You are missing several things about US vs Chinese economy. 1. US household tend to buy on credit and the finance change are accounted as consumption (and GDP), while most Chinese effectively pay cash. 2. All major currencies are managed by central bank levers, no more so than the USD which is insulated from fluctuations by FED interest rate manipulation and the fact it is largely a reserve currency (which enables Americans to buy on credit). 3. Chinese spend less on utilities & transportation which still operate for the public good while Americans households pay inflated prices for utilities which are privatized and earn high margins (e.g., CN &10 shell service vs USA $50-100 cell service).
Living in Indonesia, I remember in the 80s-90s when Japanese products had image of being cheap and low quality. Even at that time, only middle class could afford TV, while fewer low income family could afford TV. Then the Asian financial crisis hit, and people become even poorer, even the middle class were hit badly. Suddenly those Japanese, European and American goods were unaffordable for most people. Then the Korean goods began to come into the scene. They were replacing the Japanese goods as the new "cheap and low quality" goods. Not far behind the Chinese also entered the scene with even cheaper goods. So cheap that now even the poor could afford the TV. Living standard suddenly is better off for the poor.
@@godzillamothra5983 yeah it's definitely a cycle. First Japanese goods were cheap and low quality, then they moved up the prestige tree, then came Korean products, now Chinese ones. Yeah I have no qualms about buying a Chinese phone or TV. Actually whish they should Chinese EVs here in US. SEA will have better cheaper (Chinese)cars than us in US in 5 years.
@@abp1400 one thing that the western media never mention is that China didn't just lift hundreds of millions of its citizens from poverty, but made in China also lifted the living standards of many poor countries. Poor people who couldn't buy TV, suddenly now can buy TV, satellite TV, handphone, microwave, laundry machine, etc. That changed life. Without access to TV and satellite TV, poor people have no access to knowledge.
Yes, why should only the Global North & the wealthy get to enjoy a good standard of living. I'm glad Chinese productivity has made improving standards of living in the Global South a real possibility. The only thing I'd be concerned about is whether other countries could still find something to trade with. Wouldn't want a repeat of Chinese history where it was so self-sufficient that it didn't want to trade with an Europe addicted to Chinese goods, which eventually lead to the Opium Wars & century of humiliation.
Wonderful conversation; intellectually stimulating. You two are too timid to admit that Xi is a great leader for China. He arrived, fortuitously for China, at the most critical moment of China’s growth. He possesses just the right mix of attributes: competency, vision, boldness, humility, confidence and intellect to lead the nation. Let’s be frank, the west secretly admires the guy so much that they hate him. Be real, Xi has no need nor the tendency to turn into a monster. He is too smart to do that. In many way, there is a parallel between Xi and Putin. Both are great leaders who only come rarely in human history. Humanity is blessed with these two great men at the same time and at such a critical juncture in human history. There is no need to hedge your bet. Honor Xi’s accomplishments.
Terrific conversation, realistic and factual with no bias. They did miss out on highlighting one of Xi's key goals - to reduce income inequality and the rural-urban divide. China could be the only modern country willing to do this at the expense of temorarily lower nominal GDP growth. Reducing the attractiveness and influence of financial sector is a proper and necessary focus on keeping the society more sane.
love these chinese podcasts, learn so much more here than anything on mainstream media especially the garbage rag The Economist- which has been wishfully hoping for the chinese economy to collapse for the last 30 years
Re: Meituan. It's important to note that in America, there are a lot of gig economy workers who barely scrape by. I imagine many of them are also college grads who couldn't find employment.
Xi is the best thing that happened to China since Deng. He has the vision and the tenacity and toughness to lead China through this critical time. compared with Jiang and Hu, he is definitely the better person for this moment in history. I'll take Xi any day over any political leader in the west today - actually there is no comparison.
There's video right here on TH-cam of Glenn Greenwald saying that one of the documents from the Edward Snowden revelations is the official C.I.A. profile of Xi Jinping from the end of his tenure as Vice President. The Americans assessed that XJP is absolutely incorruptible: there's no tempting him with anything; not wine or women or money or power or status or even his own family...the guy is totally devoted to the country and simply cannot be swayed by any other consideration!! That's what firmly cemented my faith in XJP's tenure -- that American spooks themselves recognize how tough he will be to manipulate!
true, Han Feizi was quite arrogant on this point and it was surprising too as he never struck me as arrogant--Xi's accomplishments even just up to today are more than enough to warrant him one of the greastest leaders in history and worldwide, no matter what he will do later-China's more closed up nowadays is false, it's shocking it came out of Han Feizi's mouth.
