China's real economy is better than ever

[Martian2]

China's real economy is better than ever.

1. China's economy is growing due to better technology, which enhances productivity. An objective measure is China's annual USPTO patents. China has surpassed Canada, Britain, France, and Italy. This means China is a major industrialized country in terms of technology.

2. Lower commodity prices give the false appearance that Chinese exports are falling. China is a major exporter of petrochemicals and specialty chemicals. When the price of oil falls by half, China has to slash the price of its chemical exports.

The situation is the same for iron ore, which has fallen by 50%. Chinese steel export prices have fallen commensurately. In reality, the volume of Chinese steel and chemical exports hasn't really fallen.

The best measure of China's economic health is its merchandise trade surplus. China is on-track to hit a whopping $600 billion in its merchandise trade surplus for this year. In absolute terms, China Inc. is more profitable than ever.

3. The fall in China's growth rate is a statistical effect and has nothing to do with China's real economy. In absolute terms, China's economy is growing faster than ever. Last year, China's nominal GDP was $10.4 trillion. A 7.5% economic growth rate means $750 billion growth in the economy.

In 2009, China's economy was $5.1 trillion. It grew at 10%. This meant the economic growth was only $510 billion.

In absolute terms, China's economy is growing faster than ever. Due to the "base effect" of statistics, China's economic growth is incorrectly perceived to be slowing down.

In conclusion, China's economy is much stronger today due to ever-increasing Chinese annual USPTO patents (e.g. better technology), record merchandise trade surplus (e.g. record profitability), and unprecedented absolute economic growth.

 

[Martian2]

Source (The Wall Street Journal. July 8, 2015): China Exports Slide, Imports Tumble - WSJ

 

[空气蛹scz1998]

when My politics teacher talk about Chinese stock market in class two years ago (when i was a student of ten grades),he told us chinese stock market is different from foreign.becasuse our stock market can not relect real situation of economy...
it is seems that a lot of foreigners do not know this...
btw...i guess these people who predict china will collapse might feel unhappy again...

 

[ahtan_china]

when My politics teacher talk about Chinese stock market in class two years ago (when i was a student of ten grades),he told us chinese stock market is different from foreign.becasuse our stock market can not relect real situation of economy...
it is seems that a lot of foreigners do not know this...
btw...i guess these people who predict china will collapse might feel unhappy again...

You are right. It is for financing in China stock market. But it's investment market for foreign stock market. It is real different.

 

[j20blackdragon]

Let me offer three reasons why the so-called stock market crash has little to no effect on the real economy:

1. Most of China’s listed companies are majority state-owned. SOEs don't rely on the primary markets to raise capital. They're funded by the state. Similarly, those figures about trillions of dollars being wiped off Chinese wealth are in themselves a myth. Most of those losses are paper losses for the Chinese government, not losses incurred by private households.

2. Only about 6 percent of Chinese households actually own stocks and shares. That figure is 55 percent in the US. Big difference.

3. 39 percent of individual wealth in China is in real estate, while bank deposits account for 46 precent.

 

[steelseries779]

1. Most of China’s listed companies are majority state-owned. SOEs don't rely on the primary markets to raise capital. They're funded by the state.

This is funny, dude, since those SOEs are funded by government, then why do they even need to go public to raise capital?

 

[Bussard Ramjet]

Source (The Wall Street Journal. July 8, 2015): China Exports Slide, Imports Tumble - WSJ

Yes, but China is still loosing capital. Capital is flowing out of the country in droves, and hence the net current account is in negative.

China is loosing cash.

 

[Martian2]

Yes, but China is still loosing capital. Capital is flowing out of the country in droves, and hence the net current account is in negative.

China is loosing cash.

I think you're wrong.

China's forex reserves are currently $3.7 trillion. It was $3.9 trillion.

Where did the $200 billion go?

$100 billion to AIIB.
$50 billion to BRIC bank.
Rest went to other initiatives.

Thus, China's forex reserves were moved to different accounts. There has been no serious outflow of cash.

