Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
Canadian Cannabis Stocks CRASH as Canopy Growth Hits a Dead End - 14th Dec 19
Retail Sector Isn’t Dead, and These 6% Dividend Paying Stocks Prove It - 14th Dec 19
Top 5 Ways to Add Value to Your Home - 14th Dec 19
Beware Gold Stocks Downside - 13th Dec 19
Fed Says No Interest Rate Hikes In 2020. What About Gold? - 13th Dec 19
The ABC’s of Fiat Money - 13th Dec 19
Why Jo Swinson and the Lib Dems LOST Seats General Election 2019 - Sheffiled Hallam Result - 13th Dec 19
UK General Election 2019 BBC Exit Poll Forecast Accuracy Analysis - 12th Dec 19
Technical Analysis Update: Tadawul All Share Index (TASI) - Saudi Arabia ETF (KSA) - 12th Dec 19
Silver Miners Pinpoint the Precious Metals’ Outlook - 12th Dec 19
How Google Has Become the Worlds Biggest Travel Company - 12th Dec 19
UK Election Seats Forecasts - Tories 326, Labour 241, SNP 40, Lib Dems 17 - 12th Dec 19
UK General Election 2019 Final Seats Per Party Forecast - 12th Dec 19
What UK CPI, RPI INFLATION Forecasts for General Election Result 2019 - 11th Dec 19
Gold ETF Holdings Surge… But Do They Actually Hold Gold? - 11th Dec 19
Gold, Silver Reversals, Lower Prices and Our Precious Profits - 11th Dec 19
Opinion Pollsters, YouGov MRP General Election 2019 Result Seats Forecast - 11th Dec 19
UK General Election Tory and Labour Marginal Seats Analysis, Implied Forecast 2019 - 11th Dec 19
UK General Election 2019 - Tory Seats Forecast Based on GDP Growth - 11th Dec 19
YouGov's MRP Poll Final Tory Seats Forecast Revised Down From 359 to 338, Possibly Lower? - 10th Dec 19
What UK Economy (Average Earnings) Predicts for General Election Results 2019 - 10th Dec 19
Labour vs Tory Manifesto's UK General Election Parliamentary Seats Forecast 2019 - 10th Dec 19
Lumber is about to rally and how to play it with this ETF - 10th Dec 19
Social Mood and Leaders Impact on General Election Forecast 2019 - 9th Dec 19
Long-term Potential for Gold Remains Strong! - 9th Dec 19
Stock and Financial Markets Review - 9th Dec 19
Labour / Tory Manifesto's Impact on UK General Election Seats Forecast 2019 - 9th Dec 19
Tory Seats Forecast 2019 General Election Based on UK House Prices Momentum Analysis - 9th Dec 19
Top Tory Marginal Seats at Risk of Loss to Labour and Lib Dems - Election 2019 - 9th Dec 19
UK House Prices Momentum Tory Seats Forecast General Election 2019 - 8th Dec 19
Why Labour is Set to Lose Sheffield Seats at General Election 2019 - 8th Dec 19
Gold and Silver Opportunity Here Is As Good As It Gets - 8th Dec 19
High Yield Bond and Transports Signal Gold Buy Signal - 8th Dec 19
Gold & Silver Stocks Belie CoT Caution - 8th Dec 19
Will Labour Government Spending Bankrupt Britain? UK Debt and Deficits - 7th Dec 19
Lib Dem Fake Tory Election Leaflets - Sheffield Hallam General Election 2019 - 7th Dec 19
You Should Be Buying Gold Stocks Now - 6th Dec 19
The End of Apple Has Begun - 6th Dec 19
How Much Crude Oil Do You Unknowingly Eat? - 6th Dec 19
Labour vs Tory Manifesto Voter Bribes Impact on UK General Election Forecast - 6th Dec 19
Gold Price Forecast – Has the Recovery Finished? - 6th Dec 19
Precious Metals Ratio Charts - 6th Dec 19
Climate Emergency vs Labour Tree Felling Councils Reality - Sheffield General Election 2019 - 6th Dec 19
What Fake UK Unemployment Statistics Predict for General Election Result 2019 - 6th Dec 19

Market Oracle FREE Newsletter

UK General Election Forecast 2019

This Is the Key to Understanding China’s Economy

Economics / China Economy Jan 30, 2019 - 05:54 PM GMT

By: John_Mauldin

Economics

China is facing many challenges. That’s probably not news to you.

