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India vs China - Is the Chinese economy in worse shape?


gorah_pindu

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You are probably a lot more familiar with economics than I am - since I was never interested as a kid (ex commie)' date=' and didnt take any courses in economics or business - id be interested to hear your opinion on The Writing on the Wall (or just the review, if you havent read it).[/quote'] Will surely try if i can get a review of this book.. I am tempted to point out here that off late, its common practice for authors to proclaim doomsday scenarios of the world's economic future just to heighten public interest in their books. Remember how much hype was created when Goldman Sachs came out with this study showing how the BRICS ( Brazil , Russia , India, China , S.Africa ) are going to dominate the economic landscape in the 2nd half of this century. China's growth is good for the world economy. As much as they are constantly referred to as the manufacturing hub of the world , their people also consume tremendous amounts, keeping most of the world commodities going. For example , but for chines demand , the steel industry of world would have totally collapsed, resulting in millions of job losses..
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I dunno about soft landing - their party is even more reluctant to reform where it is needed than the CPI.
Economic reforms need not neccecarily be related to political ideology. Infact , it is political compulsion of keeping a billion people wealthy and happy that is driving China's ecomomic reforms. But for the so much wealth that is created and owned by chinese people , the focus will then shift to political reforms and greater calls for democracy. And you would not believe how capitalist chinese economic systems is. Unlike India, they allow 100% foreign ownership in every sector, paving way for billions of dollars in FDI and millions of jobs. And talking about the communists in India , all they are interested is in vote-bank politics. Their central leadership blocks every diversification plan of the UPA govt, while its Bengal CM announces that call center strikes are illegal. Now , that is what you call double standards !
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Here is a sample of one of the points he makes, which I do not believe is an exageration:

According to one influential estimate, even the tiniest upward movement in interest rates or the slightest decline in sales would mean that 40%-60% of their enormous bank debts would not be serviced, rendering the entire Chinese banking system bankrupt.
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Another poignant example:

China now needs $5.4 of extra investment to produce an extra $1 of output, a proportion vastly higher than that in economies such as Britain or the US. But 20 years ago, China needed just $4 to deliver the same result. In other words, an already gravely inefficient economy has become even more inefficient.
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Will Hutton basically points out that while some companies in 'non-strategic-sectors' (i.e. industry with no value) have majority foreign control, China retains control of most firms via proxy shareholders and manditory communist board members - i.e. no company is free of party direction in China even now, and those that arnt usually get effectively re-nationalised if they ever become sucessfull - and the party blows that sucess ordering them to buy failing Chinese companies, etc.

