Most of the stuff written on China is based on mistaken assumptions. Alan Longbon is different.The purpose of this article is to look at the macro sectoral flows and assess whether China is a good place for investment.
- China is undergoing a self imposed slowdown.
- The current account had declined and actually moved into deficit.
- Credit creation by banks and the government has been shutdown and effectively not added to the stock of money in the economy since 2016.
- This slowdown comes at a time when other governments and central banks are also slowing down fiscal expenditures and bank balances.
Seeking Alpha
The China Slowdown
Alan Longbon
How do you know it’s not just an accounting change by US multinationals not letting retained earnings remain in their China divisions as there is no longer any financial incentive to do so since January 1, 2018 US tax changes?
ReplyDeleteAnd nothing real in China has changed?
So all the morons lose their shit as China GDP is accounted for differently as a result of change in US firms accounting policies...
How do you know it is?
ReplyDeleteThis is an issue with economics and finance, especially China.
Where is the data? A lot of it is private, therefore, proprietary and not disclosed, and who can actually tell how good government-provided data is?
One thing about China does seem clear to me through. Most US people writing on it are projecting their own beliefs, and when it comes to banking and finance, those beliefs are based on fantasy.
ReplyDelete“GDP continues to rise, but more slowly than before.”
ReplyDeleteThis is not “slowing down”.... everything is fine in Chyina....
Sectoral balances are difficult to calculate when companies and banks are directed by government. (The assumption of profit motive is false;) They have social goals, produce X amount of steel or electric cars or solar panels without respect to profit, they are unlimited liability companies funded by banks with the backing of PBOC. Local governments and CCP officials operate businesses conglomerates while also directing the national government. If all governments were like China, the national accounting standards would be nothing like they are; the data is virtually meaningless.
ReplyDeleteI would not say "meaningless" without qualifying it. The figures are always "just bookkeeping." The context is all-important. Nothing meaningful can be read into figures without context.
ReplyDeleteThe context of the accounting are completely different China in terms of the institutional arrangements. China is a socialist country with some elements of capitalism, while the US is a capitalist country with some elements of socialism. Very different games, so to presume the same or similar context is just silly.
Most people "analyzing" China are doing so on capitalist assumptions that even the US doesn't conform to. When the GFC hit, the Fed and Congress stepped in to rescue the financial system in order to forestall impending collapse that would have spread not only to the domestic economy, but also to the global financial system and the world economy. The US would have been blamed for the ensuing depression, and Lehman would have become infamous as the contemporary Creditanstalt. No one cared to go there, no matter what it took. Hank the Hammer Paulson was barfing — literally — at the thought of it.
"The context of the accounting are completely different China in terms of the institutional arrangements" should read, "The context of the accounting is completely different in China from the US in terms of the institutional arrangements that result in different contexts in the two countries"
ReplyDeleteSorry for the initially confusing sentence structure.
“just bookkeeping”
ReplyDeleteThen look at real output data like tons, kWs, barrels, BTUs, etc...
“just bookkeeping”
ReplyDeleteThen look at real output data like tons, kWs, barrels, BTUs, etc...
Yes, and also deconstruct the processes and supply chains.
We have to stop thinking chiefly or exclusively in national terms, even though the policies, institutional arrangements, accounting, operations, etc. may be chiefly national if we are to avoid fallacies of composition in terms of the global economy, which should also include the informal economy.
That involves systems thinking in terms of a whole that is greater than the sum of the parts owing to synergy. There are two major factors to consider — synergy and entropy. They interrelate dialectically.