Xi ends the one child policy in 2015: birth rate is 1.57. Eight years later, in 2023, the birth rate is 1.07. This the most powerful and undeniable proof that the Chinese people do not believe in the future that Xi promises. China hasn't had such a small number of births (>10 million) in 250 years. It had more than three times as many in 1963 than it had in 2023. It is a dying, declining nation. For some reason, all of East Asia is on the same suicidal road.
If you are familiar with Chinese history, the empires always fail when corruption (amongst other things) takes root. Chairman Xi is a good student of history.
Thanks for the podcast, as always! Excellent timing for me, I'll be in Beijing soon for a day, the first time in China in 12 years, and second time in 20 years. With mixed bag experience on things like ali express I'm extremely interested in comparing some of these takes with what I can see with my own eyes. Exciting times!
Shanghai 2018 » Shenzhen 2020 » Beijing 2022 except for politics, where Beijing always leads for obvious reasons. The real story is the Class 2 and Class 3 cities are now only 2-3 years behind now, some even ahead in some respects (e.g., Hangzhou leads in IT/AI).
According to Georgetown University's CSET, 41% of China's 3.57 million STEM graduates in 2020 works in STEM fields, while only 20% of USA's 820 thousand STEM graduates do. Let me do the math for you: *that's a ratio of 8.9 to one.* China has an overwhelming advantage in technical brain power.
Michael Pettis has been wrong about China for 25 years. The Chinese economy is a hybrid socialist-capitalist economy that does not conform to his Western capitalist model. End of story. The astute economist on China is (surprisingly?) Chinese: 金刻羽 [Jin Keyu] now a professor at LSE.
Also recently heard about Justin Yifu Lin (林毅夫) & New Structural Economics theory on developing economies. Made a lot of sense to me. th-cam.com/video/nxklzgQftHE/w-d-xo.html
This was a great discussion. And he's right, there is no mechanism or even a plan to deal with financial losers of the globalized economy. Now welfare can help the poor, but it's not gonna be enough for the middle class, in any capacity.
UBI? Welfare can perversely become a barrier to getting out of poverty by discouraging initiatives. Wish US had given Andrew Yang a chance back in 2020.
That was an amazing discussion. Thanks to you both for sharing some very interesting analysis. I would like to think that some of the more intellectually curious policymakers in the incoming administration would tune in but I would be lying to myself.
I think the host mistook the Chinese currency exchange mechanism. If you go to any currency trading platform, you can see USD/CNH which fluctuates second by second line other currency pairs. Offshore it’s freely traded
At the end, it should be mentioned that reshoring would be inflationary as a motherfucker unless corporations would be willing to slash profitability, which is never ever gonna happen because if i have to make a widget in china for 1 dollar and sell it for 5 to get my big profit margin, now that it costs me 5 dollars to make this widget, i'm not gonna sell it for 5 but for 10.
PPP and exchange rates are not linked, exchange rates are set by the flow of funds. If China deregulated its exchange rate and capital flows the RMB may very well fall due to a flow of capital out of the country investing in foreign assets (lets remember the very high savings rates of the average Chinese). The capital account can very easily offset the trade account. Such a deregulation would cause a lot of unnecessary volatility and thats why China manages its exchange rate to maintain predictability, exactly what the West lost when the US went off gold at the start of the 1970s. An upward move of the RMB would also deliver an inflation shock to the US that could trigger stagflation.
Yes, the RMB FX rate is a very complicated topic. For the purposes of this conversation, the main point is that the FX rate isn't the best conversion factor for comparing the size or quality of US vs PRC economies.
no, versus janitors or low level factory workers from the country side (but factory wirkerd are provided w food/dorm). there are different kind of construction workers, entry level ppl w/o skills make little, ppl with skills make a lot.
Even with the US failing to 'pay off' or take care of the interest groups that lost during globalization (like midwestern factory workers), the net effect on humanity (if we include the Chinese economy in our utility function) was still very positive. Anything wrong with that picture?
Jai Hind. For information, Xi JinPing had earned a degree in Chemical engineering in Tsinghua University and hope never will, a degree in Finance from the now defunct Trump University.
What would be :redistribution of Globalization to make it fair"? Giving the Global South the financing they deserve for development after 500 years if suffering the effect of European and American colonization? The BrROCS and de-dollarization are doing that, much to the stress of the USA & EU the somehow feel entitled to compensation for losing the exorbitant privileges they have enjoyed and now fining hard to hold n to.
This us not quit true, the fossil fuel cars allow China to learn & innovate to EVs because 75% of the EVs design are very different from the fossil cars. There are nothing the same except the body shape & the wheels. Even the hybrid is designed is new concept.
