Anyone seen anything interesting on the RCEP deal to be signed, supposedly this sunday? Seen little reporting and analysis. Asean s already China's largest trading partner. The deal more or less binds that part of the pacific rim together. Including Australia, oddly enough. Been many years in the making. Lost track of what s been diluted etc. Does it still have the significance it once had?
Anyone seen anything interesting on the RCEP deal to be signed, supposedly this sunday? Seen little reporting and analysis. Asean s already China's largest trading partner. The deal more or less binds that part of the pacific rim together. Including Australia, oddly enough. Been many years in the making. Lost track of what s been diluted etc. Does it still have the significance it once had?
India is out, which leaves Australia as the only deficit country in the trading bloc. By definition then every single other country in the bloc is producing more than it is consuming and so will be looking to export the surplus to... Australia. It's not super sustainable.
I think the idea is that China would be the End Importeur. Not sure about the latest, but Japan Korea and ASEAN all have had surplus with China....so overall a balanced pattern at least. That Goal would need to go hand in hand with internationalising the currency and securing steady flow of inbound DIRECT investments. Both aspects represent huge leverage for the international community to shape chinese policies.
Sure, but that's only because the US and EU have bought up all of China's surplus... given that the US at least (and likely the rest of Europe outside of German industry) will certainly be reducing the deficit with China, where is the rest of China's surplus going to go?
Am not sure i follow. I doubt Asean Japan Korea buy the same stuff as the EU for example. Overall, isnt the policy direction now one of stimulating internal development and moving away from export dependency? That s a relief for the rest of the players.
The've been sailing in the "policy direction" of increasing domestic demand/consumption since... at least 2007 (Wen Jiabao's famous speech), and their own internal economists have been talking about it since around 2000 (Wu Jianlian, Mr. Market from the past generation). Yet the policy has utterly failed, they've only been able to increase "dual circulation" (rebalancing by another name, increasing consumption, increasing domestic demand, whichever term on prefers I list them so the non-macro people can understand they're the same) by about 0.5% a year over the past decade (consumption has moved from 33% to 38% of GDP over the past decade). That's far too slow for China to suddenly reverse a massive trade surplus/change the entire structure of its economy and become a net importer from the RCEP nations/the globe.
The reason they have failed is because "dual circulation" is short-hand for "take a ton of money and power away from politically powerful CCP families, both in Beijing and local governments, and just give it to average Chinese people." Specifically which families and SOE's and industries is irrelevant because the macro numbers tell the story--they've been unable to do it.
As for import composition, it doesn't really matter since the overall surpluses/deficits tell the story, although as a matter of fact Japan imports a ton of machinery and manufactured goods from China (I'd have to look up the exact number but I'm not wrong), which is what the EU overwhelmingly imports from China (like 97% of EU imports from China or so). Everyone imports a lot of manufactured goods from China. While it is the fact of the matter, it's not really pertinent though, because even in a world where Japan imported 0 of the same products, once the EU and US reduce the deficit with China via political means, China either a) just shuts down all that production and enters recession, b) transfers the excess surplus to other nations with whom it has entered into FTA's (RCEP, for instance), or c) transfers all the party wealth from SOE's to the general population so it can consume all of it itself. A) they are unlikely to accept, and they've been trying C) for 13 years, so that leaves B, but with Australia the only nation in the RCEP running a deficit, it will be difficult for China to unload economic surpluses on a bunch of nations who are trying to do the exact same thing to China. Hence the difficulty of the RCEP.
I should add, I'm analyzing this from China's macro perspective of trying to have a thriving economy, the RCEP will not live up to their hopes because it won't solve China's fundamental problem (lack of domestic demand), hence it is bound to become politically difficult for all nations, either China if it turns out it has a trade deficit within RCEP if for instance they aren't importing any of the stuff the EU and US rejected, so China is just not exporting to the EU/US as much but continues importing from the RCEP in which case it has exacerbated not helped China's fundamental issue of overproduction/underconsumption at home, or China somehow succeeds in forcing deficits on the RCEP nations (for instance, through its patented combo of market protection at home and export subsidy abroad) in which case the RCEP nations will find it politically unpopular as their unemployment increases at home and they run deficits. Again, it all points back to China's lack of domestic demand and the failure of "dual circulation," forgive me "rebalancing" since at least 2007.
