China trade war

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LonelyTeaPot
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China trade war

Post by LonelyTeaPot » Wed Jun 12, 2019 7:57 am

China has threatened to stop exporting rare earths to the U.S. If Beijing carries out its threat, how long do you reckon will it take until Trump caves in, two days, a week perhaps?

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Re: China trade war

Post by mad hatter » Wed Jun 12, 2019 8:13 am

a week.
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Re: China trade war

Post by RichD » Wed Jun 12, 2019 9:58 am

China has an almost monopoly on rare earths these days because of price not because they have the only supply. If they stop exporting, other sources will be viable again so the impact will be temporary.
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Re: China trade war

Post by Godjira » Wed Jun 12, 2019 10:02 am

Trump will wave a blank piece of paper around and declare victory.
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Re: China trade war

Post by misanthrope » Wed Jun 12, 2019 10:03 am

LonelyTeaPot wrote:
Wed Jun 12, 2019 7:57 am
China has threatened to stop exporting rare earths to the U.S. If Beijing carries out its threat, how long do you reckon will it take until Trump caves in, two days, a week perhaps?
Trump has the Chinese by the short and curlies.

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Re: China trade war

Post by Godjira » Wed Jun 12, 2019 10:20 am

Chinese people have straight pubes. No wonder Trump is all F ed up!
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Re: China trade war

Post by RichD » Wed Jun 12, 2019 10:23 am

misanthrope wrote:
Wed Jun 12, 2019 10:03 am
LonelyTeaPot wrote:
Wed Jun 12, 2019 7:57 am
China has threatened to stop exporting rare earths to the U.S. If Beijing carries out its threat, how long do you reckon will it take until Trump caves in, two days, a week perhaps?
Trump has the Chinese by the short and curlies.
How so? Or this just your wish based on your hatred of China?
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Re: China trade war

Post by misanthrope » Wed Jun 12, 2019 10:35 am

RichD wrote:
Wed Jun 12, 2019 10:23 am
misanthrope wrote:
Wed Jun 12, 2019 10:03 am
LonelyTeaPot wrote:
Wed Jun 12, 2019 7:57 am
China has threatened to stop exporting rare earths to the U.S. If Beijing carries out its threat, how long do you reckon will it take until Trump caves in, two days, a week perhaps?
Trump has the Chinese by the short and curlies.
How so? Or this just your wish based on your hatred of China?
My hatred of China? Good lord.

First it's the disruption of the bond market and now rare earth metals. People like to spin a story around a few cherry picked bits that they like.

China has much more to lose than the US in a trade war. They are dependent on exports and manufacturing. I'm suspicious that Trump is interested in doing the bare minimum and then declaring victory. That would be a disappointment.

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Re: China trade war

Post by RichD » Wed Jun 12, 2019 11:00 am

misanthrope wrote:
Wed Jun 12, 2019 10:35 am
My hatred of China? Good lord.

First it's the disruption of the bond market and now rare earth metals. People like to spin a story around a few cherry picked bits that they like.

China has much more to lose than the US in a trade war. They are dependent on exports and manufacturing. I'm suspicious that Trump is interested in doing the bare minimum and then declaring victory. That would be a disappointment.
China is far less export and manufacturing dependent than you think it is. China was one of the few economies to emerge relatively unscathed from the financial crisis a decade ago, that was a far bigger storm than this is. The trade war hurts everyone, it will hurt China but the US does not have China by the "short and curlies" by any stretch.

The long term impact of the US / China split will be felt in the coming years across the world. The trade war is pushing the world back into a bipolar world. Countries are being pushed to choose between the US and China, most are trying to find a middle way. This is going to weaken US alliances in Asia. China's role in the world economy today and the future is as a massive consumer market. No economies will want to risk access to China. Look at how the Huawei ban has played out worldwide.

If I am wrong and you are right then the situation will escalate further. If China is backed into a corner the conflict will move from trade into other areas. But, I don't believe this is the case.
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Re: China trade war

Post by misanthrope » Wed Jun 12, 2019 11:12 am

RichD wrote:
Wed Jun 12, 2019 11:00 am
misanthrope wrote:
Wed Jun 12, 2019 10:35 am
My hatred of China? Good lord.

First it's the disruption of the bond market and now rare earth metals. People like to spin a story around a few cherry picked bits that they like.

China has much more to lose than the US in a trade war. They are dependent on exports and manufacturing. I'm suspicious that Trump is interested in doing the bare minimum and then declaring victory. That would be a disappointment.
China is far less export and manufacturing dependent than you think it is. China was one of the few economies to emerge relatively unscathed from the financial crisis a decade ago, that was a far bigger storm than this is. The trade war hurts everyone, it will hurt China but the US does not have China by the "short and curlies" by any stretch.

The long term impact of the US / China split will be felt in the coming years across the world. The trade war is pushing the world back into a bipolar world. Countries are being pushed to choose between the US and China, most are trying to find a middle way. This is going to weaken US alliances in Asia. China's role in the world economy today and the future is as a massive consumer market. No economies will want to risk access to China. Look at how the Huawei ban has played out worldwide.

