On July 31 2018 01:26 Starlightsun wrote: I think this thread is a great idea. Wish I had more to contribute.
Thank you. Seeing how this thread is going towards information rather than debate like the US, UK, and EU threads. If you have any questions or need any resources on a specific country or background information, I will make a post gathering articles, videos, podcasts, and TL;DRs on that topic.
Thanks for recommendation, maybe i will give him a second chance. As to Chinese debt i know that everyone is talking about it. When i was in China last year i was amazed by the amount of Skyskrappers and other tall buildings, construction everywere. But then one Chinese guy told me half of them is empty and noone is living there. I am definitely curious where China is going.
On July 31 2018 05:26 IgnE wrote: if the debt is mostly corporate debt, in the event of a crisis couldn't Beijing just takeover any corporate debt itself, propping up any businesses it deems worthy of survival? who owns that debt anyway? the chinese government?
Most of the debt is owned by Chinese state owned banks and the government can indeed take over the debt and nationalize the company (if it has not been done so already) but this is what Japan has done and look how stagnant their economy is. As of now, the gap between debt percentage of the GDP and economic growth is getting incredibly wide which worries me about what will happen between 2020-2024.
Also, this model is not ideal for many reasons. In the event of an economic crisis, the problems, scandals, and cracks in the company become very apparent and it's usually a good thing when bad companies go bankrupt and pave the way for better companies. In China however, most companies are conglomerate (and state backed) when there is a bad practice that is not meant to stand the test of time, it will persist nonetheless because the sheer size and state backing of the company will remove any incentive for competition and innovation.
In the 80s and 90s, Sony, Nintendo, Honda, and Mitsubishi were great examples of looking towards the future and now, they are symbols of backwardness and inefficiency. If things continue the way they are, the image of Tencent, Alibaba, China Life, and Huawei will go from creative young minds to old withered elders.
On July 30 2018 23:33 Silvanel wrote: Stapling Fukuyama's name on any prophecy for me instantly lowers its credibility.
It's a damn shame that the End of History will forever taint Fukuyama because his true magnus opus is Origins of Politics Order + Political Order and Political Decay which gives an alternative and more proper analysis to why society developed to Guns, Germs and Steel.
But in regards to Chinese debt, as Igne said, everyone has been talking about it for a long time and even though the short sellers on China humiliated themselves the debt is still there and it's still a problem.
On July 31 2018 01:26 Starlightsun wrote: I think this thread is a great idea. Wish I had more to contribute.
Thank you. Seeing how this thread is going towards information rather than debate like the US, UK, and EU threads. If you have any questions or need any resources on a specific country or background information, I will make a post gathering articles, videos, podcasts, and TL;DRs on that topic.
Thanks for recommendation, maybe i will give him a second chance. As to Chinese debt i know that everyone is talking about it. When i was in China last year i was amazed by the amount of Skyskrappers and other tall buildings, construction everywere. But then one Chinese guy told me half of them is empty and noone is living there. I am definitely curious where China is going.
This is becoming a trend in pretty much all fast growing economies sadly =/
From what I can see about real estate and housing, the trend is that building new modern cities is very easy but making it affordable is difficult. I am not too familiar with the technical details about housing and real estate, but how bad would it be for the economy if a price ceiling was placed on these new apartments to fill in these empty buildings?
On July 31 2018 05:26 IgnE wrote: if the debt is mostly corporate debt, in the event of a crisis couldn't Beijing just takeover any corporate debt itself, propping up any businesses it deems worthy of survival? who owns that debt anyway? the chinese government?
Most of the debt is owned by Chinese state owned banks and the government can indeed take over the debt and nationalize the company (if it has not been done so already) but this is what Japan has done and look how stagnant their economy is. As of now, the gap between debt percentage of the GDP and economic growth is getting incredibly wide which worries me about what will happen between 2020-2024.
