China Roundup

The Chinese las Vegas is doing ok.

The Chinese rustbelt is not. At that link we get this map that helps drive home the point that this is a big regional economy.

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Here is Scott Sumner

2.  People forget that until recently China had 10% trend growth, so when it goes from 14% to 7%, that’s a big slowdown.  People also forget that some sectors of the Chinese economy are probably growing smoothly.  Health care, college education, subways rides (which are constrained by capacity), etc.  So if the overall RGDP growth rate slows from 14% to 7%, and some sectors are growing smoothly at 10%, then the cyclical sectors are slowing extremely rapidly.  And the cyclical sectors are also the commodity intensive sectors.  You could easily see lots of industry data that seems inconsistent with a 7% RGDP growth rate, during a cyclical slowdown.

And, boom, Michael Pettis

But every “growth miracle” ends up following the same credibility path, with what once seemed an unending stream of sophisticated and dedicated leaders at every level of policymaking suddenly and unexpectedly becoming an administration of clunky, incompetent bureaucrats, as foolish as the rest of us. When the miracle country outperforms expectations year after year during the expansion phase, we assume that brilliant policymaking is the cause, rather than– more appropriately, as I will explain– inverted balance sheets. When this same balance sheet inversion subsequently causes the economy sharply to underperform expectations during the contraction period, our admiration for policymakers quickly turns into contempt for their incompetence, usually tinged with bitterness that our forecasts turned out so magnificently wrong.

And more..

I believe, however, that without a massive and fairly unlikely transfer of wealth from the state sector to the household sector, the average Chinese GDP growth rate under Xi Jinping cannot exceed 3-4%.

This is what had surprised me most, which is that the massive state transfer hasn’t happened, to my personal financial detriment.

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