It's Steve's m.o., unfortunately -- just how he runs his shop. Steve's interesting in his own right, honestly, IMHO, but it's frustrating nonetheless like how some high-end restaurants have waitstaff that are actually supposed to be an integral part of your dining experience with tales about the dish being served -- 'cept of course it can get tiresome at times since you just want to dig in without further ado while they have to do their jobs which is to also provide some light bit of "entertainment".... Lotsa TH-camrs are luke this, unfortunately; many travel channels even constantly have the non-telegenic host in most of the shots, taking up valuable screen real estate much better devoted to scenery!!
@@StephenHsu I expected this response. Well a host hogging the "conversation" is definitely not my idea of good form or manners. But that narcissistic reflex is par for the course.
It's a legit criticism that Pettis hasn't reviewed his own predictions. This is also a criticism applicable to the great majority of public intellectuals. Paul Krugman certainly doesn't check his own predictions. This is only done as a matter of course in the rationalist community. This lack of accountability for intellectuals is why so many of the prominent ones are garbage dealers. Pettis claim 1 is "China invests too much, saves too little." Consider that 20 years ago China was investing about the same percentage of GDP, but getting 10% growth. Today, with the same (extremely high) percentage of GDP invested it gets 5% growth. The national ROI has dropped around 50% in 20 years. The knock-on effect of this ROI decline is a massive upsurge in debt, now standing at 300% of GDP. One of the key lessons in his books is how high debt levels increase financial instability and therefore economic instability. China could have avoided this debt problem had it gradually reduced investment in line with diminishing profitable investment opportunities--which is just a restatement of Pettis claim 1. But, because Xi insists on national GDP targets (a relic of communist five year plans), investment was forced to meet bureaucratic targets. Of course, for some of those targets it might be worth accepting uneconomic returns--for geopolitical reasons. Most, however, are just arbitrary bureaucratic diktats that foul up the free market gears. Contra Feizi, Pettis has never claimed that China was likely to suffer a financial crisis. He also reminds his readers regularly that he does not and did not predict this. Pettis claim 2 Steve covers in part and largely accepts. It's worth adding that an undervalued currency is only one tactic to drive up the trade surplus. They can and do use additional tactics like wide ranging financial repression, massive infrastructure investment to aid export companies, and various restrictions on foreign companies in China. I think what confuses people about this whole discussion is that they don't realize that both Steve and Pettis can be right in the same world. Steve emphasizes China's success in dominating more and more industries, including some high tech ones. Pettis emphasizes China's mediocre and ever worsening national ROI. Essentially, China is sacrificing its citizens consumption level to achieve the geopolitical goal of preeminence in multiple strategic industries. For Xi, geopolitics > living standards. And he gets away with this politically (so far) because China's living standard continues to rise, even if its absolute level is 20% below where Pettis thinks it ought to be. Most people do not, as a psychological matter, notice their nation's absolute level of wealth. What they notice is the relative changes in income levels.
Feizi claims the Pettis consumption numbers for China's economy are too low due to statistical problems. If so, investment is not as high as Pettis claims. What Feizi doesn't seem to appreciate is that this implies that China's malinvestment is actually worse than in the Pettis model. No one disputes the GDP (in renminbi terms) or national debt numbers. No one disputes the GDP growth figures either. So it follows: if China's debt is rising as fast as it is, driven by significantly lower investment--by definition a higher proportion of that investment is wasted than it is in the Pettis model. Yet, at the same time, the good investment in the Feizi model is more profitable than it is under the Pettis model, since a smaller amount of investment is still delivering 5% growth. A smaller investment is at once driving a lot of debt accumulation and respectable growth numbers. Steve should have inquired more about this issue. I suspect the only real explanation for this, if true, is that the Chinese economy is bifurcated between the domestic sector and the export sector. The former is a money sink, the latter is a growth engine.
What people notice even more is quality of life. Chinese seem to have better quality of life without having to have same level of income as Americans when converted into USD. What is the difference between those who see $ as an end vs those who see $ as a means.
