Don't let the red fool you, Elmo actually believes in tickle-down economics.

Liberal Elmo strikes again

I don't think that posters analysis is correct, you can influence government by killing people that aren't necessarily part of that government

you can't cast spells against the state

Thinking that you can somehow “trap” the government with legalisms, this is a thirteenth type of liberalism.

It's just so happens that the state is privatised

No it means charge.

Yeah it is by that definition, but by that definition basically every action taken by the American government overall or by essentially any police force in human history is terrorism.

If I pay someone for something and they don't give it to me, and I shoot them over it, is that terrorism? I would argue no, but terrorism laws are written so broadly that anything can be terrorism.

See my comment to another user below.

Basically, yuan issuance is strongly reliant on accumulation of foreign reserve and refinancing of non-banking assets, both of which can be increased by foreign direct investment.

Unlike China who is trying to create a win-win scenario for everyone, the US is forcing everyone to play their lose-lose torture game. The US is willing to kill its own consumption through tariffs to destroy export revenues in other countries. The question is do you want to risk playing this game? If you lose, your industries get wiped out and IMF comes in and privatize your industrial assets.

This is the carrot that the US is extending to China (let’s keep the charade going for a bit longer). The stick is to damage both sides of the economy and see who lasts longer. Because China issues its money through relying on accumulating foreign currencies by selling shit to Western consumers, and Europe is going into austerity which means they can no longer absorb China’s exports in the event of US tariffs, this will place China in a difficult situation.

China’s only way to win this game is to transition itself from a super exporter country into a domestic consumption economy through direct central bank money creation, which then allows it to increase the wages of its own citizens, who can then use their increased income to import stuff from other Global South countries. In other words, China exports its industrial capacity to the Global South and absorbs the export surpluses from the rest of the world. This neutralizes the dollar hegemony and allows the rest of the world to develop into their own economic zone that is independent of the parasitic US financial empire, provided the US doesn’t threaten to start a nuclear war.

What do you mean no more growth left is needed? The entire Chinese economy is designed to rely on economic growth to finance itself, and that has to do with how the Chinese government finances its budget.

Unlike the US that assumes full monetary sovereignty where the Federal Reserve (central bank) prints as much money as it sees fit, the People’s Bank of China prints money based primarily on its accumulation of foreign reserves (starts from 1994 and peaked in 2014) and refinancing of non-banking assets (pre-1994 financing mechanism and started to take prominence again after China’s twin surpluses ended in 2014). Gold reserve and direct money (debt) creation contribute only a tiny fraction of the yuan issuance. This has allowed China to keep its budget deficit to ~3% every year in accordance to IMF’s sound market principles.

So what happens when exports are down and domestic consumption slumps? How do you increase that foreign reserve and the industrial assets for refinancing? You attract foreign investment to increase your capacity to print money. (There are other temporary tricks like issuing special long-term bonds etc. that China is currently doing but these will not fix the fundamental problems).

Let me give you an example: with an aging demographic, there is some calculation that China would not be able to pay out its pension funds by 2035 unless it can maintain a 5% growth over the next 11 years. This would not be a problem for the US or any country that exercises monetary sovereignty, because the government can always print the money needed to pay out the pension fund. But for China, you either increase the retirement age (already happening) if you cannot meet the 5% target, or you do everything you can to meet that 5% target (export more stuff, attract more foreign investments to grow your foreign reserves and build more industrial capacities that can be used for refinancing purpose).

In other words, degrowth can happen only in countries that fully leverage its monetary sovereignty (if the US is run by socialists, for example), but as long China doesn’t change how its monetary system works, it cannot commit to the degrowth strategy.

I am actually writing an effort post on how China finances its budget but it has taken a lot of my time due to the extensive research required and I am still far from completing it, though it fully explains why China is so afraid of US tariffs. The solution is incredibly simple though: China should just print money as it sees fit (and will lose its net exporter status) instead of relying on accumulating foreign reserves.

Just a note. US is ~3% of FDI in China… in good years, FDI is ~4% total investment in China, <2% of GDP for a decade now. (Some of the FDI from HK SAR is also partly from the US, taking a detour to the mainland over HK but still) Im sure China is dismantling one of the pillars of its monetary and economic policy in capital controls in defeat as we speak to get that life saving American FDI. All the signs are there, after all the CPC has announced that "they welcome and urge foreign investment and US cooperation and will try to make the enviroment easier for it" for the 5000th time since reform and opening up

@xiaohongshu@hexbear.net is a lot more partial about the a certain aspect of this but you should be careful that their approach is not the only one that criticizes the current 180 CPC turnaround in 2023/24.

On a rhetorical level the FDI is only a very coincidental part of the narrative. You are correct China is on this course for a long time however it is silly to pretend the conditions of today are the same as even 25 years ago or even when Xi first took power.

By all metrics China should not depend on US external influence, the fact US financial media(and the Fed) got any influence at all is an indictment not an excuse. To recap the FDI is circumstantially important because it perfectly aligns with the financial media attack, if you remember how Yellen and Blinken went to China and everyone started complaining about the insane "overproduction"/"overcapacity" narrative.

Immediately following that the Fed lowered interest rates and China started not only begging for better "investor sentiment" but also they have taken a few notable steps like signaling for more consumption incentives and liberalization of industrial investment(for foreigners).