Again, not a call for collapse, but an analysis of the consequences of China's ultra-low consumption as a % of GDP. It just doesn't consume enough to make it an attractive trade partner at this point.
It s the size of the pie that matters to businesses and trade partners though. During that period of stagnant percentages, trade volumes and values have grown enormously. That keeps everyone interested. Given how everything grew, that the gdp composition actually improved a bit was a surprise. A matter of having to run very hard to keep still. But until they actually solve the composition problem, they ll always be at risk and at odds with trading partners. That s for sure.
When you say "it's the size of the pie that matters to businesses and trader partners" though (meaning even if consumption is a low % of GDP in China, absolute consumption is still immense given the size of the economy), to businesses focused on exports, sure, but to "trade partners" as a whole, I think that conflicts with your last two sentences. The whole point is even if the China market is big, if on the whole they are looking to sell you more than they are looking to buy from you (which by definition is true because they run a massive surplus with the world), there will be trade friction. With the US/EU now, and with RECP countries later if the US/EU continue decoupling and China is forced to try and shift its surplus onto other, smaller economies.
A small Pointer. Narrow focus on surplus is misleading. It s the ownership of that surplus that also Matters. A huge chunck of that surplus is OWNED by the Trade Partners. Few are fools in commerce. Do not imagine millions of put upon businesses looking to be rescued... in many Ways that s why the Marco top down Problem is so difficult to define and fix. We all know there is a problem. But the handle to fix that Problem is not Trade surplus or deficitis per se.
Hi Ken, Foreign ownership of particular businesses operating in China is irrelevant because they are all factored into the final GDP/trade balance numbers. That is why looking at the whole is appropriate rather than any specific sector or business ownership.
The real issue is China's extraordinarily low consumption share of GDP. The surplus is a byproduct of that. To the extent that we focus solely on the surplus, and not on the underlying cause (consumption is too low in China), I would agree that a narrow focus on the surplus is incorrect. However, as long as we understand that the surplus is caused by low consumption, it is fine to want the Chinese surplus as a whole (not just with the USA) to go down, because that would mean Chinese consumption was rising, thus rebalancing global demand.
Anyone seen anything interesting on the RCEP deal to be signed, supposedly this sunday? Seen little reporting and analysis. Asean s already China's largest trading partner. The deal more or less binds that part of the pacific rim together. Including Australia, oddly enough. Been many years in the making. Lost track of what s been diluted etc. Does it still have the significance it once had?
India is out, which leaves Australia as the only deficit country in the trading bloc. By definition then every single other country in the bloc is producing more than it is consuming and so will be looking to export the surplus to... Australia. It's not super sustainable.
I think the idea is that China would be the End Importeur. Not sure about the latest, but Japan Korea and ASEAN all have had surplus with China....so overall a balanced pattern at least. That Goal would need to go hand in hand with internationalising the currency and securing steady flow of inbound DIRECT investments. Both aspects represent huge leverage for the international community to shape chinese policies.
Sure, but that's only because the US and EU have bought up all of China's surplus... given that the US at least (and likely the rest of Europe outside of German industry) will certainly be reducing the deficit with China, where is the rest of China's surplus going to go?
Am not sure i follow. I doubt Asean Japan Korea buy the same stuff as the EU for example. Overall, isnt the policy direction now one of stimulating internal development and moving away from export dependency? That s a relief for the rest of the players.
The've been sailing in the "policy direction" of increasing domestic demand/consumption since... at least 2007 (Wen Jiabao's famous speech), and their own internal economists have been talking about it since around 2000 (Wu Jianlian, Mr. Market from the past generation). Yet the policy has utterly failed, they've only been able to increase "dual circulation" (rebalancing by another name, increasing consumption, increasing domestic demand, whichever term on prefers I list them so the non-macro people can understand they're the same) by about 0.5% a year over the past decade (consumption has moved from 33% to 38% of GDP over the past decade). That's far too slow for China to suddenly reverse a massive trade surplus/change the entire structure of its economy and become a net importer from the RCEP nations/the globe.