To add. Han feizi expresses credulity that pettis can claim that China underconsumes. ‘But look at all the luxury goods Chinese buy?!?!?’ When someone tells me that an economy consume too little, I look for macro data. In this case, China is 17%-18% of the global economy but has a much smaller share of global consumption. Of course the Chinese consume a ton of things nominally (large economy), but their NET consumption is low relative to their GDP. Any macro analyst can tell u that. China has 13-15% of global consumption but 32% of global manufacturing. Its current account surplus is the largest in human history. It’s not possible to run a persistent trade surplus without weak consumption. This guy is an American in 1927 thinking that Americans are super geniuses (with the largest sustained trade surpluses in history at the time) and that things can only go up from there. China is there now, dependent on the world for employment but very confident about its independence/autarchy. The problem here is that China, like the U.S. before, has high unproductive debts that must be written down. Its trade surplus makes it vulnerable to adverse shocks from trade conflict. The U.S. resolved its imbalances with a crisis. Japan did it with stagnation. If Han Feizi is serious, he would respond to this core claim-that chinas debt growth far outpaces the growth of gdp. We can argue about if that’s a problem or not (good arguments both ways), but this exchange implies that these two didn’t actually bother to steelman the arguments they rail against. Very strange.
China centre gov debt is 30% compared to US 122%. 96% Chinese own homes, with 80% outright own without debt. Majority that has debts are property speculator that have more than 3/4 houses. China pop their property bubble intentionally to shift capital towards hi tech manufacturing in 2018. It was all planned that's why it used to have 50 EV companies down to a few now and it's likely that many will fail due to intense competition that only the most innovative will survive. I get it why you're focusing on China debt, if you just look at imf calculation you can clearly see how they changed their way to calculate China debt started in 2018 and I believe I don't have to tell you what happened in 2018. For comparison to debt ration btw China and the US, you know if you want to compare apple to apple, you would have to add in US unfounded liability, state and local debts. Read Horton, wealth of a nation = productive capacity Internal debt minus out External assets minus external debt If you could have been a little more aware of what's going on especially regarding who's controlling Imf, you would had doubts about everything that you believe and read from their reports and that includes all the western media. China is the largest creditor in the world while the US is the largest creditor in the world. However it doesn't even matter how much debt China has as it has nothing to do with the current financial system which are dominated by the US as the dollar is the GRC and while the US is fully dependent on foreign savings now and that the only way for them is inflation. Biden 4 years in realm had showed that American people had low tolerance on pain caused by inflation. Inflation takes away your purchasing power, and the system was built on continuing inflation. Deflation to the rich is what inflation to the poor and that's a no no. Why do you think media overhyped about the goods in inflation? I'll give you a example, a worker experience deflation and rising wages vs worker experiences inflation and rising wages. Which scenario is building up the middle class? Regular Americans are paying for policymakers mistakes for the past 20 years where they borrowed 8 trillions for global war on terror and decades long of zirp that punished savers. All roads from here leads to inflation, as the US gov inflate their debt while interest rates remain high even after the Fed cut. If you have any sense of what's going on, you will understand why politicians lies, especially at this moment when the people are pissed off. Inflation is also away of control. Too broke living paycheck to paycheck and working 2/3 jobs to survive? People will be less enthusiastic to protest. That's what the French/UK did historically when they had borrowed too much for wars.
Steve's arguments on the second point of Pettis were incomplete and biased, it was surprising Han Feizi didn't refute him-I don't have energy talking about it now. Han Feizi doesn't seem good at confrontation despite bright (he struck me as a very good tempered guy), no wonder on Twitter his main method of dealing with confrontation was 插科打诨😅。
Have been following Han Feizi on Asia Times, always releasing thought provoking article. Thanks for inviting him.
Just listened to letter from Shanghai; another informative and meaningful discussion. Thank you for bringing this conversation and your guest to us.
You are missing several things about US vs Chinese economy. 1. US household tend to buy on credit and the finance change are accounted as consumption (and GDP), while most Chinese effectively pay cash. 2. All major currencies are managed by central bank levers, no more so than the USD which is insulated from fluctuations by FED interest rate manipulation and the fact it is largely a reserve currency (which enables Americans to buy on credit). 3. Chinese spend less on utilities & transportation which still operate for the public good while Americans households pay inflated prices for utilities which are privatized and earn high margins (e.g., CN &10 shell service vs USA $50-100 cell service).
Living in Indonesia, I remember in the 80s-90s when Japanese products had image of being cheap and low quality. Even at that time, only middle class could afford TV, while fewer low income family could afford TV. Then the Asian financial crisis hit, and people become even poorer, even the middle class were hit badly. Suddenly those Japanese, European and American goods were unaffordable for most people. Then the Korean goods began to come into the scene. They were replacing the Japanese goods as the new "cheap and low quality" goods. Not far behind the Chinese also entered the scene with even cheaper goods. So cheap that now even the poor could afford the TV. Living standard suddenly is better off for the poor.
