China's economic shift set to throw the West off-balance


mentalfloss
#1
China's economic shift set to throw the West off-balance

China’s new leadership is trying to create a shift in its economy from low-wage, investment-driven growth to a consumer economy driven by domestic demand and when that change happens, the rest of the world will have to change too.

That’s the message Stephen Roach is trying to deliver, with some urgency, in his book Unbalanced: The Codependency of America and China.

“To the extent that Canada, Australia, Brazil and other resource-based economies are counting on China to stay the course of open-ended resource demand, you could be in for a rude awakening,” says Roach, a former chairman of Morgan Stanley Asia who is now at Yale’s Jackson Institute for Global Affairs.

China’s new leadership is trying to create a shift in its economy from low-wage, investment-driven growth to a consumer economy driven by domestic demand and when that change happens, the rest of the world will have to change too.

That’s the message Stephen Roach is trying to deliver, with some urgency, in his book Unbalanced: The Codependency of America and China.

“To the extent that Canada, Australia, Brazil and other resource-based economies are counting on China to stay the course of open-ended resource demand, you could be in for a rude awakening,” says Roach, a former chairman of Morgan Stanley Asia who is now at Yale’s Jackson Institute for Global Affairs.

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Roach argues the rest of the world has become dependent on China’s high-growth model, with resource economies such as Canada’s growing faster than the rest of the world after the financial crisis because of demand for raw materials from China.


Children wearing masks against pollution as they walk home after school in Beijing, China in February. A growing middle-class means higher expectations.(Ng Han Guan/Associated Press)
But Chinese wages are no longer the lowest in the world and, with millions lifted out of poverty, the Chinese are adapting to a middle-class level of comfort. That means higher expectations among people, for social and labour mobility and quality of life, a change the leadership may not yet be prepared for.
Chinese leaders are under pressure to replace a growth model based on exports and investment that delivered three decades of rapid expansion but has run out of steam. Chinese premier Li Keqiang has promised more private investment and greater reliance on domestic consumption as exports continue to fall.

Challenge for Canada's resource economy
“China is about to create the biggest middle-class the world has ever seen and that’s a huge opportunity for other countries to export into," Roach says in an interview with CBC's The Lang & O'Leary Exchange.

"For a resource-based country like Canada, there’s a special challenge. As China moves from manufacturing to services, services require far less resources per unit of GDP,” he says.

In his book Unbalanced, Roach argues that China and the U.S. are codependent, with the U.S. reliant on China for cheap capital, cheap goods and demand for treasuries. China is a big holder of U.S. bonds as it seeks to invest its current account surplus.

“We’ve gotten ourselves into a quagmire because this has kept us mired in a sluggish recovery with a shortage of savings while China has a mirror image of the problem – too much exports, too much of a foreign account surplus, excess foreign exchange reserve and lots of imbalances in their country from excess resource consumption to environmental degradation,” Roach says.

Both China and the U.S. have to learn to better manage their economies, he says.

Encourage savings in America
He makes a case for American leaders to stop stimulating consumer consumption with their fiscal policies and start giving incentives to save. Roach is critical of the Fed's loose monetary policy and believes American families should be saving more of their income.

“If we focused our policies more on providing incentives to save, we could reinvest that saving in spending on infrastructure, human capital, research and development and new capacity,” he says.

Americans consume beyond their means, with their level of purchases outstripping their improved income for the past 20 years. The financial crisis helped expose the damage this is doing, Roach says.

As China shifts to domestic consumption, there won’t be another superpower to provide the U.S. with capital or finance U.S. debt, he argues. That capital could be coming from American savings, he says.

“We’ve got to really focus on rebuilding competitiveness. You can’t do that if you don’t save,” he says.

