China Hard/Soft Landing & Municipal Debt Levels
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@Able24h
Thanks for all the great comments - back at you.
Ksabrs45 3 months ago
@Able24h
Yeah you're right - over investment in infrastructure is a problem and some of that will be a liability for years to come - like that fucking Maglev train in ShangHai. I would argue that not having a social security tax puts less of a burden on workers, children, any removal or 3rd party payment - like State welfare distribution will result in greater efficiency. The Chinese, will take care of their parents, but they'll have more money to do it with and each dollar will be spent better
Ksabrs45 3 months ago
Having fewer children reduces that security. Heaven forbid they have a daughter with diminished economic opportunities. You can mention their savings rate but wage inflation is seldom calculated. I respect the hell out of you. You know how to play the game. I admire how your able to reason, and never seem to have a kind of emotional investment. Very few people can do that, very few people.
Able24h 3 months ago
@Ksabrs45 For one there is an argument that too much money in infrastructure projects can act as a a money sink. Spending money on too many projects before they can be properly utilized you end up losing money to maintain them. I could be wrong, but I believe that because there is no social welfare, does that not put more pressure on their children to support them in old age? Someone has to take care of the elderly if it's not the government it's their children.
Able24h 3 months ago
@Able24h
As far as I understand they've been recycling their foreign currency reserves into domestic infrastructure projects, like HSR, but maybe that's ill-informed and its actually tax-revenue. I don't know why demographics matter too much - given the lack of a social-security style welfare scheme that relies on ever greater numbers of young people. I don't think China is on some radiant march towards economic nirvana - just that its preferable to where the US/Europe are headed -short term.
Ksabrs45 3 months ago
@Ksabrs45 I agree, I just feel like most people writing about the issue (you not included), seem to think their foreign reserves can be used as domestic capital for anything serious is intellectually lazy. Also their long term prospects are worrying. Even if you were not talking about domestic debt or realestate. Their demographics are rather disturbing. Though I believe you know about that already. I actually admire the way you seem to have no cognitive dissonance what so ever.
Able24h 3 months ago
@Able24h
Western China offers better infrastructure, business friendly taxation policies, and institutional stability than the competing countries in South East Asia or South America. Industry will definitely move more towards the higher value added end though in the next decades. More like Taiwan I suppose.
Ksabrs45 3 months ago
@Able24h
I don't think China's primary advantage in terms of manufacturing and industry comes from their currency manipulation - I perceive it to be their lax easily-bribed regulatory environment and extremely low taxation. A combination of business friendly polices is where they win. As for labor costs, those are still in no way comparable to the West - more factories will be moved to Western China - in fact, two new development zones are to be open and functional in XinJiang by 2020.
Ksabrs45 3 months ago
@Able24h
First, one of the points of the video is that their debt is not catastrophically large and unmanageable - in comparison to the West. So yes, some debt is totally rotten and its will necessitate write offs and bankruptcies. The State owned banks will hopefully be restructure - the bad debt will be put in some special vehicle and they'll auction it off - ideally.
Ksabrs45 3 months ago
@Ksabrs45 It would be if it would do it freely under the current market conditions. But using foreign reserves to pay off local debt is a catch 22. If they used it to pay off that debt the reminbi would rise and cause a huge loss of revenues from exports. My point being, having huge foreign cash reserves gives off the erroneous impression that it can be used in that way, which it can't. Also with the huge increases in wages, their losing their competitive advantage very quickly.
Able24h 3 months ago