GDP rises at estimated 7% in 2015, 13 million jobs were added, major economic targets were achieved

[Chinese-Dragon]

@TaiShang @Martian2 @Chinese-Dragon 我们祝你好运兄弟和五月的力量与你同在

Thanks brother.

Hi. Can you explain a bit more on how China is going to make it currency free floating by 2020? Isnt it currently dollar pegged like rates are announced everyday in Shanghai? What is going to change in that regard.

The Yuan hasn't been pegged to the dollar since 2005.

Since then it's been on a "managed float" which means it can float within a certain boundary every day.

Reforms are ongoing as we speak, the Chinese government prefers to do things over a period of time so that exporters have time to adjust.

 

[Martian2]

Hi. Can you explain a bit more on how China is going to make it currency free floating by 2020? Isnt it currently dollar pegged like rates are announced everyday in Shanghai? What is going to change in that regard.

China makes deals with the United States all of the time.

For China's currency to be included in the IMF SDR basket, China gave up the right to control its currency by 2020. The US controls the IMF. If China wants something, it has to give something to the US of equal value. The US is tired of China (who says it is a developing country and the exchange rate is a sovereign right) controlling the Yuan-Dollar exchange rate.

Both sides can live with the deal. China gets to control its currency for four more years. Also, the US Congress will stop hectoring China about controlling the Yuan.
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The deal is China's Yuan becomes an IMF reserve currency in exchange for a free-floating Yuan by 2020.

What Will It Mean If the Yuan Gets Reserve-Currency Status? - Bloomberg Business

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Yuan free float set for 2020 deadline - The Standard

 

[liall]

Thanks brother.



The Yuan hasn't been pegged to the dollar since 2005.

Since then it's been on a "managed float" which means it can float within a certain boundary every day.

Reforms are ongoing as we speak, the Chinese government prefers to do things over a period of time so that exporters have time to adjust.

Yes I know that China allows currency to swing a certain percentage points everyday but then they go on and announce newer rate the next day. Free floating will require a lot of reforms and I want to know more about that

 

[Chinese-Dragon]

Yes I know that China allows currency to swing a certain percentage points everyday but then they go on and announce newer rate the next day. Free floating will require a lot of reforms and I want to know more about that

Martian provided the specifics above.

The thing is that we want the Yuan to be a global reserve currency. Sure the IMF did accept the Yuan as an official reserve currency recently, but we want to go bigger than that. And that's why we are carrying out these currency reforms, with the aim to have a free floating and freely convertible currency. To expand the role and influence of the Yuan in the global economy.

 

[Dungeness]

Nominal GDP is based on three factors.

1. Real economic growth
2. Inflation rate
3. Currency appreciation

China is currently using the archaic SNA 1993 accounting method. Everybody else is using the SNA 2008. There is a 200-page study by an American think-tank that shows China's SNA 2008 nominal GDP would be $1 trillion higher than the current figure.

China had announced its currency will be free-floating by the year 2020. In four more years, China can no longer control its exchange rate. China has a merchandise trade surplus of $600 billion in 2015. With oil dropping to $30 per barrel, China's trade surplus this year should be around $750 billion. By 2020, the pressure would be enormous for a massive appreciation in China's currency due to the accumulated trade surpluses.

In conclusion, China's nominal GDP could overtake the US as early as 2020 (due to a market-based currency valuation and adoption of SNA 2008 accounting method). At the latest, I would say about 2025.


7 years left for Xi Jinping.

Economic performance is based on the metric that you choose.

In terms of absolute economic growth, Xi Jinping is presiding over the largest economic growth in China's history at $1 trillion nominal GDP growth per year.

In percentage terms, Xi Jinping is presiding over the smallest percentage growth due to China's existing massive nominal GDP economic base.

It depends on your frame of reference. Do you care about absolute economic growth? Or do you care about the statistical percentage growth? Xi Jinping has to grow off of a much larger GDP base ($11.4 trillion). Thus, Xi Jinping will be stuck with a lower percentage figure. This large-base statistical effect applies to all future Chinese presidents.

US GDP figures in the "would-be" rent even you are living in your own house. Considering 93% house ownership in China, this alone would be a huge contributor to the total GDP.

 

[Martian2]

Yes I know that China allows currency to swing a certain percentage points everyday but then they go on and announce newer rate the next day. Free floating will require a lot of reforms and I want to know more about that

Prior to July 2005, China had a hard peg of 8.26 Yuans per US Dollar.

After July 2005, China's currency had a soft peg to the US dollar.

China's currency has currently moved to a soft peg to a basket of currencies (which China does not disclose).

By 2020, China's currency is likely to be free-floating.

By 2020, China's nominal per-capita GDP will be $11,000-$12,000. China would have built accumulated about $3 trillion more in surpluses from 2016-2020.

There is no way the IMF included the Chinese Yuan without a price. China had to give the US something valuable. A free-floating Yuan by 2020 is the most likely payment. It also removes a persistent irritant in US-China relations. A managed currency drives the US Congress up the wall. Senators McCain and Schumer are constantly complaining about it.

 

[liall]

Prior to July 2005, China had a hard peg of 8.26 Yuans per US Dollar.

After July 2005, China's currency had a soft peg to the US dollar.

