Will China pass the USA in GDP?
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- čas přidán 3. 05. 2024
- China is growing pretty fast...or is it? Much talk has been about China overtaking the US in GDP but lately China's finances have come under scrutiny. With this new analysis, maybe China won't overtake the US GDP.
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When it comes to most countries not accepting USD for trading and commercial use, you can print as much money you want but it will stay in the US causing inflation. And that bye bye.
That's a good point, but I haven't researched it enough to speak about it.
It depends.
Print money -> devalue currency -> destroy exchange rate -> exports are suddenly more competitive -> create trade surplus...
China is printing like crazy. In January they printed in single month more money than US in entire year. And nobody uses chinese currency (unless is forced to do so either by sanctions or local nationalistic leader).
And still, china is in deflation.
en.m.wikipedia.org/wiki/File:China_M2_money_supply_vs_USA_money_supply.png
@@visteonsk3792 I didn't think of that. Printing more money isn't just an American thing. Also I like your equation.
This guy definitely bought the story that China meticulously crafted for them.
A narrative that China want others to believe is that China is not to be feared,
and its growth is slowing down as the US continue growing.
This is how and what China wants to portray itself to the West
But in reality, China is not playing "China's growth will slow down, and the US will continue to grow'
In reality, China is playing "we'll pull the rug under your feet" game.
How do China do this? By putting together 2 strategies: 1) Make USD irrelevant through BRICS
2) Produces everything cheaper and better than the US.
As you know, Janet Yellen recently visited China for the umpteenth time.
This time with a clear plead.. slow down your production, it is killing the US companies.
Meaning, point #2 (China produces everything better and cheaper) is already impacting the US economy..
Or just listen to what Elon said.. "If we don't impose tariff on Chinese EV, Western EV companies WILL collapse".
So yes, China's growth will be a single digit from here on.
But the US will soon experience a double whammy. Its USD will have less users (hence hyper inflation and
less loans to grow the US economy) and its products has less buyers (e.g. BYD is literary killing Tesla).
So the US & EU economy will shrink (negative growth) just as China continue its single digit expansion.
That's how China's plan to surpass the US and EU collectively.
Yeah, I've seen how BYD is destroying the European EV market. You may be right, because Japan is holding on even with all their debt. The next 10 years will be interesting.
@@beerandnewsreport7657 Japan is already going in the wrong direction..
Its electronic industry (the one that propels Japan in the 80s) has lost to the Korean and Chinese electronic industry.
Its golden goose car industry, chose the wrong path, It chose Hydrogen car (and failed), just because it doesn't
want to rely on EV batteries that the Chinese dominate.
Its heavy industry (e.g. HSR etc) are being replaced by China too.
Japan is like an old country, with rapidly shrinking population, caught in the downward spiral it can't escape.
Brics. 😂
Brics 😂
@@brianlowe3529 That's the spirit.. We love how your underestimating BRICS.
Exactly the reaction the global south (90% of the global population) wants you to have.
That 600 pounds tiger (a.k.a BRICS) is really just a pussy cat.. Please do not be fearful.
And you bought it Hook, Line and Sinker.. It's beautiful. 🤣🤣🤣
I think you need to do a lot more research on this topic, because many of the things you say are inaccurate or downright wrong. First, China is NOT facing the problems that Japan faced in the 1990s. The Japanese economy went into a long stagnation not because the US decided to pull manufacturing out of Japan in the 1980s and switch it to China. By the 1970s and 1980s, Japanese manufacturing was concentrated in the hands of Japanese, not American, corporations. Honda and Toyota were beating the Detroit car companies hands down in the US market, Japanese electronics companies such a Matsushita and Sony were producing better TVs, Hi-Fi sound systems, radios and CD players. Sony was one of the most innovative companies on earth, coming up with the Sony Walkman and the idea of ear phones. Most US manufacturers could not hold a candle to Japan. There was a huge wave of US protectionist sentiment against the Japanese. Their economy tanked because of 2 main issues. There was a huge housing bubble that the government did not control, leading for example to the real estate occupied by the Imperial Palace in Tokyo to be valued as being worth more than the whole state of California. When the economy started to weaken in 1989-1990, property prices dipped and many home buyers found that they had loans which were more than the equity of their holdings. This led to belt tightening by the Japanese people, who cut back on a lot of consumer spending, which led to worsening economic cycles. It was a vicious cycle. Unlike in the US, which allowed for brief but very brutal recessions, the Japanese companies tried to hold on to workers, and were encouraged to do so by the government. This led to bloated companies which became loss making enterprises for years. Japanese salaries stagnated. At the same time, the banks could not clean up their balance sheets by writing off bad loans, since most of these loans related to the housing bubble. Both banks and companies ended up being zombie corporations for years.