But what we often fail to understand is this: China will deal with those challenges in a much different way than what we are used to in the West.

To solve Europe’s financial woes in 2012, ECB President Mario Draghi promised to do “whatever it takes.” Yet central bank policy was his only tool.

Xi Jinping has a vastly larger toolbox. It is hard for us in the Western world to understand that.


Xi has every tool a top-down government can have. Not only that, he has experts to wield them. And all of them are 100% aligned with his goals.

Different Game Rules

I spent a few hours with Mark Yusko last week.

Mark is a good friend of mine and the founder of Morgan Creek Capital Management. He spends a lot of time in China so I often turn to him for on-the-ground research on this market.

Every time I hear him talk about the opportunities in China, it makes me want to fly to Shanghai or Guangdong.

The country has enormous investment opportunities as well as a strong entrepreneurial culture. Entrepreneurs there can create almost anything they envision.

However, you must realize this comes at a cost. The cost is a level of government intrusion unimaginable to us in the West.

In the US, we’re debating the data collected by corporations like Facebook and Google. Their Chinese equivalents are encouraged to collect such data and share it with the government.

And in every interview that I have heard, most Chinese people simply don’t care—at least not publicly.

Playing a Decades-Long Game

Xi Jinping wants China once again recognized as a global superpower. At some point, even the leader.

The Chinese leadership are all students of Chinese history. They know where they came from. Now they want to regain what they think belongs to them.

They are playing a long game—a decades-long game.

China is investing at least as much in artificial intelligence, robotics, and Big Data as the West is. The Chinese military controls, directly and indirectly, much of it.

So when US and European military planners get, let’s just say, nervous about China’s technological advance, it is not without reason.

China also wants the yuan to be a global reserve currency. A necessity for that status is willingness to run trade deficits. It is no accident China’s large trade surpluses are beginning to dwindle.

That is a feature, not a bug. It is by design.

As for intellectual property and patent rights, the Chinese are rapidly creating their own.

China graduated 4.5 million, not counting software developers, mathematicians and other scientists. The vast majority of artificial intelligence patents filed last year were Chinese.

Their interest in protecting that property is replacing the former practice of stealing the IP shirt off your back.

Challenges Ahead

China faces numerous challenges, too.

Simon Hunt, who has been going to China for 25+ years and knows the country better than any non-Chinese person I’ve ever met, put it this way.

What should be clearly understood is that China’s economy is facing multiple changes in its structure. They include:

- Exporting companies relocating overseas because of rising domestic costs and American tactics (which won’t reduce the total imports, just the origination of those imports!)

- A shrinking labour force

- A focus on high-tech

- The need to build infrastructure to accommodate the migration of another 150 million from the countryside to the urban community [in addition to the almost 300 million that have already moved in the last 40 years, in the largest single migration in human history]

- The need to focus development on the lower-tiered cities and rural villages

- Whilst continuing the process of deleveraging the economy.

I talk often about how big China is and how fast it is growing. Often I mention it is the world’s second-largest economy after the US. I may have to change that practice soon.

Standard Chartered Bank said this month China will likely become the world’s biggest economy at some point in 2020 (by nominal GDP and purchasing power parity measures).

2020 is next year! This isn’t the far future.

Now, this won’t be the end of the world. It is simply math. GDP growth is a function of the number of workers and their productivity.

China has four times more workers who are getting more productive. At some point, their large numbers outweigh the higher productivity we have in the US and Europe. This is inevitable.

That rise won’t happen without some hiccups. And we have to remember that the US and Chinese economies are co-dependent in ways we can’t change quickly. Problems in either country will hurt the other—and both now have problems.

Join hundreds of thousands of other readers of Thoughts from the Frontline

Sharp macroeconomic analysis, big market calls, and shrewd predictions are all in a week’s work for visionary thinker and acclaimed financial expert John Mauldin. Since 2001, investors have turned to his Thoughts from the Frontline to be informed about what’s really going on in the economy. Join hundreds of thousands of readers, and get it free in your inbox every week.

John Mauldin Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules