Comments on Next Big Future: Updated China economic projection

1) Other than in the very highest tech items, I th...

2008-06-21T13:19:00.000-07:00

1) Other than in the very highest tech items, I think China's mobilization potential is greater than the USA's right now.
(in WW2 Churchill wrote of mentioning the combined steel production rates of the USA and UK vs Japan as a sign of strength. I think the USA produced about 80 million tons of steel then, and Germany 30 million, and Japan perhaps 15. Now it is China whose production equals that of the next 2 or 3 steel makers combined.
If China really wanted to and didn't mind the disruption to markets (no and yes respectively to those assumptions, at least for now, I think) she could built a D-Day invasion fleet in remarkably little time today vs. Taiwan.
(The Taiwanese of course might come up with clever countermoves that must give pause...)
2)The Chinese economy --as Brian has noted-- displays a flexibility I saw in my readings that the US economy used to and does not now. Rapid decision making and rapid execution, change of course capability, and very flexible workforce that can literally gear up for a new product in weeks, not months. We have lost that (some companies excepted) Humans are the most flexible machines, and China's production system uses them the way we used to.
3)see http://www.agoravox.com/article.php3?id_article=5006
Key part is:
"Chinese manufacturing will be facing in the next decade or so much the same problem that late 19th century American corporate farms faced. Its success thus far has been a result of having access to a large, disciplined and relatively inexpensive labor force and access to international capital to invest in large, expensive manufacturing production lines. That is about to change in a rather dramatic fashion.

When you look at a typical “high tech” consumer item coming out of a Chinese factory dispassionately you quickly discover that it is mostly air and enclosure. Take a laser jet printer, for example. Over 90 percent of it is plastic and air. The actual “high tech” parts of it will fit nicely in a small, zip-lock bag. The cost of those “high tech” parts will typically be less than 20-25% of the cost of the printer. What you are buying is mostly volume and appearance.

The Chinese economic miracle would have been impossible without the transportation revolution made possible by containerized cargo carriers. This technology made it cost-effective to move such low-density cargo as consumer appliances.

...RepRappers are currently in an advanced stage of working the bugs out of their first open source prototyping machine in New Zealand. Their machine is on target for a build price of about US$400 and will be capable of making objects for about US$0.02/cubic centimeter...
Serious trouble for China is on the way, though, from a completely unexpected direction created by hacker technologists who had no intention of causing it.
..."
Lots more there but don't want to quote too much. What Forrest Higgs (himself of the RepRap project) is basically saying is that the Chinese economic miracle (the export driven part anyway) may be in danger (especially if an economic collapse happens in the USA) from a suddenly emerging RepRap economy driven by people becoming much more self sufficient.
4) I think China's economy has reached the takeoff point where it can sustain the transition even with an export crash. This relates to basic infrastructure and steel, concrete etc. If economic apocalypse looms (USA depression, etc) , however, other parts of the Chinese economy may not be as easy to grow. Only fields in which there is say 90% or more domestic Chinese content (like the USA used to have, near autarky in its own industrial base.
In such circumstance however, we may see desperate improvisation in terms of import limitation ie power plants with lower efficiency parts that are substituted as a way to complete projects in mid-build, etc.

Joseph Friedlander.

I think a great deal of China's growth stems from ...

2008-06-20T23:14:00.000-07:00

I think a great deal of China's growth stems from the trade imbalance. If the US falls into deep recession or maintains a highly devalued currency then Chinas growth at the least will slow, if not falter. How much domestic demand can it support? I will allow for other worldwide demand though.

The other issue, as can be seen happening now, is with monumental growth will come monumental inflation, which will act as a brake. The Peoples party can only subsidize petrol for so long before it becomes untenable. This one is inescapable through demand from other countries.

If one imagines vast new technologies bringing an end to scarcity, then the framework of these economic ideas ceases to apply. ANY country would experience a relative per capita growth at the same rate with say nano fabs or bio refinement.

I presume your gdp forecast is Real Gdp excluding ...