The reason they have failed is because "dual circulation" is short-hand for "take a ton of money and power away from politically powerful CCP families, both in Beijing and local governments, and just give it to average Chinese people." Specifically which families and SOE's and industries is irrelevant because the macro numbers tell the story--they've been unable to do it.
As for import composition, it doesn't really matter since the overall surpluses/deficits tell the story, although as a matter of fact Japan imports a ton of machinery and manufactured goods from China (I'd have to look up the exact number but I'm not wrong), which is what the EU overwhelmingly imports from China (like 97% of EU imports from China or so). Everyone imports a lot of manufactured goods from China. While it is the fact of the matter, it's not really pertinent though, because even in a world where Japan imported 0 of the same products, once the EU and US reduce the deficit with China via political means, China either a) just shuts down all that production and enters recession, b) transfers the excess surplus to other nations with whom it has entered into FTA's (RCEP, for instance), or c) transfers all the party wealth from SOE's to the general population so it can consume all of it itself. A) they are unlikely to accept, and they've been trying C) for 13 years, so that leaves B, but with Australia the only nation in the RCEP running a deficit, it will be difficult for China to unload economic surpluses on a bunch of nations who are trying to do the exact same thing to China. Hence the difficulty of the RCEP.
I should add, I'm analyzing this from China's macro perspective of trying to have a thriving economy, the RCEP will not live up to their hopes because it won't solve China's fundamental problem (lack of domestic demand), hence it is bound to become politically difficult for all nations, either China if it turns out it has a trade deficit within RCEP if for instance they aren't importing any of the stuff the EU and US rejected, so China is just not exporting to the EU/US as much but continues importing from the RCEP in which case it has exacerbated not helped China's fundamental issue of overproduction/underconsumption at home, or China somehow succeeds in forcing deficits on the RCEP nations (for instance, through its patented combo of market protection at home and export subsidy abroad) in which case the RCEP nations will find it politically unpopular as their unemployment increases at home and they run deficits. Again, it all points back to China's lack of domestic demand and the failure of "dual circulation," forgive me "rebalancing" since at least 2007.
Again, not a call for collapse, but an analysis of the consequences of China's ultra-low consumption as a % of GDP. It just doesn't consume enough to make it an attractive trade partner at this point.
It s the size of the pie that matters to businesses and trade partners though. During that period of stagnant percentages, trade volumes and values have grown enormously. That keeps everyone interested. Given how everything grew, that the gdp composition actually improved a bit was a surprise. A matter of having to run very hard to keep still. But until they actually solve the composition problem, they ll always be at risk and at odds with trading partners. That s for sure.
When you say "it's the size of the pie that matters to businesses and trader partners" though (meaning even if consumption is a low % of GDP in China, absolute consumption is still immense given the size of the economy), to businesses focused on exports, sure, but to "trade partners" as a whole, I think that conflicts with your last two sentences. The whole point is even if the China market is big, if on the whole they are looking to sell you more than they are looking to buy from you (which by definition is true because they run a massive surplus with the world), there will be trade friction. With the US/EU now, and with RECP countries later if the US/EU continue decoupling and China is forced to try and shift its surplus onto other, smaller economies.
A small Pointer. Narrow focus on surplus is misleading. It s the ownership of that surplus that also Matters. A huge chunck of that surplus is OWNED by the Trade Partners. Few are fools in commerce. Do not imagine millions of put upon businesses looking to be rescued... in many Ways that s why the Marco top down Problem is so difficult to define and fix. We all know there is a problem. But the handle to fix that Problem is not Trade surplus or deficitis per se.
Hi Ken, Foreign ownership of particular businesses operating in China is irrelevant because they are all factored into the final GDP/trade balance numbers. That is why looking at the whole is appropriate rather than any specific sector or business ownership.
The real issue is China's extraordinarily low consumption share of GDP. The surplus is a byproduct of that. To the extent that we focus solely on the surplus, and not on the underlying cause (consumption is too low in China), I would agree that a narrow focus on the surplus is incorrect. However, as long as we understand that the surplus is caused by low consumption, it is fine to want the Chinese surplus as a whole (not just with the USA) to go down, because that would mean Chinese consumption was rising, thus rebalancing global demand.