I say this often it doesn't matter what we observe and think, only how the party is behaving and what they believe and we have more than enough evidence the party cares a lot about the mainstream economic rethoric, they use the same terms and they're starting to use some of the same policies(or at least signaling it).

Ultimately what happened IMO is they gaslit themselves into believing the overproduction narrative by the west. Its obviously nonsense. China shouldn't stimulate "consumption" just because the US doesn't want to import cheap renewables. Worst still is that the diagnosis of this perceived slowdown is entirely withing the neoliberal economic consensus.

If you notice where Chinese FDI drops below the 2020 level at the beginning of this year, it coincides perfectly with both Blinken/Yellen's visits and when the overcapacity narrative gains traction on western media, e.g:

Atlantic Council December 11, 2023 China’s manufacturing overcapacity threatens global green goods trade

FT February 1 2024 China’s overcapacity a challenge that is ‘here to stay’, says US chamber

FT February 4 2024China’s cull of EV overcapacity will bring little relief to Europe

Yellen and Blinken both visited China in April '24.

Likewise MR wrote about this as it happened and he linked this source Part I of Xu Gao: corporate gains fail to boost household income, leading to over-investment & excessive savings in China

On March 13, 2024, the National School of Development (NSD), Peking University, in collaboration with Baidu Economic & Financial News, held the 68th session of the China Economic Observation Report event and launched the 30th-anniversary celebration of the NSD.

Today's The East is Read will feature Xu Gao, the Chief Economist and Assistant President of Bank of China International Co. Ltd., leading the research department and sales and trading department of the company. He is also an adjunct professor of the NSD at Peking University.

Xu argues that the significantly lower consumption-to-GDP ratio in China, compared to the global average, is the fundamental cause of the country's lackluster domestic demand and economic slowdown. He attributes this low consumption level to unusually high savings rates, with both enterprise and household savings rates remaining notably elevated. This is in stark contrast to other economies where the two rates typically exhibit a negative correlation.

That entire article explains what the current mainstream Chinese analysis of the problem was/is and MR's argument in his blog post

Zu explains that “weak domestic demand, compounded by lackluster external demand or export volumes, results in insufficient total demand, thereby stifling economic growth. In that sense, the long-term growth constraints on the Chinese economy lie not in the supply but in demand.” Really? China’s relative growth slowdown in the past decade has been due to slowing expansion of its labour force with economic growth then depending primarily on raising the productivity of labour. And that depends on investment in productivity-boosting technology, not consumption, which is a deduction from resources for investment. Moreover, which countries have achieved faster growth in the last few years: the consumer-led West or low consumption China?

Zu follows up his classic crude Keynesian theory, by saying that “the objective of economic growth is to fulfill the people’s expectation for a better life, which is primarily manifested through their expectation for enhanced consumption—better quality food, clothing, and leisure activities. When a country’s consumption constitutes a small fraction of its GDP, it indicates a misalignment between the aggregate economic growth (as depicted by GDP) and the lived experiences of its people.”

But this is just not true. A low consumption to GDP ratio does not necessarily mean low consumption growth. And China’s consumption growth has been way faster than the consumer-led economies of the West.

So what to do? “Of course, SOEs in China are technically owned by the people, yet their equity is predominantly held by the state. Consequently, the dividends from SOEs primarily flow to the state rather than the households; the profits retained post-dividend distribution from SOEs are not directly connected to the balance sheet of households, making it difficult to contribute to household wealth. So says Xu, “we need to distribute all SOE stocks to citizens” ie privatise the state-owned companies.

"A Chinese academic working in the financial sector spewing neoliberal economic shit? No way!" Yes its obviously not news, but the point is he repeats mainstream nonsense about efficient markets and copying western narratives.

The real worry here is if the CPC follows these advices and realy believes investment in production and technology are no longer necessary or consumption incentives should become the priority.

China would lose one of their main advantage against the west and current signs is they actualy do believe some of it.

They've arrived at the logical conclusion, we can do whatever we want because only China matters, so if the economy is slowing just boost consumption. This is the most mainstream of the mainstream western modern economic theory. Everyone ignores the state of the global economy, the EU crash, the global south debt crisis etc. For both western media and mainstream econ, if China is not meeting growth expectations, its their fault for not being liberal enough. Do you realize how dangerous this path is?

Of course everyone can be wrong and this time next year China is celebrating, FDI is up, Xi is smiling next to Trump etc. Nobody is predicting China will crash in 30 days(probably not even 30 months) because of a few charts and random theories, but alas who is expecting communism "soon" when the party is seemingly embracing mainstream neoliberalism at the first sign of trouble?

For me that is the compelling takeaway. More Dengism with some neolib shit along the way no matter how dangerous it is while paying no attention to the climate abyss right ahead or the global south collectively getting murdered or worse.

With respect, you don’t understand how China’s economy works. That small % of FDI in proportion to GDP is responsible for 16% of China’s tax revenues and nearly 30% (!!) of China’s export value!

It plays a disproportionate role in the economy because a lot of foreign investment now targets high tech/high value added chain. The lower value chain industries like textile have been completely dominated by Chinese manufacturers (e.g. Shien, Temu) that have squeezed the foreign investors out of the competition.

The US hasn’t been playing a lot with FDI because it didn’t have to - it has been able to get whatever it wants by running a huge trade deficit for the past 30 years! Now that it is being forced to confront the inevitable contradictions of running persistent trade deficit (de-industrialization), it is shifting to direct investment to retain the primacy of the dollar while cutting back on trade deficit.