2008-06-09T05:27:00.000-07:00

I presume your gdp forecast is Real Gdp excluding inflation?All governments calculate inflation into their annual gdp growth.China's gdp by the end of 2008 should hit 29 trillion yuan.
By 2010 China's gdp should be aroundabout 36.5 trillion yuan.
As the yuan will see rapid appreciation over the next two decades inflation will actually help to speed up China's fast growth.

bw, Lots of questions here.

> However, t...

2008-06-04T23:18:00.000-07:00

bw, Lots of questions here.

> However, the increased legal immigration limit issue seems like a political non-starter.

May well be true. But even conservatives typically say, "We're not against immigration, just illegal immigration". Wouldn't fear of losing our lead in the world help the politics? And aren't Democrats in favor of immigrants?

> and up to 1.5 million/year from Mexico and South America.

Why Mexixo and S.A.? Isn't the problem with how we've handled immigration in the past is that we've allowed it to be illegal and largely from just one country?

You might be looking at a tweak of today's reality. I'm talking about getting away entirely from our illegal immigration experience and shifting that entire amount (and more) to a "reasonably handled" method such as #'s proportionate to the size of the sending country so that they don't congregate into national enclaves but easily assimilate.

Part of the growth rate is from the China's urbani...

2008-05-31T00:28:00.000-07:00

Part of the growth rate is from the China's urbanization

this site has noted that the rate of urbanization has been consistently underestimated and understated in figures

In 2004, it was estimated that China would be 58 to 60 percent urban 2020, and the urban population would hit 800 to 900 million. The urbanization rate was 37.7 percent in 2002. More recent figures suggest urbanization is at 42% in 2004, so urbanization is happening faster. A more recent university study indicates that China will be 50% urban in 2007. At a total population of 1.33 billion that means 665 million urban dwellers. 36-40 million people have been moving to the cities every year since 2002.

By 2015, at the rate of 35 million people per year moving to the cities, China would have 900 to 950 million in the cities and towns and 65-68% urbanization.

I believe the faster than expected rate of urbanization is also driving the growth of China's economy at faster than expected rate.

===
People in the cities make three times more than the rural folk. So as 2% of the people move over a few years they move up to the higher income level. +4%/year until 80-90% urbanization or so. So 15-20 years of +4% growth

China's urban population was 572 million in 2005. ...

2008-05-31T00:13:00.000-07:00

China's urban population was 572 million in 2005. And is probably 650+million now

http://www.mckinsey.com/mgi/publications/china_urban_summary_of_findings.asp

Things are obviously changing/improving, but as of...

2008-05-30T23:25:00.000-07:00

Things are obviously changing/improving, but as of just a couple years ago, most of China's population were still just peasant farmers.

So the majority of economic output and productivity is coming solely from the 350 million coastal people in the east, while the 800 million other people in the interior are still growing their own crops and living without electricity. These demographics have existed in China for thousands of years.

It's obviously one of many inequalities that needs to be addressed, just like it always had to be throughout China's history.

The PRC has enormous difficulties in front of it, ...

2008-05-29T18:46:00.000-07:00

The PRC has enormous difficulties in front of it, largely stemming from the fact that so much of what is being built in the PRC is a sham.

The state owned enterprises (SOE) still soak up huge amounts of labor and financial surplus and the banking sector is unreal beyond belief. At a certain point it's all going to come crashing down. The only really interesting question is whether the PRC's ruling party can gain enough political legitimacy to survive the resulting recession.

The chinese are not gods. They are subject to hubris, flights of fancy, and really bad business ideas just like the rest of us. These are the kinds of things that get corrected in recessions. No recessions means that the foolishness is silently building up in the PRC economy and the longer it's held off, the worse the correction must be.

Everybody who has any sense trembles at the bang that the PRC will emit when it finally succumbs to the business cycle and hopes that it is merely an economic one. Any projection of PRC dominance prior to their surviving a recession is just nonsense.

I believe that the USA could adopt policies would ...