Another reason for Japan's economic malaise was as a result of the Plaza Accords, which the Reagan administration forced on Japan's government. This was an agreement for the Japanese to peg the Yen at a certain value against the greenback, leading to their currency being over-valued. The Plaza Accords meant that Japan could no longer export its way out of the inflation it found itself in at the end of the 1980s.
Then there was the rise of Korea, which started to produce cheaper cars, cheaper electronics, etc. Korean competition from companies like Samsung, Hyundai, etc., led to Japanese consumer products and cars facing another serious Asian competitor. Over the years, the Korean manufacturers proved themselves to be a lot more innovative and nimble than the Japanese.
China today is in a different place than Japan was in the 1990s. It does not yet have a property bubble; one was indeed building up, but the Chinese government has burst it in the most ruthless fashion that I have ever seen. Large property companies like Evergrande had built housing which they sold at sky-high prices, as the sales policies encouraged speculation in real estate. These companies' business strategy was to borrow huge sums of money, then build and sell luxury housing units to speculators and reap huge profits out of this. In 2021, the Chinese government stepped in, because they saw that the strategy was actually leading to a market bubble, while pricing the ordinary man in the street out of a home. Because banks in China are state-owned, and must follow state policies, the government was able to instruct the banks to stop rolling over loans to Evergrande and a few other large property developers. This sent these companies, especially Evergrande which borrowed on a grand scale, into a financial tailspin, where they could not repay bonds and other loans. The government then demanded that these companies use whatever income they recovered from home sales to finish their projects, so that people could move into their apartments. This further meant that bond holders and shareholders (very many of them foreign speculators and investors) got burnt, but home buyers still got their units. Evergrande was allowed to go into liquidation, its management arrested, and the property bubble nipped in the bud. There was also a new policy, which restricted the amount of loans to property companies, on the basis that houses are built to be lived in, not speculated on. This was a controlled implosion of the property sector. The reason for this was, first, to curb the bubble that was building, but also in response to US trade restrictions, second, to divert loans away from the property sector to the high tech manufacturing sector.
You also mentioned about provincial government debt. This debt was incurred in the 2000s to build out China's infrastructure, and because the connectivity has raised overall productivity, even third and fourth tier cities have prospered. There is no problem on the whole with servicing of this debt. In any case, the debt was incurred in RMB, the Chinese currency, and the creditors are China's largest, state-owned banks. It really is paying from one hand to the other. It is true that some of the debt had to be restructured, mainly as a result of the sudden high interest rate resulting from the US and Western inflation in recent years, but this was done with a view to spreading the debt out over a longer period to keep interest rates affordable for provincial and city governments. China's trade surplus with the world in 2023 was around USD 850 billion. It is flush with cash to inject liquidity into its banking system in a way that no Western country except for the US is able to do. The US can do so by printing US dollars, and it had done so for many years, but this ability is curbed recently because of the inflation which has eaten into the economy. Chinese provinces can afford to repay their current debt, because the economy as a whole has been growing, and local government income from tax and investments have increased over the years.
China's economy is already larger than the US' when you take the more accurate measure of GDP by the purchasing power parity method. US$1 does not buy the same amount of goods in the US as it does in China. Applying the PPP method, China has an economy which is estimated at around US$30 trillion, which makes it considerably larger than than US' US$24-25 trillion.
It is true that China's demographic numbers show that its population has decreased. This was due to the draconian one child policy, but that has been reversed, and couples are allowed now to have 3 children. Most of the urban dwellers will stop at 2, but even with the rate of decrease of 2 million per year, the estimated number of people that China will have in 100 years, will still be around 1.2 billion. Still, depopulation is a real concern. But your point about social security, etc., might not be applicable to China. The reason is this - the growth of China has been extremely fast. It has stepped into the threshold of a reasonably rich nation (2023 per capita income was around US$13,000) from almost universal poverty in around 40 years, or a little over 2 generations. This means that productivity rise has been massive. Given the lower level of consumption that the older generation is used to, they would be relatively less of a burden in retirement than an equivalent retiree in the West.