If I am wrong and you are right then the situation will escalate further. If China is backed into a corner the conflict will move from trade into other areas. But, I don't believe this is the case.
China was in a better economic position during the GFC. Now it has an enormous credit bubble, which is arguably a bigger problem than the trade war itself.

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Re: China trade war

Post by RichD » Wed Jun 12, 2019 11:37 am

misanthrope wrote:
Wed Jun 12, 2019 11:12 am
China was in a better economic position during the GFC. Now it has an enormous credit bubble, which is arguably a bigger problem than the trade war itself.
China's debt problem is a political problem. The household or private consumption share of GDP is too low. In the US, it is just under 70%, in Australia, just under 60% while in China, it is under 40% but rising from 35/36% a decade ago. GDP growth is driven by local government infrastructure spending done through borrowing. But the flip side of this is that the local governments have far more assets than liabilities. Selling these assets, growing the domestic consumption economy is the rebalance they are trying to do. The political problem they need to overcome is that entrenched interests in the status quo resist these changes. This is what drives Xi's political strongman agenda, to take control to drive these changes. The Hu Jintao era, while politically less repressive, absolutely failed to make these changes to the economy, despite it being their main aim. They were not politically strong enough to do this.
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Re: China trade war

Post by Godjira » Wed Jun 12, 2019 1:11 pm

There won’t be any US China split. Trump’s long term effect will be a whole lot of nothing.

Political strongmen cannot cause an economy to change in ways it is not ready for. That’s the real lesson of communism.
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Re: China trade war

Post by RichD » Wed Jun 12, 2019 1:14 pm

The US China split is inevitable. It was coming, it did not need to come yet. What Trump did is rush in head first without shoring up alliances, without a game plan. This is to China's advantage.
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Re: China trade war

Post by Godjira » Wed Jun 12, 2019 1:24 pm

What split? How? Were they unified? Sounds odd to me.
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Re: China trade war

Post by cowtown » Wed Jun 12, 2019 1:47 pm

damn, we may have to mine our own toxic metals but with the EPA gutted it won't be as expensive as it was before and those varmints need jobs and we can park the waste in some Libtard city

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Re: China trade war

Post by misanthrope » Wed Jun 12, 2019 9:21 pm

RichD wrote:
Wed Jun 12, 2019 11:37 am
misanthrope wrote:
Wed Jun 12, 2019 11:12 am
China was in a better economic position during the GFC. Now it has an enormous credit bubble, which is arguably a bigger problem than the trade war itself.
China's debt problem is a political problem. The household or private consumption share of GDP is too low. In the US, it is just under 70%, in Australia, just under 60% while in China, it is under 40% but rising from 35/36% a decade ago. GDP growth is driven by local government infrastructure spending done through borrowing. But the flip side of this is that the local governments have far more assets than liabilities. Selling these assets, growing the domestic consumption economy is the rebalance they are trying to do. The political problem they need to overcome is that entrenched interests in the status quo resist these changes. This is what drives Xi's political strongman agenda, to take control to drive these changes. The Hu Jintao era, while politically less repressive, absolutely failed to make these changes to the economy, despite it being their main aim. They were not politically strong enough to do this.
You're giving me elaborate answers to a question that I didn't ask. China's debt problem is much more than political at this stage.

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Re: China trade war

Post by RichD » Thu Jun 13, 2019 12:32 am

You made an assertion, I rebutted it. You double down on your assertion without offering substance. If you are not interested in discussing China’s debt why make the assertion?

My high level summary of China’s debt is factual. It is the view of one of the foremost US economists on China.


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Re: China trade war

Post by misanthrope » Thu Jun 13, 2019 12:50 am

https://www.bloomberg.com/quicktake/chinas-debt-bomb

This article asserts that China's debt problem is a global threat.

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Re: China trade war

Post by Godjira » Thu Jun 13, 2019 1:00 am

Is it really 300% of GDP? That would make it the highest level of debt in the world, or am I reading that article incorrectly. This link says it is just over 50% of GDP

http://worldpopulationreview.com/countr ... onal-debt/

Maybe this link is official data
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Re: China trade war

Post by misanthrope » Thu Jun 13, 2019 1:21 am

Godjira wrote:
Thu Jun 13, 2019 1:00 am
Is it really 300% of GDP? That would make it the highest level of debt in the world, or am I reading that article incorrectly. This link says it is just over 50% of GDP

http://worldpopulationreview.com/countr ... onal-debt/

Maybe this link is official data
That's government debt.

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Re: China trade war

Post by Godjira » Thu Jun 13, 2019 1:29 am

Oh, okay- I didn't read the original article closely enough
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Re: China trade war

Post by twodogs » Thu Jun 13, 2019 2:12 am

"In the event of China withholding rare earths, the US has private and public stockpiles to fall back on in the short term. In the medium term, the US and others are likely to increase their own production of rare earth metals.