China's economic shift set to throw the West off-balance
 
Spade
Free Thinker
+4
#2  Top Rated Post
Jesus, them Chinese want to be just like real people!
 
coldstream
+1
#3
Quote:

China is about to create the biggest middle-class the world has ever seen and
that’s a huge opportunity for other countries to export into," Roach says in an
interview with CBC's The Lang & O'Leary Exchange

China will never do that if it continues to base its economy on foreign consumption of domestically based prodution.

That's the other side of the equation of the Free Market West's domestic consumption of foreign produced product. That has destroyed their Middle Class and works solely to the benefit of a trading oligarchy.. immensely enriching a few and impoverishing the rest on both sides of that equation.

Both China and West can only succeed if they base their economies on developing integrated national industrial economies that serves domestic markets first and foremost.. with trade relationships developed on the basis of equtable distribution of wealth, trade balance respecting each other's technical and resource advantage and maintainenance of full employment.

Global Free Markets will NEVER work. They will just produce another Great Depression and another World War.
Last edited by coldstream; May 27th, 2014 at 01:56 PM..
 
petros
+3
#4
Without our raw materials there is no Chinese economy.
 
mentalfloss
#5
Quote: Originally Posted by petrosView Post

Without our raw materials there is no Chinese economy.

That's why the Chinese claim ownership over our territory through buyouts.
 
petros
#6
Quote: Originally Posted by mentalflossView Post

That's why the Chinese claim ownership over our territory through buyouts.

They make all sorts of silly claims. No matter what, they are reliant on us for food.
 
mentalfloss
#7
Quote: Originally Posted by petrosView Post

They make all sorts of silly claims. No matter what, they are reliant on us for food.

They will eventually own our farms too.
 
Spade
Free Thinker
#8
And our lakes - wild rice is next on the menu!
 
petros
#9
Quote: Originally Posted by mentalflossView Post

They will eventually own our farms too.

Nope CPP is gobbling up farmland driving the prices up too high for profitable investment from foreign interests and securing food for Canadians.

My land has gone from $160K a section 7 years ago to $1M a section today with record crops over the past decade to top it all off. Nobody is getting out like they were 10 years ago. The money is too good.

The good money is contract crops with whichever foreign interest bids the highest which means a lower but guaranteed sale with no shipping costs.

Quote: Originally Posted by SpadeView Post

And our lakes - wild rice is next on the menu!

Sell what's in the dug outs. Salamanders and all.
 
darkbeaver
Republican
+2
#10
A manufacturing base is absolutely necessary for Canada. Hewers of wood and carriers of water for the world won't work for Canada. I live in the middle of a forest of fine furniture wood, It's being chipped and shipped to the orient, we have no value added industries, we are stupid and we will suffer further until we manufacture goods, at least the stuff you'll find in every house in North America, like goddamned kitchen tables and chairs.
 
damngrumpy
No Party Affiliation
#11
China is emerging into a modern economy and their middle class will be able to
compete for food water and oil around the world. The days of cheap food will soon
be over as we all compete for quality food.
Many in the west Canada and the USA do not realize their food bills will double in a
few years and the way the economy is producers will be selling food off shore for
much higher prices and if they insist of cheap food they will end up with whats left
over.
 
BaalsTears
+2
#12
Canada is going to move down the international food chain along with the rest of the west. This is going to be very hard on young people who grew up in an era of affluence.
 
darkbeaver
Republican
+1
#13
The unipolar world is already dead, sure it's still twitching and stumbling arround the chopping block, but it's got no head you see, a little more blood pumping and it tips over into the pot. hahahaha

The international communitists can kiss my buttocks
 
EagleSmack
+1
#14
Hey hey... impossible... China is still a developing nation!
 
mentalfloss
+1
#15
Quote: Originally Posted by EagleSmackView Post

Hey hey... impossible... China is still a developing nation!

Looking at most people that live there it will always be a developing nation.
 
darkbeaver
Republican
+2
#16
Developing nations are living nations, the west is full of dead stagnant nations rooted in an economic mire so thick they cannot survive extraction, indeed they aren't supposed to.
 