China has moved up the value-added chain, and does not only manufacture toys and cheap tat anymore, but electric vehicles, communications equipment, drones, the entire solar and windpower ecosystem, batteries, etc. Last year, it beat Japan into becoming the largest car exporter on Earth. While trade with the US has gone down, this is because the Chinese have been going to Mexico to assemble finished goods and them have them exported from Mexico into the US, to bypass US tariffs. You need to check out the trade figures between China and Mexico, to better understand this phenomenon. And it is not just Mexico. The Chinese are among the largest investors in Vietnamese manufacturing. The largest mobile phone seller in Africa, a potential market of a billion people, is Chinese. It designs mobile phones specifically for the African market in China, manufactures the components there, and then exports these components to be assembled in Africa.
Meanwhile, Chinese labour is being steadily replaced by automation - China is the largest market for, and the biggest manufacturer of, mid-end robotic systems.
The Chinese growth story is NOT at an end. Last year, China's GDP growth was 5.2%, while that of the US was less than half of that at 2.5%. At this rate, China is looking to overtake the US in dollar GDP terms by about 2035-2036.
Thanks for your very detailed comment. You seem to be an expert on China and I would like to interview you as a response to tis show. Would you be open to that?
@@beerandnewsreport7657 Thanks for this, but I'm afraid that I am camera shy.
Recently a Chinese cancer treatment drug was approved by US. It cost $150 on import but resold to US patients at $3,500. So it means for each dose sold, the GDP of US has increased by $3,000 🤣🤣🤣
Same response as with your other comment
China's economy already overtook the US economy in 2017 by PPP which is the real measure of the economy adjusted for local crisis. As long as America's inflation rate outpaces China's real economic growth, America will always have the biggest nominal GDP. Today, the average Chinese is already living better than the average American. Chinese cities are cleaner, greener, more energetic and safer than American cities.
Delusional, nonsensical comment!
Yeah, I had heard about China overtaking the US when you use PPP. I just prefer GDP. As for a cleaner, greener, more energetics, and safer than American cities… That's a whole different subject.
this is only if you believe chinese propaganda. li kequang the previous Chinese premier up until last year stated that over 600 million Chinese still live in abject poverty in contradiction of the Chinese dictator xi xingping. He then surprisingly stepped down and then a few months ago died of a heart attack.
yeah china is already better than the US
"The average Chinese lives a better life." Yeah, sure thing, buddy America should adopt China's 996 work culture
At 9:25, you claim that China's debt-to-GDP ratio is 360%. Out of curiosity, what's the source of that number? According to the IMF, China's debt-to-GDP ratio is at 77.1% as of 2022. (According to IMF also, as of 2022, Japan is at 261.29% and the US is at 121.38%). I'm not saying you're wrong, I'm just wondering if there's a more accurate data source than the IMF.
I said that China's national debt to GDP ratio 77% in the beginning of the show. The 360% ratio came from total debt, not just national. Two of my main sources were czcams.com/video/EgeV0n9L2es/video.html and czcams.com/video/dnp_MxXY9qs/video.html.
@@beerandnewsreport7657 in china total debt should be considered state debt because of local governments, SOE etc...
The Gdp of USA is growing fast because of inflation, while in China they have experienced deflation for the past 3 years, that is why USA seems to growth fast in Gdp measurement, but China is slowly moving to a reasonable inflation rate, and for sure China Gdp will overtake the USA Gdp by 2040 or even before (2038)
That's an interesting perspective. Time will tell if you are correct.
Great show Art 😊. You taught me something new and you also brought back some memories. 😅
Thanks, Tony. Let me know what you think about the comments
Although i dont agree with your conclusion but all the points you brought up were very objective and convincing!
Thanks, the next ten years will be very interesting.
17% of US GDP is Health care whereas in China it's 6% and BTW Chinese life expectancy is higher than people in US.
