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Thresholds Of Prc Military Power

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#61 Yama

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Posted 03 August 2018 - 0206 AM

If you believe those numbers, sure.

What do you think is wrong with these ?


Well, US debt is too small, for starters...
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#62 Josh

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Posted 03 August 2018 - 0733 AM

They point to the exact opposite conclusion of what is going to happen than what Josh hopes, is the problem with those numbers.


I don't tend to believe economic numbers put forth by the CCP. Their defense budget is routinely low balled and their measurements of debt tends to ignore a lot of shadow banking. As to 'what I want', I don't think a massive economic dislocation will be good for anyone and I suspect it would probably lead to a military conflict with the US or a US ally. So it isn't 'what I want'. I just think their current growth is unsustainable, if only because no other asian nation maintained it historically, and also there is small but real chance that they suffer some sort of economic calamity in the next decade.

The private debt might be understated, but there is no real way to cook the books on public debt, nor is there a good reason as it is not high, and there is near zero chance of sovereign default.


My understanding is that there is very little accounting of local banks and how leveraged they are. I'm not insinuated that PBOC will fail or that the country will have an Argentina like default, just possibly a severe recession that cause them to potentially curtail their defense budget. You saw this in Russia when the price of oil crashed a couple years ago.
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#63 KV7

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Posted 03 August 2018 - 0805 AM

 

 

 

They point to the exact opposite conclusion of what is going to happen than what Josh hopes, is the problem with those numbers.


I don't tend to believe economic numbers put forth by the CCP. Their defense budget is routinely low balled and their measurements of debt tends to ignore a lot of shadow banking. As to 'what I want', I don't think a massive economic dislocation will be good for anyone and I suspect it would probably lead to a military conflict with the US or a US ally. So it isn't 'what I want'. I just think their current growth is unsustainable, if only because no other asian nation maintained it historically, and also there is small but real chance that they suffer some sort of economic calamity in the next decade.

 

The private debt might be understated, but there is no real way to cook the books on public debt, nor is there a good reason as it is not high, and there is near zero chance of sovereign default.

 


My understanding is that there is very little accounting of local banks and how leveraged they are. I'm not insinuated that PBOC will fail or that the country will have an Argentina like default, just possibly a severe recession that cause them to potentially curtail their defense budget. You saw this in Russia when the price of oil crashed a couple years ago.

 

Private debt is a separate issue, and there is a chance of it causing an issue, unlike for sovereign debt.

China issues RMB, so it can never run out of RMB, and can cover all liabilities in RMB at will.

Even is a mild recession happens, it will only be via choice, as again the levers are there to prevent one.:

If private lending stalls, then the government banks can maintain lending

If private expenditure stalls, the government can engage in fiscal policy

If private firms fail, the government can order the banks to write down their debts

 . . . 

The only downside of a really big stimulus program or debt write down is a potential spike in inflation (though this is hardly a big worry as inflation is low) which might annoy some savers relying on low return deposits etc. but again if you cannot keep some middle class self-funded retirees in line- well that also counts as monumental stupidity.

Workers might also panic over inflation but workers should prefer full employment to stable prices and mass unemployment, but again . .

If private firms won't raise wages enough to keep up with inflation, the government can order (vie the existing central wage norm arrangements) wage rises.

We may well see a mild recession, but if we do it will be:

because the leadership want to let a fair few firms go bust in order to discourage rampant borrowing and for some idiotic reason decided not to sensibly offset this with stimulus
 

because they listened to some neoliberal bullshit about how stimulus is bad and building railways is 'miss-allocating resources' etc. and failed to therefore respond to some external or internal shock

because they idiotically decided to start operating their SO banks like private banks, and therefore force them to bankrupt firms by insisting on harsher terms etc.


because some other stupid reason

 

The important thing to remember is that China is not Russia and not the USSR - the underlying supply side fundamentals are very strong, so if the leadership wants to see growth continue, all they need to do is keep investment high (which hardly takes much effort as the savings rate is naturally very high), and keep deploying their existing powerful recession fighting mechanism in order to maintain stability.

