The Atlanta spa shooting has brought the subject of anti-Asian violence to the focus of the public. Many think that the explosion of hate crimes is an extension of the tension between the U.S. and China.
In essence, what causes the hate is the shift of the public's cognition generated from the news or social media. Instead of delivering critical facts, many provide modified 'facts' with a bias, especially when benchmarking China and the U.S. in the economy. Many news is exaggerating and mislead readers with only partial info.
In 'China's Economy Slowly Edges Toward World Dominance,' Bloomberg states its reasons why China's economy is on the way to world dominance. Though many data and analyses are legit and trustworthy, all the discussion is external. Nothing is mentioned about China's internal issues.
China's marginal output of investment is diminishing since the index of consumption cannot go up. In Beijing's growth in 2019, tax cuts had contributed a lot to the economic growth, but it won't be a solution all the time if we do not discuss pulse shocks such as the new crown.
From a longer-term perspective, the three major driving forces of China's rapid development in the past four decades, "demographic dividend, advantages brought by China's globalization, and Chinese reform advantage," are challenging to sustain.
Regarding the demographic dividend issue, some seemingly formal editorials, for example, the increase in high-tech talents, can replace the demographic dividend. The general logic is probably reasonable, but this is still a manufacturing thinking model. If it is the manufacturing industry, as a major manufacturing country, the advantages generated by the increase of high-tech talents have been realized. The marginal value of the emergence of new high-tech talents is not so great.
Ordinary engineers cannot make Chinese manufacturing become a Chinese invention. If the information technology industry is based on software's scale effect, it may not generate high-industrial talent dividends like the manufacturing industry. In a few years, programmers may become new industrial workers. Some so-called high-tech software companies have been labor-intensive industries for a long time.
The low-end trend of the high-tech industry will be apparent, turning into a new version of manufacturing.
From the market perspective, this industry is different from the manufacturing industry, and it is difficult to win with cheap labor. In the manufacturing industry, China can produce footwear at lower labor costs. However, even with thousands of free programmers in the information society, it may be difficult to create another Google, Facebook, and Microsoft successfully. Although labor costs are low, it is difficult for CICC to become Merrill Lynch, Morgan Stanley, Goldman Sachs, and Citigroup. Therefore, it remains to be determined whether continue to exert the demographic dividend's effect.
The advantages brought by China's globalization will not necessarily last. The future situation will be more severe. Issues such as the trade war and Huawei's ban are just the beginning of the international economic situation deterioration.
It is no longer as easy for Chinese companies to develop their business abroad as it was five or six years ago, such as the Tik Tok ban bill signed by Trump a while ago and a ban on India's Chinese software services. There are also many top Internet companies, Alibaba, JD.com, Baidu, and NetEase, all listed on the U.S. capital market, which is equivalent to entrusting the core China's fate high-tech companies to the U.S. capital market. From the perspective of internationalization, the future technological development for China is not clear.
In the short term, the problems mentioned above may be easy to deal with. The easiest way is for China to develop infrastructure projects vigorously, and most securities analysts have a consensus on this. After the tightened monetary policy, the fiscal stimulus might be the simplest, convenient, and effective way. Still, in essence, it is just that the hidden costs of this approach are not obvious.
Looking at the advantages brought about by China's reform in the long run, if the private enterprises that are the economic foundation continue to develop and grow, it may bring some instability. That is, as China's private enterprises continue to grow, the gap between the rich and the poor will gradually widen, which may lead to social instability. China's Gini coefficient has always remained high, and uneven income distribution is still a problem people should not underestimate.
At the same time, the Chinese Yuan, which has risen rapidly in recent years, has also been overvalued to a certain extent. China's total outstanding social financing is still more than 30 trillion U.S. dollars, but the year-on-year increase in issuance exceeds 10%. The acceleration of debt growth may cause overestimation. Cause the problem of "industry hollowing out."
Comments