@@godzillamothra5983 yeah it's definitely a cycle. First Japanese goods were cheap and low quality, then they moved up the prestige tree, then came Korean products, now Chinese ones. Yeah I have no qualms about buying a Chinese phone or TV. Actually whish they should Chinese EVs here in US. SEA will have better cheaper (Chinese)cars than us in US in 5 years.
@@abp1400 one thing that the western media never mention is that China didn't just lift hundreds of millions of its citizens from poverty, but made in China also lifted the living standards of many poor countries. Poor people who couldn't buy TV, suddenly now can buy TV, satellite TV, handphone, microwave, laundry machine, etc. That changed life. Without access to TV and satellite TV, poor people have no access to knowledge.
Yes, why should only the Global North & the wealthy get to enjoy a good standard of living. I'm glad Chinese productivity has made improving standards of living in the Global South a real possibility. The only thing I'd be concerned about is whether other countries could still find something to trade with. Wouldn't want a repeat of Chinese history where it was so self-sufficient that it didn't want to trade with an Europe addicted to Chinese goods, which eventually lead to the Opium Wars & century of humiliation.
it was Japan in the 60-80s, then the four tigers, and then entered China.
Wonderful conversation; intellectually stimulating.
You two are too timid to admit that Xi is a great leader for China. He arrived, fortuitously for China, at the most critical moment of China’s growth. He possesses just the right mix of attributes: competency, vision, boldness, humility, confidence and intellect to lead the nation. Let’s be frank, the west secretly admires the guy so much that they hate him. Be real, Xi has no need nor the tendency to turn into a monster. He is too smart to do that. In many way, there is a parallel between Xi and Putin. Both are great leaders who only come rarely in human history. Humanity is blessed with these two great men at the same time and at such a critical juncture in human history.
There is no need to hedge your bet. Honor Xi’s accomplishments.
Terrific conversation, realistic and factual with no bias. They did miss out on highlighting one of Xi's key goals - to reduce income inequality and the rural-urban divide. China could be the only modern country willing to do this at the expense of temorarily lower nominal GDP growth. Reducing the attractiveness and influence of financial sector is a proper and necessary focus on keeping the society more sane.
love these chinese podcasts, learn so much more here than anything on mainstream media especially the garbage rag The Economist- which has been wishfully hoping for the chinese economy to collapse for the last 30 years
Great episode! Thanks for introducing me to Han Feizi.
Re: Meituan. It's important to note that in America, there are a lot of gig economy workers who barely scrape by. I imagine many of them are also college grads who couldn't find employment.
Eye opening about consumption data. Thanks for this conversation
100% accuracy of the assessment
Wow love the transcript over the audio! Very useful for video
Agree 100%. Very helpful to deaf and hard of hearing folks! Thank you!
Xi is the best thing that happened to China since Deng. He has the vision and the tenacity and toughness to lead China through this critical time. compared with Jiang and Hu, he is definitely the better person for this moment in history. I'll take Xi any day over any political leader in the west today - actually there is no comparison.
There's video right here on TH-cam of Glenn Greenwald saying that one of the documents from the Edward Snowden revelations is the official C.I.A. profile of Xi Jinping from the end of his tenure as Vice President.
The Americans assessed that XJP is absolutely incorruptible: there's no tempting him with anything; not wine or women or money or power or status or even his own family...the guy is totally devoted to the country and simply cannot be swayed by any other consideration!!
That's what firmly cemented my faith in XJP's tenure -- that American spooks themselves recognize how tough he will be to manipulate!
true, Han Feizi was quite arrogant on this point and it was surprising too as he never struck me as arrogant--Xi's accomplishments even just up to today are more than enough to warrant him one of the greastest leaders in history and worldwide, no matter what he will do later-China's more closed up nowadays is false, it's shocking it came out of Han Feizi's mouth.
Xi ends the one child policy in 2015: birth rate is 1.57. Eight years later, in 2023, the birth rate is 1.07.
This the most powerful and undeniable proof that the Chinese people do not believe in the future that Xi promises. China hasn't had such a small number of births (>10 million) in 250 years. It had more than three times as many in 1963 than it had in 2023. It is a dying, declining nation. For some reason, all of East Asia is on the same suicidal road.
Totally agree with you
If you are familiar with Chinese history, the empires always fail when corruption (amongst other things) takes root. Chairman Xi is a good student of history.
Thanks for the podcast, as always! Excellent timing for me, I'll be in Beijing soon for a day, the first time in China in 12 years, and second time in 20 years. With mixed bag experience on things like ali express I'm extremely interested in comparing some of these takes with what I can see with my own eyes. Exciting times!
