Economics

中国错觉

Feb 16, 2016 Rob Johnson

纽约—中国对其汇率盯住机制的管理仍在影响全球金融市场。关于人民币贬值的持续不确定性正在助长恐慌——通缩压力将席卷新兴市场，并严重打击利率已经达到或接近零水平（因此无法继续下降对抗输入性通缩）的发达经济体

但最近的汇率焦虑其实是另一个事实的症候：中国增长战略从出口拉动型转向内需推动型的过程远远不像人们希望的那样平稳。

对一些人来说，中国特色资本主义的美好前景仍然没有褪色。他们笃定地认为，在经历了三十多年国家引导的增长后，现在中国领导人知道如何扭转低迷的经济。

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0 Comments on this paragraph, 13 Comments on this article

Kenneth Pao Feb 29, 2016

Good article. However I challenge the following paragraph:

"The key to stabilizing the exchange rate lies in creating a credible development policy. Only then will the pressure on the renminbi, and on China’s foreign-exchange reserves, subside, because investors both within and outside the country will see a clear way forward. "

In my humble opinion, the key to stabilizing the Renminbi (Yuan) lies in creating a "staged transition plan" of "reducing size of export/investment focused SOE's" on one hand equating with the "increasing size of domestic consumption focused businesses" on the other hand.

With these 2 closely measured efforts marching in locked steps, this is the only way to ensure that China's GDP being kept within the permissible window and that the transition of the Chinese economy from export focused / investment driven to domestic demand led and consumption driven will be kept on target. And downward pressure on the Chinese Yuan/Renminbi will subside.
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David Olsen Feb 18, 2016

Good article.

Yes aggregate demand support for new industry is needed for China to make the necessary transition to a upper middle income economy.

Shock therapy can be truly shocking and generally ends after a deflationary spiral with the departure of the shock therapists and a period of rebuilding. Or if the nation in question is unlucky a brief period of stability followed by another recessionary episode as the shock therapists see if it will work second time around.

As Mr Moriyama said China's stability can't really cope without a central authority, and with this type of supply side shock therapy the centre can't really hold.

A transfer of govt resources to private consumers (free heath care, education, housing subsidies for the poor, loans for small entrepreneurs) is needed for sustainability of the transition.
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Paul Daley Feb 17, 2016

The anxiety over China's economic performance reflects failures elsewhere, as much as in China. Central banks in advanced countries have painted themselves into a corner with QE initiatives that have reduced interest rates to near zero without raising prices for anything beyond existing assets. Commentators like Johnson blame "fiscal gridlock" for this but there is no reason to excuse central banks which have never developed any capacity to lend against income or operate beyond asset markets. If they had, the current gap between asset prices and income flows would never have opened up and developed countries would not be so critically dependent on China's forbearance in regard to the exchange rate.

The lesson for central banks is simple: if you're going to take steps for the entire economy, then act in the entire economy. Don't enter through asset markets alone and then wonder that the stimulus goes no further. Don't assume that one price for money prevails everywhere when experience shows that many don't have access to money at that price. Adjust; get the powers you need to deal with the economy as it is, not as theory says it should be.
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dan baur Feb 17, 2016

"The key to stabilizing the exchange rate lies in creating a credible development policy" - now where do you come up with these platitudes? Have the Chinese solicit you as adviser? No? Then what's the point of this whole Keynesian nonsense?
- Jose araujo Feb 17, 2016
  
  @Dan
  
  Stabilizing exchange rate is anything but Keynesian, Gold Buggers, Free trader Classics and Neo-Classics and even Friedman followers, but I think you have got your economics wrong by mentioning Keynes in a exchange rate discussion
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- dan baur Feb 17, 2016
  
  Their problem is that they actually followed the Keynesian nonsense and got nowhere. You haven't even noticed that - your credibility is Zero.
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G. A. Pakela Feb 16, 2016

China is using its revenues to finance the construction of islands, aircraft carriers, fighter planes and zombie enterprises. If the Chinese Communist Party/ government wants to transition into a consumer driven economy perhaps it should use more of its revenue to finance better social security and medical care for its elderly and promote more entrepreneurial activity to create new jobs and transitions it economy away from the old jobs.
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Aale Hanse Feb 16, 2016

Woe is us.
China has been feeding the world for awhile now and we have become dependent, fat and lazy with no one being prepared for the outcome which is that all good things have to come to an end. Berating china’s officials on how they should transform themselves so we do not have to worry about our future is not going to help them or us. I’d say get our own house in order first....
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Steve Hurst Feb 16, 2016

Red is a good colour for China for it is the colour of blood
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Yoshimichi Moriyama Feb 16, 2016

Kindly suggestions have been made to Chinese capitalism like "transition from an export-led growth to one propelled by domestic consumption," or "floating the renminbi."
But most of them cut into the political power of the CCP, and the leaders do not want it.
Moreover, Chinese society has its Chinese characteristics like its economy, and is held together only by enormously authoritarian central power. It would face an imminent danger of breaking down and going to pieces without it. This is where China is different from Western society.

China's turmoils such as the Great Leap Forward and the Great Cultural Revolution did not affet us before Deng Xiaoping's opening up, but it is a member of the globalized world today though it is not a resonsible stake-holder and it does not want to be one, our boat will be rocked up and down with its ups and downs.
- Yoshimichi Moriyama Feb 23, 2016
  
  Thank you for your reply, Mr. Stone.
  You said it all in a few words, "lack of skills to deal with such a complex problem other than through brute force,"
  "the reality of empire was that of a hard core of wei, or force, surrounded by a soft pulp of de, or virtue (June Teufel Dreyer, China's Tianxia: Do All Under Heaven Need One Arbiter?, YaleGlobal Online.)"
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- Richard S. Stone Feb 22, 2016
  
  YM: Yes, exactly. None of this is directly about what the Chinese people want, it is about the CCP and what it wants to do, or is willing to do, to stay in power, and adding that to a historical version of what China really is in a cultural understanding. In addition, China is not a democracy in any way. It does not even pretend to be one. It has never had anything in place that was even close to democracy. China is closer to Saddam Hussein's Iraq than to any version of democracy. At this point the CCP is trying to establish its primacy in terms of force because it IS worried, and with good reason, about internal issues. Even if 300 million Chinese people are doing well enough in China now, it still has 1 billion Chinese people who are not satisfied.
  
  But if there is one issue, I think it looks like this: The Chinese government is not directly interested in the welfare of the Chinese people, because it is mainly, maybe only, interested in its survival. But no one has any good reason to believe that the CCP leaders are capable of dealing with the Chinese internal issues because the problems may be simply intractable (in the short term) even with the best of (worldwide) skills and intentions, and The CCP leaders are obviously hampered by mixed motivations and by lack of skills to deal with such a complex problem. No one has any good reason to think they will succeed, other than through brute force.
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Marc Laventurier Feb 16, 2016

On what planet is this 'New Economic Thinking'? And the CCP has yet to conceptually climb out of the Liangjiahe caves in understanding it's unique and historic opportunity to create standards and technologies for massive social service platforms such as an international medical service, instead aping a market model of social development that is failing financially almost everywhere, sustained only by unpayable debt. Add to this the spectacle of bow-tied buffoons on Bloomberg TV bemoaning the fact, without the rigor of even referencing the toy economic premises which betray such contradictions, the fact that the Japanese/Chinese/ American populations are failing to produce the gross demographics needed to increase their profits, much like ranchers discussing their herds. Nothing New here - move along, little doggies...
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