China will face a problem of growth slowdown when it approaches the productivity frontier (and some firms and regions are getting close to it) but by then it will be a massive economy - maybe close to 1/3 of world GDP. I think betting on 'China cannot innovate' to motivate the case for a very sharp or premature slowdown is a pretty bad idea too. 




 


Edited by KV7, 03 August 2018 - 2343 PM.

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#64 Nobu

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Posted 03 August 2018 - 1741 PM

It was not that long ago that people did not have to wonder what kind of intervention it would take to slow down the economic growth activity of China and Chinese because there was no economic growth activity of China and Chinese by any relative measure. A PLAN "fleet" operating with impunity anywhere in the world was unthinkable in the 80s, nevermind the insanity of Chinese carrier task forces or the existence of a consumerist middle class larger than the entire Japanese population.

 

This level of growth, however accurately numerated or not, is thankfully not sustainable, lest the Chinese be testing warp drive by the time Japan and Japanese are able to actually look the world in the eye and call a capital ship a capital ship.

 

The conversation itself is illustrative of an achievement of some kind, unfortunately.


Edited by Nobu, 03 August 2018 - 1755 PM.

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#65 Nobu

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Posted 03 August 2018 - 1749 PM

The worry is that if China and Chinese have been overstating the numbers, and they very well may have been, this implies the existence of more untapped room for economic expansion before the reaching of economic stationarity, not less.


Edited by Nobu, 03 August 2018 - 1757 PM.

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#66 Josh

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Posted 04 August 2018 - 0049 AM

While I generally disagree with Nobu on almost everything, I will say current Chinese growth is unquestionably unsustainable. The question is what happens next. Even if there isn't a huge debt problem, which I personally thing there is, they have some troubled water to navigate. This isn't to say that some downfall will happen, this is only to note that continued economic growth at the levels previously considered acceptable is unlikely and also their current numbers are not trustworthy. They are trying to make the jump to a domestic consumer economy. There are a lot of economic and political reasons why that jump will be hard for them and despite their wealth, on the books, I do not consider it a forgone conclusion. Your mileage may differ.
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#67 RETAC21

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Posted 04 August 2018 - 0257 AM

While I generally disagree with Nobu on almost everything, I will say current Chinese growth is unquestionably unsustainable. The question is what happens next. Even if there isn't a huge debt problem, which I personally thing there is, they have some troubled water to navigate. This isn't to say that some downfall will happen, this is only to note that continued economic growth at the levels previously considered acceptable is unlikely and also their current numbers are not trustworthy. They are trying to make the jump to a domestic consumer economy. There are a lot of economic and political reasons why that jump will be hard for them and despite their wealth, on the books, I do not consider it a forgone conclusion. Your mileage may differ.

 

It's sustainable only as far as the rest of the World is willing to make China the factory of the World. Looking at a very specific sector, shipbuilding, you can see how the US and European yards were progressively priced out by the Japanese and the Japanese by the Koreans and these, by the Chinese. At some point it will reach a plateau (if it's not reached already) in which the CCP will try to keep on going by fomenting internal demand. At the end of the day, the strength of an economy is its consumer base and China should be well positioned. What was atypical was its position in the 60-80s due to Mao's madness.

 

Militarily they can go on with the current build-up for some time, but at some point they won't need more destroyers and corvettes and some years down the road obsolescence will rear its head and if they have disbanded their production base they would be in a bad spot. See the Royal Navy of the 30s.


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#68 Colin

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Posted 04 August 2018 - 1120 AM

China has massive internal issues to deal with, terrible pollution, large State industries producing little and sucking up money. A lot of money spent on projects with little return. A growing standard of living and a mobility of capital and people not ever seen before. A large disparity between the haves and the have nots. Not to mention about 25 million surplus males. A potentiel for a large population shift as a die off of the population caused by a gender imbalance, which will ease some problems for government and create new ones as certain areas become unpopulated. I think their colonial adventures is going to expose them to all the problems other colonial powers had to deal with post WWII.   


Edited by Colin, 04 August 2018 - 1121 AM.

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#69 Nobu

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Posted 04 August 2018 - 1240 PM

Being able to operate with impunity within the first island chain impresses me, in spite of myself.

 

What worries me is the very distinct possibility that China and Chinese may not care about overextending themselves beyond it.


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