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| WSJ: Behind Xi's Bluster Is a Vulnerable China - Trump's policies have America surging, while Chinese growth could slow further still. |
| 2019-01-10 |
| [WSJ] President Xi Jinping observed the 40th anniversary of China’s shift from doctrinaire communism to quasi-capitalist totalitarianism by delivering a televised speech last month in unyielding authoritarian language. Yet his forceful posturing couldn’t hide his concern. America’s main economic rival is under real pressure to give up many of the mercantilist policies it has relied on for decades to prop up growth. Like his predecessors, Mr. Xi insists that China’s Communist Party has been "totally correct" over the past 40 years. "No one is in the position to dictate to the Chinese people what should and should not be done," he declared. He praised Marxist-Leninist principles and quoted Friedrich Engels as he envisioned China’s socialist path through the 21st century. This bluster is typical for a regime deeply concerned about appearing weak. President Trump’s trade policies have put heavy pressure on the sore spots of China’s economy. With per capita gross domestic product just above $10,000, China must sustain far more rapid growth than the U.S., where GDP per person is about $62,000. But the Chinese economy is losing momentum. The People’s Bank of China reported in October that economic growth had slowed to 6.5%‐below expectations and the lowest rate since the financial crisis. Meanwhile, December saw China’s first decrease in manufacturing activity since 2016 as new export orders declined for the seventh month in a row. Things are likely worse than these numbers indicate. Economists have long disputed the accuracy of China’s official economic data. Production reports for state-run industries have begun to go "missing" in recent months, presumably because they reveal that companies haven’t met the government’s aggressive targets. In September Beijing sent a directive to journalists listing topics it intended to "manage," including "worse-than-expected data that could show the economy is slowing" and "the impact of the trade war with the United States." The trends concern China’s leaders. One official told Bloomberg News last month that "many people are worried the private sector is in retreat as the government steers policy support toward state-owned enterprises." These large, inefficient and uncompetitive enterprises have always weighed down China’s economy, as the state ignores market demand and directs huge amounts of capital into selected industries for its own reasons. The U.S. economy, on the other hand, is on an upward trajectory. While concerns about an economic slowdown have roiled stock markets, consumer spending remains strong. Holiday-season consumer spending was the highest in six years, according to Mastercard SpendingPulse. This should come as no surprise, because more Americans are working. Wages rose 3.2% in December, the largest gains since April 2009. With more workers earning higher wages and taking home more of what they earn‐thanks to the Republican tax cuts‐they’re spending and driving economic growth. As a result, growth in 2018 was likely at least 3% for the first time since 2005, and, despite market turmoil, the odds of a recession this year are close to zero. The St. Louis Federal Reserve maintains an economic model that predicts the probability of a U.S. recession. The most recent update, in January, put the risk at less than 1%. Despite market concerns, the trade war’s impact on U.S. growth has been far less than anticipated. In September Federal Reserve Chairman Jerome Powell stated that notwithstanding concerns like supply-chain disruption, materials cost increases, and loss of overseas markets, "it’s hard to see much happening at this point." In fact, "you can ask, if all of the tariffs that have been announced are applied, what would be the effect at the aggregate level? And they’re still relatively small." U.S. exports to China totaled $130 billion in 2017, or about 0.6% of America’s $21 trillion economy, while imports from China (which lower U.S. GDP) totaled $506 billion, about 2.4% of the U.S. economy. It should be fairly obvious who has the most to lose from a failure to reach what President Trump has called a "real deal" on trade. Mr. Xi’s speech was intended to reinforce the myth of an invincible Chinese dragon capable of bullying America into submission with its economic clout. The bluster is a sign of economic weakness. President Trump’s trade strategy has exposed China’s vulnerability, demonstrating the risks of going toe-to-toe with a determined opponent that happens to be your largest customer. |
| Posted by:Besoeker |
| #11 LOL |
| Posted by: newc 2019-01-10 22:19 |
| #10 I've been there a couple of times myself on business and trained the folks in Hyderbad to do the work we needed. I have a very high opinion of Indian engineers and high tech workers myself. |
| Posted by: rjschwarz 2019-01-10 16:34 |
| #9 you're not kidding. That "leather" saddle I bought online from India is a POS |
| Posted by: Frank G 2019-01-10 15:39 |
| #8 If only India or someone else could ramp up and produce the same crap China does. You’re kidding, right? India is certainly capable of producing the same crap China does, only it will be much crappier. Take it from someone that has spent a lot of time there, India and Indians are not what most Americans think they are. |
| Posted by: Speamble Elmeack5265 2019-01-10 15:35 |
| #7 Armies and Navies are expensive That is probably why the Dragon Throne abolished its own intercontinental Navy just a few years before Columbus went west and discovered a New World. The Chinese even destroyed their shipbuilding facilities & tried to erase all memory of Admiral Zheng He and his accomplishments. |
| Posted by: Anguper Hupomosing9418 2019-01-10 15:22 |
| #6 If only India or someone else could ramp up and produce the same crap China does. There was a time we used to make our own computers. They cost more, but I mysteriously had more disposable income. |
| Posted by: Thing From Snowy Mountain 2019-01-10 13:47 |
| #5 we just need to wean ourselves off the crap that China and American Importers are trying and succeeding to sell us, mostly stuff we do not need and buy on impulse due to saturation marketing |
| Posted by: 746 2019-01-10 13:38 |
| #4 If only India or someone else could ramp up and produce the same crap China does. |
| Posted by: rjschwarz 2019-01-10 13:34 |
| #3 K Street hit hardest |
| Posted by: Procopius2k 2019-01-10 11:31 |
| #2 Don't think it will be that bad. But there is a real opportunity here to put China on its back. Armies and Navies are expensive and hard to maintain when you are broke and people are starving. |
| Posted by: DarthVader 2019-01-10 10:36 |
| #1 If China's economy gets a cold, the rest of the world's will need a respirator. |
| Posted by: M. Murcek 2019-01-10 10:08 |