Exorbitant residential rents also contribute in ballooning US Gdp
Calling out our health care cost is cherry picking. It's like me calling out China's AI surveillance system and how ruined the lives of some people. It's cherry picking.
Great show Art! You're the only person I know who can make economics or biological science interesting 🤗 It's hard to get my head around these massive numbers in economic debt though.
Thanks Steve, What bothers me is that the governments (any government) doesn't seem to care.
Very interesting episode, Art! Cheers!
Let's talk about it in gymnastics class tomorrow
gdp is a trash measurement
I'm not an economist, and it was the only one I know.
only if you are a chinese wumao
Just give you a timely different perspective for reference if you are interested . See: “China Is Still Risig: Don't Underestimate The World's Second-Biggest Economy" by Nicholas R. Lardy in Foreign Affairs (latest edition).
Thanks for the reference, Min Lee but I can't find it, even on Amazon. Is there another book you would recommend by Nicolas R. Lardy? There are several listed.
@@beerandnewsreport7657 Foreign Affairs is perhaps the most prestigious and must read periodical in the field of US foreign policies. Just google and get to its web side to have a view of the article
@@beerandnewsreport7657 Foreign Affairs is perhaps the most prestigious periodical about US foreign policies. Just google to get to its webside to view the article.
@@beerandnewsreport7657 Foreign Affairs is perhaps the most prestigious periodical about US foreign policies. Just google to get to its website to view the article.
@@beerandnewsreport7657 Just google "Foreign Affairs" to get to its website to view the article.
There is one aspect of demographics that I have not seen many CZcamsrs comment upon. I agree that China's demographics will mean that her population will decrease this century. And most commentators say that this will be catastrophic for China's economy. However, how does a population actually help a nation's economy? It is that a high population usually gives you a large labour force to produce economic output. China will combat her demographic decline by utilising the labour of other countries in the process of setting up factories and farms in other countries, especially in the Global South, and employing local labour. So there will be economic output on account but not using Chinese citizen's labour. The British Empire ruled the world at one point, even though it had a tiny native population.
The other thing is that China used to implement the one child policy which was discontinued las decade. However if needed, it could try to have a reverse policy. It would be harder to pull off for sure. But it could do things like giving increasing tax breaks for the more children you have, all the way to providing free housing for larger families as the state owns many properties and "ghost citites". The Chinese State will own many more properties before the property bust is over as it says it will not bail out property developers. And who owns the distressed properties eventually, the State of course.
Also, China has instigated the mass production of robots and y 2025 she hopes to make robots commonplace in society. This also ameliorates the effect of demographic decline. So you see, China has problems for sure, but demographics can be solved with many tools.
Let's be clear, China is not the only country where the population is going to go down. As the baby boomers around the world age, consumerism goes down. China is a trading nation, so, as consumption goes down, so will their economy. That is an interesting proposal of giving free housing for larger families. No country has done that to my knowledge. I agree that China has invested heavily in robotics, and it remains to be seen if any country can replace their workforce with robots or AI for that matter.
@@beerandnewsreport7657 Thankfully China started with the robots some time ago. 52% of all industrial robots in the world are installed in China. And this figure will only go up and China manufactures more and more of its own robots. In Beijing there is an operational robotaxi network with driverless taxis that passengers can use. The robotaxis are going to be rolled out to other Chinese cities very soon. There is also a rollout of drone deliveries of online ordered things as well.
As far as adoption of AI goes, China is well placed because not only is the Government willing to use AI, the general public is also very open to the idea of AI playing an active role to help them. There are also over a billion connected internet users in China generating 25% of all data in the world, food for the AI models.
Keep on dreaming!
Well it will be fun to watch over the next decade or so.
‼️👍👍🇧🇷🇷🇺🇮🇳🇨🇳🇿🇦➕️👏👏✌️
Interesting way to show BRICS
China will never pass the GDP as long as US is printing more and more money. When China get close, we can print a few Trillions. Then it will take China a few more years to catch up. We can repeat this forever.... hahahahaha
These are most idiotic comments I have seen on CZcams.
US inflation is real! You cannot keep on printing money
I don't think that's how it works
china prints more than any other country and manipulates its currency values
en.m.wikipedia.org/wiki/File:China_M2_money_supply_vs_USA_money_supply.png