China and Japan are very different. Japan invested lot in manufacturing and when japanese bubble popped, japan exported its way out through china but china does not have any bigger china to do that. Also China cannot increase its money supply to get out of trouble because of the dollar peg. Mundell-Fleming Framework says if you have fixed exchange rate then you dont have monetary control. Thats why china stopped more real estate. its not because xi wanted it because they are wasting resource but because to continue real estate bubble, real estate credit must increase by 15%. thus given chinese real estate account for 30% of GDP, it will take 4.5% of credit. But if US credit growth is 4%, china can increase its credit growth only by 6% in order to maintain the dollar peg. Thus if real estate takes 4.5% of 6%, only 1.5% is available for rest. Thats why real estate was popped not because of Xi's voluntary three red lines
China does have monetary control, what they don't have instead is the free flow of capital in and out of the country. Stopping more real estate investment is in fact a policy of capital control.
this is factually incorrect. Japan's main trade partner was US at the time. China in fact also exported its way through the U.S. and will be able to do less of that after trump. I also don't know where is the dollar peg notion from. Maybe you mistook HKD, which does have a dollar peg, for CNY.
Same problem in the US going forward: Trump wants to bring manufacturing back to the US, so needs to shift wealth to manufacturing from one of the two remaining blocks of wealth, government or house holds. Obviously he would prefer that the Democrat's base (government) suffers that loss. The Democrats would prefer that Trump's base (house holds) suffer that burden.
I would think that the US problem is the flip side of the China imbalance, as in both countries the vast majority of the workers/households have not enjoyed a fair share of productivity gains. However, as the US household is an addicted consumer rather than a saver, the US household relies on ever-increasing debt to maintain the consumption habit which is not sustainable in the long term. Income inequality - the distribution of national income - is a problem in both countries and others, it is maintained by institutional systems that will make extremely hard to resolve. One has to question which segment of society/households benefit from the current situation in both countries and how their political power can prevent necessary distributional reforms.
@@georgewoods5543 In order to keep the world economic system moving it was necessary for someone to consume the excess of manufactured goods produced by the developing world. If the US became addicted to consumption, China (and Japan before them) became addicted to production. Japan we allowed to move their production plants to the US, China, not so much. Friend/enemy thing. By manipulating the interest rate, and cutting consumer income, the Fed caused both the 2008 and the current recession, ending our ability to consume the world's excess production, cutting China (and Germany) off at the knees. Shifting wages from consumers to savers has the added benefit of building our war chest, waiting for that mother of all stimulus measures.
Incredible historical and currently relevant insights into the world economy ! I am not so sure that the leaders of China and the major world powers will follow his advice.
Very insightful on the macro economic side of the Chinese financial crisis. However, proof that western people have very limited understanding in Chinese political economics fabrics when it comes to the Hukou system. As long as China remains a highly centralised one party state, it won’t be abolished. The system can be traced back to Qin dynasty more than 2000 years ago when China was unified under one emperor for the first time. One can imagine how hard it is to abolish that if you know a little bit of Chinese history.
My beef with China is the trade imbalance. It needs to be balanced. Trump will work, with tariff to move those product out of China. Hopefully some back to the USA.
Thank you so much for this interesting talk and sharing your view!
Hope yr shoulder recovers soon Prof!
China and Japan are very different. Japan invested lot in manufacturing and when japanese bubble popped, japan exported its way out through china but china does not have any bigger china to do that. Also China cannot increase its money supply to get out of trouble because of the dollar peg. Mundell-Fleming Framework says if you have fixed exchange rate then you dont have monetary control. Thats why china stopped more real estate. its not because xi wanted it because they are wasting resource but because to continue real estate bubble, real estate credit must increase by 15%. thus given chinese real estate account for 30% of GDP, it will take 4.5% of credit. But if US credit growth is 4%, china can increase its credit growth only by 6% in order to maintain the dollar peg. Thus if real estate takes 4.5% of 6%, only 1.5% is available for rest. Thats why real estate was popped not because of Xi's voluntary three red lines
China does have monetary control, what they don't have instead is the free flow of capital in and out of the country. Stopping more real estate investment is in fact a policy of capital control.
this is factually incorrect. Japan's main trade partner was US at the time. China in fact also exported its way through the U.S. and will be able to do less of that after trump. I also don't know where is the dollar peg notion from. Maybe you mistook HKD, which does have a dollar peg, for CNY.
The best way would be to force the labor laws which will create more jobs and sustain consumption.
Wow! Truly insightful!
Same problem in the US going forward: Trump wants to bring manufacturing back to the US, so needs to shift wealth to manufacturing from one of the two remaining blocks of wealth, government or house holds. Obviously he would prefer that the Democrat's base (government) suffers that loss. The Democrats would prefer that Trump's base (house holds) suffer that burden.
I would think that the US problem is the flip side of the China imbalance, as in both countries the vast majority of the workers/households have not enjoyed a fair share of productivity gains. However, as the US household is an addicted consumer rather than a saver, the US household relies on ever-increasing debt to maintain the consumption habit which is not sustainable in the long term. Income inequality - the distribution of national income - is a problem in both countries and others, it is maintained by institutional systems that will make extremely hard to resolve. One has to question which segment of society/households benefit from the current situation in both countries and how their political power can prevent necessary distributional reforms.
@@georgewoods5543 In order to keep the world economic system moving it was necessary for someone to consume the excess of manufactured goods produced by the developing world. If the US became addicted to consumption, China (and Japan before them) became addicted to production. Japan we allowed to move their production plants to the US, China, not so much. Friend/enemy thing. By manipulating the interest rate, and cutting consumer income, the Fed caused both the 2008 and the current recession, ending our ability to consume the world's excess production, cutting China (and Germany) off at the knees. Shifting wages from consumers to savers has the added benefit of building our war chest, waiting for that mother of all stimulus measures.
Incredible historical and currently relevant insights into the world economy ! I am not so sure that the leaders of China and the major world powers will follow his advice.
Very insightful on the macro economic side of the Chinese financial crisis. However, proof that western people have very limited understanding in Chinese political economics fabrics when it comes to the Hukou system. As long as China remains a highly centralised one party state, it won’t be abolished. The system can be traced back to Qin dynasty more than 2000 years ago when China was unified under one emperor for the first time. One can imagine how hard it is to abolish that if you know a little bit of Chinese history.
Plus the fact that the wellbeing of the bottom half of the population has never been a priority with the Chinese leadership.
maybe we should thinking more basically, just like the noble prize award point out-----focus on the system, party centered totalitarian system?
no way he can sell this to Chinese
My beef with China is the trade imbalance. It needs to be balanced. Trump will work, with tariff to move those product out of China. Hopefully some back to the USA.
Trump will not work because he isn't addressing the root of the problem.
Uncontrolled capital inflows.
😂😂is this guy joke?
I thought same
Better improve your English, Mr. Bot!
He IS a joke. Just search his prediction on Chinese Economy in 2013, which turns out to be completely wrong🤣🤣
@@aidenchen1275 If Tsinghua and Peking universities think he's good enough , where do people like you get your confidence from?
@@777Damiano dude, he is simply a teaching faculty.