Also, this model is not ideal for many reasons. In the event of an economic crisis, the problems, scandals, and cracks in the company become very apparent and it's usually a good thing when bad companies go bankrupt and pave the way for better companies. In China however, most companies are conglomerate (and state backed) when there is a bad practice that is not meant to stand the test of time, it will persist nonetheless because the sheer size and state backing of the company will remove any incentive for competition and innovation.
In the 80s and 90s, Sony, Nintendo, Honda, and Mitsubishi were great examples of looking towards the future and now, they are symbols of backwardness and inefficiency. If things continue the way they are, the image of Tencent, Alibaba, China Life, and Huawei will go from creative young minds to old withered elders.
Maybe I'm overly optimistic, but I see companies like Tencent, Alibaba, and Huawei as being more like Facebook and Apple than like Sony and Mitsubishi. I also perceive them as currently having less technical expertise than those western companies but yet a lot more potential to spread globally and continue to innovate by hiring a continuously growing base of foreign and domestic talent (although I don't really see much innovation coming from Huawei yet; they seem to be content with making second-rate phones for now). Things like WeChat Pay and Alipay where everyone and their grandma can simply scan a QR code to pay for everything from Ikea furniture to tangerines sold by some farmer pushing a cart on the side of the road is, while not quite Picasso-level genius, pretty innovative I think.
[Before I knew it, this post got really long, so I put it the rest in a spoiler. TL;DR: personal thoughts on the contemporary Chinese economy] + Show Spoiler +
This kind of stuff (substituting cash/debit/credit cards with a smartphone app that also does everything) might not work in western countries where it would be difficult to get all the different retailers and smartphone users to use the same 1 or 2 phone apps for payment (although Starbucks and KFC and everyone else uses it in China), but this is just one of many examples of new tech/services from Chinese companies that can potentially allow them to maintain their rapid level of growth if they can expand in international markets. Other examples include things like dockless bike sharing, namely Ofo https://en.wikipedia.org/wiki/Ofo_(company) and MoBike https://en.wikipedia.org/wiki/Mobike, which is being introduced to European and other markets, ride sharing apps like Didi, which is also expanding internationally https://www.ft.com/content/2212fc06-17ae-11e8-9376-4a6390addb44 and tons of mobile games companies (one of which I work for) who are hungry for international profits. At least in terms of room for growth, innovation and expansion in the tech sector, this current cohort of tech companies to me doesn't seem too analogous to the comparatively more rigid '80s/90s Japanese economy. Now of course, Japan and most developed countries also have burgeoning tech sectors, so it’s not like this is a uniquely Chinese phenomenon, but the growth and novelties you see here are unparalleled.
As for the debt and real estate bubble and the similarities to Japan's situation in the '90s, I admit I only have a superficial understanding and thus won't comment too much, but with my limited knowledge I would venture and say that there are some key differences between the two circumstances: one is that while Japan has a “jobs-for-life” salarymen corporate culture, China doesn't quite have anything that. Only the State Owned Enterprises (SOEs), most of which are for things like oil (Sinopec), mining and steel manufacturing, and many of which are inefficient, offer these kinds of “jobs-for-life”-style benefits, but the central government has been continuously phasing out the inefficient SOEs ever since ‘90s. While this does come with some social upheaval and will take a while to complete https://www.scmp.com/news/china/policies-politics/article/2055588/breaking-chinas-iron-rice-bowl-will-be-easier-said-done, it’s far from the case that these inefficient SOE dinosaurs are precipitating an economic collapse.
While in Japan most university graduates will end up as either 1) part of the unemployed/underemployed “have-nots” jumping from one temp job to the next or 2) in one of the few salarymen positions that isn't being held by a baby boomer/gen Xer, in China, in contrast, it‘s more along the lines of: any university graduate can get a job as a coder, some kind of designer or whatever other office position (albeit usually for fairly low pay) while working on some personal side-business or start-up. It feels at times like everyone here is trying to get rich with some kind of business scheme, rather than simply land a stable career at some company before some bubble bursts and the jobs disappear. I work in a part of Shanghai filled with all kinds of (not state-owned) tech companies and it seems to me personally that the economic climate and corporate culture here are a lot more flexible and prone to paradigm changes than in more maturely developed countries where the rules and norms are more or less set, both in terms of government regulations and corporate culture, so I think this also needs to be factored into predictions as to where the economy is heading.