2008-05-27T14:21:00.000-07:00

I believe that the USA could adopt policies would increase its GDP growth rate.

However, the increased legal immigration limit issue seems like a political non-starter. The extreme of no-immigration and no-population growth or population decline can be seen in countries like Japan and some european countries. I think that reasonably handled that it would increase overall economy/GDP. A more open immigration policy could add 200,000-400,000 people per year via a freer H1B program, and up to 1.5 million/year from Mexico and South America. Eventually it could add 1-2% to GDP as those people were integrated into the economy.

There is a lot of debate about the policies that would increase growth.

http://econ161.berkeley.edu/Econ_Articles/hoover/growth_delong_hoover.html

some argue for the "fair tax"
http://en.wikipedia.org/wiki/FairTax#Economic

http://en.wikipedia.org/wiki/Predicted_effects_of_the_FairTax#Promotion_of_economic_growth

They believe it could boost GDP by 1% per year.

Better and more effective technology bets/development could also add to growth. Potentially this could be the biggest gains. The technologies that are promoted on the nextbigfuture.com site are the ones that are winners. (various fission energy possibilities, iec fusion, AI, biotech, nanotech etc...)

Could the US reasonably keep ahead of China's GDP ...

2008-05-26T16:18:00.000-07:00

Could the US reasonably keep ahead of China's GDP through greatly increasing legal immigration? I am thinking about making some arrangement where people can immigrate from a variety of countries. They have to know English. They can't just move anywhere but have to live in rural America for 10 years so as to prevent traffic congestion. They would have already have been educated in a trade in their country and ideally their children would be between 10 and 22 years old (i.e. we don't have to invest so much into them). Their training would represent a cross-section of the occupations in the US so they they would create jobs for each others and not produce an unneeded glut in any particular job.

I'm thinking that a whole lot of young educated people facing little opportunity in developing countries would gladly accept a US green card and live in the rural US for 10 years.

I'm not comfortable with China passing our GDP because that means that they can pass our military production capability. If they:
- were not semi-totalitarian,
- didn't sell so many arms to bad countries,
- cut economic deals with so many bad countries,
- were kind instead of threatening to Taiwan,
- weren't builing up their military
then I wouldn't mind so much their passing us economically. But they are doing all of the above and I think that for the welfare of the world it would be good for us to grow our economy by growing our population.

Besides, I'd like to be able to retire at 65 and get Social Security. But there needs to be a lot of young'uns to pay for that!

John Hunt

Wesley,

the difference between China and Ja...

2008-05-25T09:07:00.000-07:00

Wesley,

the difference between China and Japan is that china only has to pass 25% of the US per capita GDP while Japan would have to pass 250% of US per capita GDP.

Why would the US maintain 4 times the productivity of each chinese person over the really long term ?

Considering the momentum that China has now and the fact that everyone agrees that China's currency is undervalued (20-40%) then China's economy is already bigger than Japan's with a "fair" exchange rate.

So the momentum just has to be sustained a few more years for the economic pass to occur. This is also a return to the condition of China having the worlds largest economy which existed for thousands of years prior to 1800.

Yeah, and the funny thing is, even with their econ...

2008-05-24T18:55:00.000-07:00

Yeah, and the funny thing is, even with their economy smaller than ours, they are making more money than they spend, a huge surplus. Whereas America on the other hand is approaching a 1/2 trillion dollar yearly deficit. How many years until America goes bankrupt because it can't make the interest payments? The federal govt is just as irresponsible as the majority of Americans (negative savings rate).

articles like this assume all things will be equal...

2008-05-24T08:50:00.000-07:00

articles like this assume all things will be equal over a long period of time. this will never be the case. china's economy will have to transition from stages 1-2 to 2-3. this will be remarkably painful for the communist. japan is a good yardstick to prove this point. everyone thought they would over take our economy in the 80s.. all things being equal they would. however, as their economy grew, they didn't manage the transition from stage 2 to 3 very well and went into a 15 year recession. their economy shrank.