Manifold really managed to get the infamous Twitter dog himself for an entire podcast. 😂
That horndog is quite a source of entertainment for me on Twitter 😂😂😂.
@@fangzification That guy is hilarious!
What do you mean?
Doggy Dog, you mean..... love that guy.
@@debscatenaYou love pro-china propaganda?
53:45 Back in those days, merchants were at a lower class than farmers. Even they appreciated the value in actual production back then. Go figures.😂
Shanghai 2018 » Shenzhen 2020 » Beijing 2022 except for politics, where Beijing always leads for obvious reasons. The real story is the Class 2 and Class 3 cities are now only 2-3 years behind now, some even ahead in some respects (e.g., Hangzhou leads in IT/AI).
Excellent piece that offers new insights. Am a fan!
Brilliant discussion ❤
According to Georgetown University's CSET, 41% of China's 3.57 million STEM graduates in 2020 works in STEM fields, while only 20% of USA's 820 thousand STEM graduates do.
Let me do the math for you: *that's a ratio of 8.9 to one.*
China has an overwhelming advantage in technical brain power.
Michael Pettis has been wrong about China for 25 years. The Chinese economy is a hybrid socialist-capitalist economy that does not conform to his Western capitalist model. End of story. The astute economist on China is (surprisingly?) Chinese: 金刻羽 [Jin Keyu] now a professor at LSE.
Also recently heard about Justin Yifu Lin (林毅夫) & New Structural Economics theory on developing economies. Made a lot of sense to me. th-cam.com/video/nxklzgQftHE/w-d-xo.html
Jin is currently the most honest analyst on China
This was a great discussion. And he's right, there is no mechanism or even a plan to deal with financial losers of the globalized economy. Now welfare can help the poor, but it's not gonna be enough for the middle class, in any capacity.
UBI? Welfare can perversely become a barrier to getting out of poverty by discouraging initiatives. Wish US had given Andrew Yang a chance back in 2020.
That was an amazing discussion. Thanks to you both for sharing some very interesting analysis. I would like to think that some of the more intellectually curious policymakers in the incoming administration would tune in but I would be lying to myself.
Should have given Andrew Yang a chance back in 2020.
Very insightful thanks
Good show!!!
I think the host mistook the Chinese currency exchange mechanism. If you go to any currency trading platform, you can see USD/CNH which fluctuates second by second line other currency pairs. Offshore it’s freely traded
Yes but PRC actively intervenes to control the rate. Occasionally the US threatens to classify PRC as a currency manipulator.
That’s why Chinese government has capped salaries and bonuses in finance
At the end, it should be mentioned that reshoring would be inflationary as a motherfucker unless corporations would be willing to slash profitability, which is never ever gonna happen because if i have to make a widget in china for 1 dollar and sell it for 5 to get my big profit margin, now that it costs me 5 dollars to make this widget, i'm not gonna sell it for 5 but for 10.
PPP and exchange rates are not linked, exchange rates are set by the flow of funds. If China deregulated its exchange rate and capital flows the RMB may very well fall due to a flow of capital out of the country investing in foreign assets (lets remember the very high savings rates of the average Chinese). The capital account can very easily offset the trade account. Such a deregulation would cause a lot of unnecessary volatility and thats why China manages its exchange rate to maintain predictability, exactly what the West lost when the US went off gold at the start of the 1970s. An upward move of the RMB would also deliver an inflation shock to the US that could trigger stagflation.
Yes, the RMB FX rate is a very complicated topic. For the purposes of this conversation, the main point is that the FX rate isn't the best conversion factor for comparing the size or quality of US vs PRC economies.
92% chinese owns home so little rent. conctrete house need no fire insurance.
utility transport cost is 80 90% cheaper than west.
You gonna get Gong Lei one of these days?
Would be great to hear an interview with thr Ford ceo.
he says delivery drivers are compensated on the highend of blue collar wages? as in compared to trades people? construction etc?
no, versus janitors or low level factory workers from the country side (but factory wirkerd are provided w food/dorm). there are different kind of construction workers, entry level ppl w/o skills make little, ppl with skills make a lot.
Life is better when you're wealthier but those on minimum wages suffer 😢
Even with the US failing to 'pay off' or take care of the interest groups that lost during globalization (like midwestern factory workers), the net effect on humanity (if we include the Chinese economy in our utility function) was still very positive. Anything wrong with that picture?
One day you could be the loser too & would you be OK losing while everyone else seem to gain?
Bankers/Lawyers should not make much more than an engineer；actually，they should make less。
Jai Hind. For information, Xi JinPing had earned a degree in Chemical engineering in Tsinghua University and hope never will, a degree in Finance from the now defunct Trump University.