Also, it is easy for China to increase its cash position. China can raise its interest rate to attract capital. Alternatively, China can restrict foreign currency transactions (e.g. how many dollars you can move out of the country). In any case, China does not have a cash flow problem. China had stated that it is official policy to stop accumulating forex reserves.

 

[j20blackdragon]

This is funny, dude, since those SOEs are funded by government, then why do they even need to go public to raise capital?

Because the Chinese public has a massive savings rate and they would like to tap into it. But the bottom line is that a majority SOE is primarily funded by the Chinese government.

 

[steelseries779]

I think you're wrong.

China's forex reserves are currently $3.7 trillion. It was $3.9 trillion.

Where did the $200 billion go?

$100 billion to AIIB.
$50 billion to BRIC bank.
Rest went to other initiatives.

Thus, China's forex reserves were moved to different accounts. There has been no serious outflow of cash.

Also, it is easy for China to increase its cash position. China can raise its interest rate to attract capital. Alternatively, China can restrict foreign currency transactions (e.g. how many dollars you can move out of the country). In any case, China does not have a cash flow problem. China had stated that it is official policy to stop accumulating forex reserves.

No.......

The fx reserves are declining because CNY is devaluating, so China PBOC has to sell out USD and simultaneously buy in CNY to stop CNY from further devaluation, that's why the FX reserves is declining. The first and primary function of FX reserves is intervention.

 

[Martian2]

No.......

The fx reserves are declining because CNY is devaluating, so China PBOC has to sell out USD and simultaneously buy in CNY to stop CNY from further devaluation, that's why the FX reserves is declining.

Actually, I just remembered a large portion of China's forex is in Euros.

The Euro has fallen dramatically against the US dollar from $1=0.75 Euros to $1=0.89 Euros.

A portion of China's fall in forex reserves is due to the fall in the Euro and the price of gold.

Thus, it is simple currency fluctuation between the dollar and the Euro.

 

[steelseries779]

Actually, I just remembered a large portion of China's forex is in Euros.

The Euro has fallen dramatically against the US dollar from $1=0.75 Euros to $1=0.89 Euros.

A portion of China's fall in forex reserves is due to the fall in the Euro and the price of gold.

China is selling Euros too, EU economy is worsening plus the Greece debt default is not actually over.

China FX reserves include 2/3 USD or U.S. Treasury bonds, 1/5 Euros, 1/20 GBP, 1/20 JPY.

 

[Martian2]

China is selling Euros too, EU economy is worsening plus the Greece debt default is not actually over.

China FX reserves include 2/3 USD or U.S. Treasury bonds, 1/5 Euros, 1/20 GBP, 1/20 JPY.

I'm pretty sure that your earlier claim of currency intervention is wrong.

China does not have a fully convertible currency. You cannot demand to exchange Yuans for Dollars in unlimited quantities.

 

[Bussard Ramjet]

I think you're wrong.

China's forex reserves are currently $3.7 trillion. It was $3.9 trillion.

Where did the $200 billion go?

$100 billion to AIIB.
$50 billion to BRIC bank.
Rest went to other initiatives.

Thus, China's forex reserves were moved to different accounts. There has been no serious outflow of cash.

Also, it is easy for China to increase its cash position. China can raise its interest rate to attract capital. Alternatively, China can restrict foreign currency transactions (e.g. how many dollars you can move out of the country). In any case, China does not have a cash flow problem. China had stated that it is official policy to stop accumulating forex reserves.

Forex Reserves by their definition include your money in International Banks.

(Also, right now 100 billion is the total finance of AIIB, of which China contributes something like 40 billion dollars or so)

 

[Martian2]

Forex Reserves by their definition include your money in International Banks.

(Also, right now 100 billion is the total finance of AIIB, of which China contributes something like 40 billion dollars or so)

The Wall Street Journal reported that China loaned $70 billion to Russia.

Bloomberg News reported that China loaned $10 billion to Brazil.

There's your difference.