I also have a hunch that many western China watchers, whether scholars, journalists or armchair commentators, have a neoliberal free market bias in interpreting the circumstances here. It's not so much that I think that they want to affirm their worldview by seeing a state-capitalist economy fail, but that the traditional economic models applied to more conventional economies do not always factor in some of the idiosyncrasies of contemporary China. For one thing, since the government runs everything here with no separation of powers, election cycles, etc. to impede them, they can just enforce emergency measures by mandate even if it adversely affects some of the population. That is of course a cause for humanitarian concern, but what I mean is that the central government is much more able to fix economic issues at will than countries where the ruling parties are 1) less powerful and 2) more beholden to corporate interests and other lobbyists.
I hope that last part won’t make me come off as a pro-China shill, as I’m not actually pro-China or anti-China. And I’m definitely not saying authoritarianism is preferable to democracy, I’m only highlighting the fact that the former can sometimes be more effective at managing economies.
On July 31 2018 05:26 IgnE wrote: if the debt is mostly corporate debt, in the event of a crisis couldn't Beijing just takeover any corporate debt itself, propping up any businesses it deems worthy of survival? who owns that debt anyway? the chinese government?
Most of the debt is owned by Chinese state owned banks and the government can indeed take over the debt and nationalize the company (if it has not been done so already) but this is what Japan has done and look how stagnant their economy is. As of now, the gap between debt percentage of the GDP and economic growth is getting incredibly wide which worries me about what will happen between 2020-2024.
Also, this model is not ideal for many reasons. In the event of an economic crisis, the problems, scandals, and cracks in the company become very apparent and it's usually a good thing when bad companies go bankrupt and pave the way for better companies. In China however, most companies are conglomerate (and state backed) when there is a bad practice that is not meant to stand the test of time, it will persist nonetheless because the sheer size and state backing of the company will remove any incentive for competition and innovation.
In the 80s and 90s, Sony, Nintendo, Honda, and Mitsubishi were great examples of looking towards the future and now, they are symbols of backwardness and inefficiency. If things continue the way they are, the image of Tencent, Alibaba, China Life, and Huawei will go from creative young minds to old withered elders.
Maybe I'm overly optimistic, but I see companies like Tencent, Alibaba, and Huawei as being more like Facebook and Apple than like Sony and Mitsubishi. I also perceive them as currently having less technical expertise than those western companies but yet a lot more potential to spread globally and continue to innovate by hiring a continuously growing base of foreign and domestic talent (although I don't really see much innovation coming from Huawei yet; they seem to be content with making second-rate phones for now). Things like WeChat Pay and Alipay where everyone and their grandma can simply scan a QR code to pay for everything from Ikea furniture to tangerines sold by some farmer pushing a cart on the side of the road is, while not quite Picasso-level genius, pretty innovative I think.
[Before I knew it, this post got really long, so I put it the rest in a spoiler. TL;DR: personal thoughts on the contemporary Chinese economy] + Show Spoiler +
This kind of stuff (substituting cash/debit/credit cards with a smartphone app that also does everything) might not work in western countries where it would be difficult to get all the different retailers and smartphone users to use the same 1 or 2 phone apps for payment (although Starbucks and KFC and everyone else uses it in China), but this is just one of many examples of new tech/services from Chinese companies that can potentially allow them to maintain their rapid level of growth if they can expand in international markets. Other examples include things like dockless bike sharing, namely Ofo https://en.wikipedia.org/wiki/Ofo_(company) and MoBike https://en.wikipedia.org/wiki/Mobike, which is being introduced to European and other markets, ride sharing apps like Didi, which is also expanding internationally https://www.ft.com/content/2212fc06-17ae-11e8-9376-4a6390addb44 and tons of mobile games companies (one of which I work for) who are hungry for international profits. At least in terms of room for growth, innovation and expansion in the tech sector, this current cohort of tech companies to me doesn't seem too analogous to the comparatively more rigid '80s/90s Japanese economy. Now of course, Japan and most developed countries also have burgeoning tech sectors, so it’s not like this is a uniquely Chinese phenomenon, but the growth and novelties you see here are unparalleled.