What would be :redistribution of Globalization to make it fair"? Giving the Global South the financing they deserve for development after 500 years if suffering the effect of European and American colonization? The BrROCS and de-dollarization are doing that, much to the stress of the USA & EU the somehow feel entitled to compensation for losing the exorbitant privileges they have enjoyed and now fining hard to hold n to.
What trump didn’t tell you is tariff on Chinese goods is a form of national sales tax to help fund the federal government.
You mean to fund Trump & his pals.
You mean to fund Trump & his pals.
👍👍👍😃😃😃👏👏👏
I thought it is 韩非子
视频里说这个客人的笔名的确是“韩非子”！🙂
🥰😍🤩
This us not quit true, the fossil fuel cars allow China to learn & innovate to EVs because 75% of the EVs design are very different from the fossil cars. There are nothing the same except the body shape & the wheels. Even the hybrid is designed is new concept.
看名字，我还以为是韩非子呢
视频里说这个客人的笔名的确是“韩非子”！🙂
The clearest sign of a bad interview is where the interviewer talks more than the interviewee. This was bad.
This was more of a conversation than an interview. Feel free to stop listening to this podcast.
It's Steve's m.o., unfortunately -- just how he runs his shop.
Steve's interesting in his own right, honestly, IMHO, but it's frustrating nonetheless like how some high-end restaurants have waitstaff that are actually supposed to be an integral part of your dining experience with tales about the dish being served -- 'cept of course it can get tiresome at times since you just want to dig in without further ado while they have to do their jobs which is to also provide some light bit of "entertainment"....
Lotsa TH-camrs are luke this, unfortunately; many travel channels even constantly have the non-telegenic host in most of the shots, taking up valuable screen real estate much better devoted to scenery!!
Conversations between two bright minds are always more interesting than "interviews"
@@StephenHsu I expected this response. Well a host hogging the "conversation" is definitely not my idea of good form or manners. But that narcissistic reflex is par for the course.
@@dancerinmaya6813 my point remains whatever you call it
The low cost yet convenient lifestyle that middle class in China get to enjoy is off the backs of cheap labour and delivery workers.
It's a legit criticism that Pettis hasn't reviewed his own predictions. This is also a criticism applicable to the great majority of public intellectuals. Paul Krugman certainly doesn't check his own predictions. This is only done as a matter of course in the rationalist community. This lack of accountability for intellectuals is why so many of the prominent ones are garbage dealers.
Pettis claim 1 is "China invests too much, saves too little." Consider that 20 years ago China was investing about the same percentage of GDP, but getting 10% growth. Today, with the same (extremely high) percentage of GDP invested it gets 5% growth. The national ROI has dropped around 50% in 20 years. The knock-on effect of this ROI decline is a massive upsurge in debt, now standing at 300% of GDP. One of the key lessons in his books is how high debt levels increase financial instability and therefore economic instability. China could have avoided this debt problem had it gradually reduced investment in line with diminishing profitable investment opportunities--which is just a restatement of Pettis claim 1. But, because Xi insists on national GDP targets (a relic of communist five year plans), investment was forced to meet bureaucratic targets. Of course, for some of those targets it might be worth accepting uneconomic returns--for geopolitical reasons. Most, however, are just arbitrary bureaucratic diktats that foul up the free market gears.
Contra Feizi, Pettis has never claimed that China was likely to suffer a financial crisis. He also reminds his readers regularly that he does not and did not predict this.
Pettis claim 2 Steve covers in part and largely accepts. It's worth adding that an undervalued currency is only one tactic to drive up the trade surplus. They can and do use additional tactics like wide ranging financial repression, massive infrastructure investment to aid export companies, and various restrictions on foreign companies in China.
I think what confuses people about this whole discussion is that they don't realize that both Steve and Pettis can be right in the same world. Steve emphasizes China's success in dominating more and more industries, including some high tech ones. Pettis emphasizes China's mediocre and ever worsening national ROI. Essentially, China is sacrificing its citizens consumption level to achieve the geopolitical goal of preeminence in multiple strategic industries. For Xi, geopolitics > living standards. And he gets away with this politically (so far) because China's living standard continues to rise, even if its absolute level is 20% below where Pettis thinks it ought to be. Most people do not, as a psychological matter, notice their nation's absolute level of wealth. What they notice is the relative changes in income levels.