China's currency has currently moved to a soft peg to a basket of currencies (which China does not disclose).

By 2020, China's currency is likely to be free-floating.

By 2020, China's nominal per-capita GDP will be $11,000-$12,000. China would have built accumulated about $3 trillion more in surpluses from 2016-2020.

There is no way the IMF included the Chinese Yuan without a price. China had to give the US something valuable. A free-floating Yuan by 2020 is the most likely payment. It also removes a persistent irritant in US-China relations. A managed currency drives the US Congress up the wall. Senators McCain and Schumer are constantly complaining about it.

Well to be honest China's currency as free float is good for countries like India. Right now if China devalues Yuan then it puts a lot of pressure on our currency as well. And 11,000$ per capita income is a really respectable figure. Will probably match the living standards of Russia by then.

 

[Martian2]

Well to be honest China's currency as free float is good for countries like India. Right now if China devalues Yuan then it puts a lot of pressure on our currency as well. And 11,000$ per capita income is a really respectable figure. Will probably match the living standards of Russia by then.

The IMF says China's nominal per-capita GDP will be higher than Russia or Brazil in 2016. Both the Russian and Brazilian currencies have collapsed due to the drop in the price of oil.

For 2016, the IMF predicts the following nominal per-capita GDP.

China: $8,866
Brazil: $8,118
Russia: $8,058

Reference: List of countries by past and projected GDP (nominal) per capita - Wikipedia, the free encyclopedia

 

[Economic superpower]

The renminbi seems to be declining almost every day recently. China used up enormous amount of forex reserves to stop it from declining during 2015 and I think the PBOC has allowed the renminbi to fall instead of wasting valuable forex reserves to prop it up.

Reforms have been too slow to keep up with the slowdown in industry. The overcapacity in steel, coal, aluminium, cement and glass industries are a big problem that needs to be addressed.

Companies should be encouraged to raise financing in the bond market instead of relying on the stock market or bank loans.

 

[Shotgunner51]

@Chinese-Dragon @TaiShang whats the timeline of china over-taking US economically?

Well if you break down economy by sectors, China is already far bigger in primary (or agricultural) GDP, and secondary (or industrial) GDP (also see other measurements e.g. manufacturing, power generation, merchandise exports). The trend is that China has been expanding the global lead.

But China is far behind in tertiary (or services) GDP, since the economic structure is entirely different between the two countries:

• Consumption is low in China, while savings is extraordinarily high (savings rate as % of GDP ranks #3 in the world behind Qatar & Brunei, amount exceed $5 trillion per year). Due to cultural reasons and others, I am cautiously optimistic on whether China can convert savings into consumption. With good purchasing power of Dollar, ample "room for increase" in debt ceilings (of both public debt & external debt), US will continue to consume.

• As large component of services economy, the finance markets in China still tightly regulated and small, for example even by now few Chinese understand derivative "products" like CDS or sub-prime. I am skeptical about development of "virtual" economy, US will maintain a "lead" in this front for a long time.

The two are heading in opposite directions, let's not compare China with US, thanks!

 

[rott]

Chinese government always downplays everything including the GDP. I somehow have a feeling the GDP is hovering much above 7. I don't know but this is just the mentality of the Chinese people.
Even a person like me, I always downplays my achievements. Be it financial gains or personal matters.
In a simpler sentence, "we're just the opposite of Indians."

 

[LittleFish]

@Chinese-Dragon @TaiShang whats the timeline of china over-taking US economically?

In figures we may surpass US in 2030s, but it may take 20 more years to achieve the preset goal of becoming a mid-level developed country in 2050s.

 

[Martian2]

Chinese government always downplays everything including the GDP. I somehow have a feeling the GDP is hovering much above 7. I don't know but this is just the mentality of the Chinese people.
Even a person like me, I always downplays my achievements. Be it financial gains or personal matters.
In a simpler sentence, "we're just the opposite of Indians."

The Chinese government has to keep the GDP numbers down as much as possible (e.g. not floating the exchange rate).

Otherwise, the US wants China to share the burden of maintaining world order.

China is too busy developing its own country to share the US burden.

You can see that China is delaying adopting SNA 2008. Some American guy was mad and complained that China was trying to lower its contribution to the UN. I think assessments are based on the size of a country's nominal GDP.

We don't know the truth. China may simply need time to install the new SNA 2008 system. China is a huge country and things tend to move slowly.

I also read an analyst's opinion. He said that China is delaying adoption of SNA 2008 to keep up the economic growth rate. After SNA 2008, China's nominal GDP would be about $1 trillion larger. This would bring down China's economic growth rate and scare everyone.

 

[Dungeness]

13 million jobs created in 2015, and I think this is more significant than 7% GDP growth. Put it to perspective, USA created 211K new jobs in November 2015. So even in terms of "Per Capital", China is doing a better job. Besides, there are more than 70 million Americans without a job are not even considered "unemployed" statistically.

 

[AndrewJin]

13 million jobs created in 2015, and I think this is more significant than 7% GDP growth. Put it to perspective, USA created 211K new jobs in November 2015. So even in terms of "Per Capital", China is doing a better job. Besides, there are more than 70 million Americans without a job are not even considered "unemployed" statistically.

Job creation is the number one task of Chinese government.