China is the world’s biggest producer of rare earths, but it does not have the monopoly on them. It is estimated to have up to 37 per cent of the world’s rare earth reserves. The US also has rich deposits of the elements, and so do nations friendly to the US, such as Australia, Canada, India, South Africa and Brazil.

The US Defence Department said last week that it is looking to reduce its reliance on Chinese rare earth metals. Last year, Japanese researchers said they found rare earth deposits equivalent to hundreds of years of global consumption near the island of Minami-Torishima.

Beijing had briefly used rare earths as a weapon against Tokyo in 2010, in a territorial dispute, but it was a misfire. The Japanese responded by building a rare earth supply chain outside China, and the Chinese share of rare earth production dropped from more than 95 per cent of the world’s supply in 2010 to around 70 per cent in 2018."
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Re: China trade war

Post by RichD » Thu Jun 13, 2019 4:38 am

This is cut and paste from an old post.

US Debt
Public Debt: 22T
Household Debt: 13.3T
Corporate Debt: 9T
Total US Debt: 44.3T

China Debt
Public Debt: 10.5T
Household Debt: 6.5T
Corporate Debt: 16T
Total: 33T

Household debt: 53% of GDP. 60% of this made up of mortgage debt. This level of debt-to-gdp is well below international norms - Australia's household debt is 120%.

The flipside of household debt is household savings. The world average is 25.3% of GDP. Australia is 24.6%. US is 17.6%. China is 47.4%.

In the last couple of years, it is household debt that is rising faster than the other two forms of national debt. This is positive, household debt can rise more and household savings should fall as China transitions to a domestic market economy away from a low-wage export-driven economy. This is the change that China needs to move from middle-income to rich. So this number should continue to rise.

Public Debt: 10.5T. This is not that high compared to other countries at 87% of GDP. US is 99%, Japan is 212%. It does carry risk as some 37% of it is in the form of local government financing vehicles - what the regional governments borrow off book to finance infrastructure investment. The government is cracking down on this and regional governments are relying more on municipal bonds to raise funds. So this proportion of debt is not without risk but not out of control in comparison with other countries.

China Corporate Debt.

SOE: 50% of corporate debt lies with state-owned enterprises. They account for only about 14% of employment. SOE reform has left SOE concentrated in a bunch of industries: finance, power, energy, telecoms and defence manufacturing. These are the industries that the government regards as strategic and intends keeping state control over. This is generally regarded as the weakest part of the Chinese economy, but I don’t see this as being true anymore. These industries are the ones central to the Belt and Road Initiative (BRI). They will not fail. If BRI is successful, these industries will be successful. But, regardless, China has a high level of savings, runs current account surpluses, all its debt is its own currency which it has full control of.

EDITED TO ADD: I read an interesting discussion on this recently. China has developed as much infrastructure as it needs, probably a lot more than immediate demand requires, but if it shuts down infrastructure development this will lead to unemployment, so it is also a form of welfare program. An alternative way of looking at BRI, is that China is exporting this problem. It is providing loans to BRI participants, primarily for infrastructure, the work on these infrastructure projects goes to Chinese companies. So, rather than having provincial governments continue to borrow to fund infrastructure they no longer need, they are getting regional countries to fund this.

Private Sector Corporate debt: the other 50%. This is slightly higher than US corporate debt at 65% of GDP, US corporate debt is 48% of GDP. I think there is a lot of risks here but not systemic risk, it is spread across a lot of small businesses.

I am not an economics expert but when you dive into the detail the numbers don't seem that scary to me - but I may also be misinterpreting some of these. But I don't take what some US journalist writes on Bloomberg as an authority on China debt and what is required to address it. I am a big fan of Prof. Michael Pettis and his writing on the Chinese economy. Here is him speaking at AmCham Shanghai.
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Re: China trade war

Post by OnTheBall » Thu Jun 13, 2019 6:42 am

RichD wrote:
Thu Jun 13, 2019 4:38 am
This is cut and paste from an old post.

US Debt
Public Debt: 22T
Household Debt: 13.3T
Corporate Debt: 9T
Total US Debt: 44.3T

China Debt
Public Debt: 10.5T
Household Debt: 6.5T
Corporate Debt: 16T
Total: 33T

Of course, what you are omitting is: 1) a lot of "infrastructure" spending in China is the building a lot of useless "ghost cities" that do not actually produce anything.

https://www.afr.com/news/world/asia/chi ... 404-h0ybjz

2) A huge amount of that corporate debt is the SOE debt you described. These are unprofitable, bloated enterprises where a lot of officials embezzle a ton of money that will never be paid back to banks. What will happen when these loans need to be called in?

https://www.abc.net.au/news/2016-05-24/ ... mb/7439844

I find it hard to believe that you don't know any of this, and so I am at a loss as to why you are such a huge China booster, and only tell half the story of what is really going on. You read as if there is a CCP official holding a gun to your head, forcing you to write pro-China govt., propaganda, when of course, we all know that is not the case.
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