As for the debt and real estate bubble and the similarities to Japan's situation in the '90s, I admit I only have a superficial understanding and thus won't comment too much, but with my limited knowledge I would venture and say that there are some key differences between the two circumstances: one is that while Japan has a “jobs-for-life” salarymen corporate culture, China doesn't quite have anything that. Only the State Owned Enterprises (SOEs), most of which are for things like oil (Sinopec), mining and steel manufacturing, and many of which are inefficient, offer these kinds of “jobs-for-life”-style benefits, but the central government has been continuously phasing out the inefficient SOEs ever since ‘90s. While this does come with some social upheaval and will take a while to complete https://www.scmp.com/news/china/policies-politics/article/2055588/breaking-chinas-iron-rice-bowl-will-be-easier-said-done, it’s far from the case that these inefficient SOE dinosaurs are precipitating an economic collapse.
While in Japan most university graduates will end up as either 1) part of the unemployed/underemployed “have-nots” jumping from one temp job to the next or 2) in one of the few salarymen positions that isn't being held by a baby boomer/gen Xer, in China, in contrast, it‘s more along the lines of: any university graduate can get a job as a coder, some kind of designer or whatever other office position (albeit usually for fairly low pay) while working on some personal side-business or start-up. It feels at times like everyone here is trying to get rich with some kind of business scheme, rather than simply land a stable career at some company before some bubble bursts and the jobs disappear. I work in a part of Shanghai filled with all kinds of (not state-owned) tech companies and it seems to me personally that the economic climate and corporate culture here are a lot more flexible and prone to paradigm changes than in more maturely developed countries where the rules and norms are more or less set, both in terms of government regulations and corporate culture, so I think this also needs to be factored into predictions as to where the economy is heading.
I also have a hunch that many western China watchers, whether scholars, journalists or armchair commentators, have a neoliberal free market bias in interpreting the circumstances here. It's not so much that I think that they want to affirm their worldview by seeing a state-capitalist economy fail, but that the traditional economic models applied to more conventional economies do not always factor in some of the idiosyncrasies of contemporary China. For one thing, since the government runs everything here with no separation of powers, election cycles, etc. to impede them, they can just enforce emergency measures by mandate even if it adversely affects some of the population. That is of course a cause for humanitarian concern, but what I mean is that the central government is much more able to fix economic issues at will than countries where the ruling parties are 1) less powerful and 2) more beholden to corporate interests and other lobbyists.
I hope that last part won’t make me come off as a pro-China shill, as I’m not actually pro-China or anti-China. And I’m definitely not saying authoritarianism is preferable to democracy, I’m only highlighting the fact that the former can sometimes be more effective at managing economies.
P.S. As an expat living in East Asia, I really appreciate this thread as a source of knowledge and insight. Thanks OP!
I see, and point taken, especially in regards to the differences in working culture between China and Japan. But the point I was trying to get at is that most of these companies are state backed conglomerates which are naturally innovative in their early days and in a period of economic growth, but I am worried what will happen when China's growth inevitably slows down and these companies become entrenched. Between 80s to the early 2000s, the cyberpunk image Japan had has gone to China because of Japan's inability to keep up with the times. Can anyone think of a major Japanese that's a household name and has been founded post-2000? Instead, anything new and innovative is just bought out by SoftBank which is basically a hedge fund at this point. That is one of my fear for Chinese corporations.