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Will Hutton basically points out that while some companies in 'non-strategic-sectors' (i.e. industry with no value) have majority foreign control' date=' China retains control of most firms via proxy shareholders and manditory communist board members - i.e. no company is free of party direction in China even now, and those that arnt usually get effectively re-nationalised if they ever become sucessfull - and the party blows that sucess ordering them to buy failing Chinese companies, etc.[/quote'] Yes.. that story is true , especially the proxy share-holder part. Though i dont know how you can just "nationalise" companies which dont follow the communist line. It wont go too well with the western investors. As a sidenote about all the numbers , Is it known to all that the US borrows one billion dollars A DAY to keep up its spending ?
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Yes.. that story is true , especially the proxy share-holder part. Though i dont know how you can just "nationalise" companies which dont follow the communist line. It wont go too well with the western investors. As a sidenote about all the numbers , Is it known to all that the US borrows one billion dollars A DAY to keep up its spending ?
I didnt know that - but then while some people hold the USA as the epitome of a sucessfull economy due to its gross size, I hold countries like Sweden and the Netherlands up as model societies - thus I have never really payed much attention to them beyond their massive debts, etc. @Nationalisation - basically, they are still a one-party state with the power to jail anyone they want - if they wanted to exert direct control they quite easily could - even just by assuming direct control through proxy shareholders they would be effectively nationalising a company - and the politburo is suprisingly stuck in old Lenninist views, considering the alternate image that the west has.
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I didnt know that - but then while some people hold the USA as the epitome of a sucessfull economy due to its gross size' date=' I hold countries like Sweden and the Netherlands up as model societies - thus I have never really payed much attention to them beyond their massive debts, etc. [/quote'] Actually, it is Finland that is considered the MOST model economy of all. They seem to have struck the right balance between free market economics and having a sustainable social security plan for its people.
@Nationalisation - basically' date=' they are still a one-party state with the power to jail anyone they want - if they wanted to exert direct control they quite easily could - even just by assuming direct control through proxy shareholders they would be effectively nationalising a company - and the politburo is suprisingly stuck in old Lenninist views, considering the alternate image that the west has.[/quote'] Wow, that is interesting. However , most of the multinationals in China ( like say GE China) are still privately owned, with most of the major decsions taken by the HQ.
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Yeah - you ought to read some of the statistics in this book - its unbelievable how wasteful their system is.
i dont know of this material first hand, so i must include a disclaimer but if you examine certain chinese systems and infrastructures, they are very brittle. for instance, their health sector is in complete disarray. infact, this entire ruse of chinese "holistic" medicine is nothing but a farcical propaganda spread by the country's leaders who realized that while under chairman mao, the cost of healthcare was about 20% of the average annual income, that cost has now risen to about 110% (my sources for this is an australian analyst who lives in china and advises companies attempting to make an investment in china) of the annual income. as a result, few can afford proper health care. hence, to cover up the mess thereby created, the chinese officials began to spread propaganda about how effective and efficient chinese herbal medicines are, and such was their success that they managed to hook half their population on this cheaper, junk science medicine regime while reserving top class health care for the ultra rich. and get this, and i kid you not, the chinese dont think global warming is occuring, dont know what a democracy is, their education system is so designed to eliminate or reduce creative thinking (thereby avoiding any mass demands for self determination which is often what free thinking individuals demand) and according to a government (chinese) issued statistic, over 60% of all post graduate and doctoral students engage in plagiarism. independent sources claim that number is as high as 90%!!!
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Yeh Finland is another great state - I think they were recently ranked number 1 in an index on technological prowess - probably due to high penetration of broadband' date=' computer litracy, etc.[/quote'] not quite, but yeah they are in the top 5. the best was norway.
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and get this, and i kid you not, the chinese dont think global warming is occuring
I am not too sure how true that is ! The chinese are engaged in a massive push into green/clean technologies. Infact , BBC ran a special news report saying how China could dominate the future of green technology business, the future bread-winner industry of the world. And yes , Norway is the model country for all ! Not Finalnd. I got the names confused. Their social model is sustainable, yet effective. I think UK too has got it pretty right in finding the balance between capitalism and the welfare state. France , on the other hand , has totally botched up in this regard.
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The per-capita GDP is probably the most flawed wealth measuring tool used. It is calculated based on the total earnings of the population averaged over the total number of people.Taking a community of 500 as an example as an example , if 500 people earned exactly $500 per month , the ave per capita income per month is obc $500. But imagine if a person earning a million $ moves into the community.Now , the PCI of the community is (1 million + 25,000)/501 = $2045 !, which is ridiclous coz 99.99 % of the population actually earn just a quarter of that. A better measuring too would be to find out the purchasing power of the bottom 5 % of any society. Also,They say an average american earns 10 times more than an average Indian earns. So an american is assumed to 10 times wealthier than an Indian, which again is wrong since an Indian's cost of living is much lesser than that of an american. I.E , what $300 can buy in america , the same can be bought for $100 in India. So there should be scaling tool to compensate for these differences.

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Try the PPP (Purchasing Power Parity) tables, Sriram. They factor in the cost of living. And large outlying values may skew the mean for small samples, but that argument is hardly applicable for populations measured in millions.

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Try the PPP (Purchasing Power Parity) tables, Sriram. They factor in the cost of living. And large outlying values may skew the mean for small samples, but that argument is hardly applicable for populations measured in millions.
Yes, the PPP table makes more sense. Agree that huge samples tend to average out the effects of dis-proportionate values . but i still maintain the purchasing power/wealth of the bottom 5% of the popln is what gives the real idea of the society. And do they factor in political stability/crime rate/social fabric when they calculate HDI ? I dont think so..
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I am no economist but the biggest flaw i find in all these 'PPP/ GDP per capita/GNP ' etc. measurements is that it takes no consideration of how the wealth is spread in the society. 10 millionaires in a slum of 100 people in the third world is still a per-capita of 100,000. That makes it 'look' like a well off society but is utterly useless info without finding out how the wealth is distributed. Canada has a lower per capita income than US....but having been to the US, i know for a fact that middle class/lower middle class families are much better off here than in the states. There it costs an arm & a leg to get educated. Here, the government will finance your education. Plus our basic amenities are in much better shape- having been to Philly, their public transit is the most horrible anywhere outside of india. Hell, even in India, you can find a bus to take you somewhere in 5 minutes..sure its gonna be congested and nasty inside but whatever..in Philly..except in the downtown core, the buses run like once an hour! Same case with scandinavian countries- their wealth distribution is amazing. On the other hand, in middle eastern 'oil rich' nations, you have like 50% of the native population leading bedouin traditional life and the rest 50% controlling like 99.99% of the GDP. I have no idea what the economic measurement for 'distribution of wealth' in a society is, but without that benchmark, any discussion is meaningless. We dont wanna 'raise our PPP' by making a dozen billionaires and 100s of millionaires...we want to get up there with the average man having an even shot at life too.

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