Feizi claims the Pettis consumption numbers for China's economy are too low due to statistical problems. If so, investment is not as high as Pettis claims. What Feizi doesn't seem to appreciate is that this implies that China's malinvestment is actually worse than in the Pettis model. No one disputes the GDP (in renminbi terms) or national debt numbers. No one disputes the GDP growth figures either. So it follows: if China's debt is rising as fast as it is, driven by significantly lower investment--by definition a higher proportion of that investment is wasted than it is in the Pettis model. Yet, at the same time, the good investment in the Feizi model is more profitable than it is under the Pettis model, since a smaller amount of investment is still delivering 5% growth. A smaller investment is at once driving a lot of debt accumulation and respectable growth numbers. Steve should have inquired more about this issue. I suspect the only real explanation for this, if true, is that the Chinese economy is bifurcated between the domestic sector and the export sector. The former is a money sink, the latter is a growth engine.
What people notice even more is quality of life. Chinese seem to have better quality of life without having to have same level of income as Americans when converted into USD. What is the difference between those who see $ as an end vs those who see $ as a means.
To add. Han feizi expresses credulity that pettis can claim that China underconsumes. ‘But look at all the luxury goods Chinese buy?!?!?’
When someone tells me that an economy consume too little, I look for macro data. In this case, China is 17%-18% of the global economy but has a much smaller share of global consumption. Of course the Chinese consume a ton of things nominally (large economy), but their NET consumption is low relative to their GDP. Any macro analyst can tell u that. China has 13-15% of global consumption but 32% of global manufacturing. Its current account surplus is the largest in human history. It’s not possible to run a persistent trade surplus without weak consumption. This guy is an American in 1927 thinking that Americans are super geniuses (with the largest sustained trade surpluses in history at the time) and that things can only go up from there. China is there now, dependent on the world for employment but very confident about its independence/autarchy. The problem here is that China, like the U.S. before, has high unproductive debts that must be written down. Its trade surplus makes it vulnerable to adverse shocks from trade conflict. The U.S. resolved its imbalances with a crisis. Japan did it with stagnation. If Han Feizi is serious, he would respond to this core claim-that chinas debt growth far outpaces the growth of gdp. We can argue about if that’s a problem or not (good arguments both ways), but this exchange implies that these two didn’t actually bother to steelman the arguments they rail against. Very strange.
Noob
China centre gov debt is 30% compared to US 122%. 96% Chinese own homes, with 80% outright own without debt. Majority that has debts are property speculator that have more than 3/4 houses. China pop their property bubble intentionally to shift capital towards hi tech manufacturing in 2018. It was all planned that's why it used to have 50 EV companies down to a few now and it's likely that many will fail due to intense competition that only the most innovative will survive. I get it why you're focusing on China debt, if you just look at imf calculation you can clearly see how they changed their way to calculate China debt started in 2018 and I believe I don't have to tell you what happened in 2018. For comparison to debt ration btw China and the US, you know if you want to compare apple to apple, you would have to add in US unfounded liability, state and local debts. Read Horton, wealth of a nation = productive capacity
Internal debt minus out
External assets minus external debt
If you could have been a little more aware of what's going on especially regarding who's controlling Imf, you would had doubts about everything that you believe and read from their reports and that includes all the western media.
China is the largest creditor in the world while the US is the largest creditor in the world. However it doesn't even matter how much debt China has as it has nothing to do with the current financial system which are dominated by the US as the dollar is the GRC and while the US is fully dependent on foreign savings now and that the only way for them is inflation. Biden 4 years in realm had showed that American people had low tolerance on pain caused by inflation. Inflation takes away your purchasing power, and the system was built on continuing inflation. Deflation to the rich is what inflation to the poor and that's a no no. Why do you think media overhyped about the goods in inflation? I'll give you a example, a worker experience deflation and rising wages vs worker experiences inflation and rising wages. Which scenario is building up the middle class? Regular Americans are paying for policymakers mistakes for the past 20 years where they borrowed 8 trillions for global war on terror and decades long of zirp that punished savers. All roads from here leads to inflation, as the US gov inflate their debt while interest rates remain high even after the Fed cut. If you have any sense of what's going on, you will understand why politicians lies, especially at this moment when the people are pissed off. Inflation is also away of control. Too broke living paycheck to paycheck and working 2/3 jobs to survive? People will be less enthusiastic to protest. That's what the French/UK did historically when they had borrowed too much for wars.
Steve's arguments on the second point of Pettis were incomplete and biased, it was surprising Han Feizi didn't refute him-I don't have energy talking about it now. Han Feizi doesn't seem good at confrontation despite bright (he struck me as a very good tempered guy), no wonder on Twitter his main method of dealing with confrontation was 插科打诨😅。
Wow we had the same issue! This was the moment I got so frustrated about.