EagleSmack
#17
Quote: Originally Posted by mentalflossView Post

Looking at most people that live there it will always be a developing nation.

That is just an excuse to give China a pass. China is a highly modernized country and it capabilities are enormous. Its industrial, technology, and military capabilities are second only to the US and that will change. Because the average Chinese citizen has a lower standard of living than those in the Western countries has no bearing on the capabilities of China.

You fail.
 
petros
#18
Take a trip outside of the cities and towns of Canada.....low and behold at 147 years you'll find we too are a developing nation.

It's kinda hard to take word of someone whose only experience with rural Canada is a trip to a Provincial park.
 
mentalfloss
#19
Quote: Originally Posted by EagleSmackView Post

That is just an excuse to give China a pass. China is a highly modernized country and it capabilities are enormous. Its industrial, technology, and military capabilities are second only to the US and that will change. Because the average Chinese citizen has a lower standard of living than those in the Western countries has no bearing on the capabilities of China.

You fail.

What good is having first world status if most of the people are living in third world conditions?

And I don't disagree with you that it is no excuse for the state. It's entirely the state's fault most of the people live poorly.

If anything I agree that the Chinese government needs to address the problem and take full responsibility for pollution and poor living standards.
 
petros
#20
Have you travelled anywhere in Canada? The first World crap is just that. Crap. We too are a developing nation.
 
MHz
+1
#21
Quote: Originally Posted by SpadeView Post

Jesus, them Chinese want to be just like real people!

First it was the ones that got jobs in India wanting more than their usual one meal a day, they are upstarts, trying to upset the natural balance of things, upstarts is the base term.
That being said is North America isn't the best location for an exporting power to look for 'new customers'. The places that have been at war will be the next location for manufactured goods to be sent to and that is who China will be shipping the 'bobbles and beads' to in exchange for the raw materials that produce all the exported stuff plus 10% (or whatever) and that allows their standard of living to rise for the lower classes at no expense to the leaders'.

If the Ukraine Govt was to nationalize the pipelines as being a national security item they could then 'charge a fee' for 'additional inspections' so that internal price was at income price and at the other end of the border where it entered other nations it would be a Ukraine export rather that it being a Russian product going across several borders with no additional tariffs. It would be no different than Quebec getting power lines from Nfld and exiting to America and the Quebec Govt selling the power at an increased rate making it a sizable income supported by US taxpayers. This would be NATO countries paying more for their gas but saving them a war with all the latest weapons being used in mass.

Buy all Russian petroleum products that cross the border from Russia and have a local price that is 40% less than the new export price that difference pays the bills for all the imported products and allowing a subsidy for the agricultural sector.

As the Ukraine has an elected President it would be him that stands up for anything called a war crime from that election date, like when the military is used for 'crowd control in the 21st Century. Tanks would be considered to be defensive weapons at 'large gatherings and the one shot big gun would have something suitable for tracking certain locations in hd and stereo sound that would be able to track sound back to it's point of origin. That sort of 'hard evidence' would be the core of the war crimes and it would serve for 'class action suits' and with the 'compensation cheques' they would be shopping for goods coming from China with a quality version of Marco Polo's trade route and this round has more than just spices.

We in North America can trade with each other (Visa paying MasterCard) where we come up with projects that employ may as we 'scavenge the land' leaving behind sculptured fields and all our 'old trash' supplied the 'raw materials'. That 90 employment rate could be changed to 9% employment with very heavy equipment and 'the rest' could pursue the 'decorating end' of things. (rather than we enter a calamity and a lot of people die)

Quote: Originally Posted by mentalflossView Post

What good is having first world status if most of the people are living in third world conditions?

And I don't disagree with you that it is no excuse for the state. It's entirely the state's fault most of the people live poorly.

If anything I agree that the Chinese government needs to address the problem and take full responsibility for pollution and poor living standards.

At what ratio does the same abuse become acceptable because what you wrote should apply to Canada and the US and all other Nations?
 

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