Hugh White versus Clive Hamilton on the rise of China

Must listen here.

I obviously side with Clive Hamilton in this debate. For me the key point is that Hugh White is no economist. Indeed, in relying upon Australian Treasury forecasts for Chinese growth ten years hence, he is taking the word of muppets demonstrably unable to get their own economy right, let alone the black box of China.

There are three major points to make:

  • first, the Chinese economy is going ex-growth over the next decade as its debt problem stagnates all, meaning its catch-up period of growth ends and so does its military one;
  • second, there is a large difference between measuring output as GDP without writing down misallocated capital as China does, and the way that the US does it. Once this difference is included, real Chinese output is already considerably lower that it appears;
  • third, China’s demographics are terrible, roughly equivalent to Japan as its decline began, whereas the US has much better and demographics which, as we know, are economic destiny.

In short, if economic power is strategic power then China is currently passing through its zenith not in the foothills of rising Himalayan power, which is not to say that it won’t be powerful, but it is to say that it can be contained.

Comments

  1. China clearly looks as though it is going to do a Japan – BUT the big the big difference is – what is Xi’s end-game with his massive military build up?

    • All part of the deal in being a power. I suspect as the economy declines CCP will get more aggressive externally (and internally) for forced legitimacy.

      • DominicMEMBER

        Debatable. That’s WW3 right there. China will continue to tiptoe around Taiwan and bully other smaller nations in the area. They are not winning a hot war with the US any time soon.

    • I hear people say China ‘will do a Japan’ but to me it seems like comparing apples to oranges. China is a tightly held dictatorship which does not do things for economic gain but rather to strengthen the party’s hold on the country. Japan has since WWII been a legitamate democracy and capitalist society that mostly does things in a capitalist way. China has built idle overcapacity whereas as I understand Japan just had an asset pricing bubble but did not necessarily have an overcapacity problem. It would seem China needs a revolution against their repressive govt. to get out of this.

  2. It doesn’t bode well for Australia.
    
🔻No Trump China Trade deal, China continues to falter, low growth, our exports reduced.
    
🔹Trump China Trade deal – Australia, NZ, Indonesia & many others face major loss in trade exports.
    
And what do we do with the 1.019 million Chinese foreign born that include 750,000 Chinese mainland communists now in Australia?
    
▫️256,000 Chinese HK, Malay, Indonesian & then later Chinese mainland communists now with citizen grants.

    ▫️423,000 mostly mainland Chinese communist PR who remain in Chinese passports but are here for the Medicare & Welfare.

    ▫️340,000 mainland Chinese communists TR – part of the 2.561 million TR / NZ SCV influx. Foreign students, NZ SCV rear door entry, skilled & sponsored, etc.
    
That influx is likely to compound & accelerate with even more Chinese economic & aged refugees flooding in on the various visa pretexts & alibis.

    Green lighted by a naive Australian government.

    • The western narrative these days that China is somehow inferior to the west is quite astounding, here some facts:
      1- China is a large populated country, so few hundreds even thousands that wants to come to Australia is just a few who falls into the cracks, call them economic, aged refugees or anything, you can find these types everywhere.
      2- China is superior to Australia in many ways, they make your phone, your TV, your paper clips, your cloths, your shoes, your computer, your network devices, your mug, your socks, your washing machines, your fridge, your chairs, your tables, your couches your lamps and your keyboard that you ‘re typing your arrogant remarks on.
      3- China is superior in technology, research and even in Space. They have a space agency and literally they have a probe roaming the far side of the moon as we speak. Here they just not aware that we do not have the ability to match their research capabilities and even are unfair to them to compare.
      4- China does have the fast train that is considered a major economic drive. The only fast train in Australia is the one taking us back to the 1950s
      5- China is a super power when it comes to nuclear power, something that is beyond our wildest imagination here in Australia.
      6- It seems that the superiority complex in the west about the Asian era is becoming so absurd that they are associating China with capitalism when they’re buying our houses, but they are communists when they buy our politicians.

      I remember when I was a kid, the story of the “Rabbit and turtle race”. The rabbit was so arrogant that the turtle actually beat him and waited for him a long time to catch up. I think this story resembles what is happening in the west these days. The west cannot contemplate that it fell behind and continue to fall, thanks to the neo-liberalism that employed millions of scientists and engineers in financial institutions and fed the financial giants with rocket scientists instead of directing the whole to a better societies.

      It was a great and appreciated effort that was done by the bankers and the media to convince the average Joe that electing millionaires and Billionaires who shafted him in the first place into their governments and senates is a good idea to get ahead in life.
      Really I appreciate that tremendous task as it comes to fruition as we see in the west.

      • GunnamattaMEMBER

        I totally agree Australia has lots of work sorting out how it approaches China. By this I mean the Australian public and Australian media (which I think about the developed world’s worst media – and I actually do think Russia has a superior media world than Australia) need to think a little harder about the relationship.  I see the simple paradigm as this – There is a Liberal democratic tradition in the (mainly) English speaking world, which for at least 40 years has run heavily on a mantra of suspicion about government involvement in the economy, and even historically has been largely averse to the state (no matter what state we are talking about – but particularly Australia) overtly controlling the economy.  I completely agree that narrative has shortcomings, and I think the era of ever decreasing state involvement has reached the denouement of the point where it makes remote sense.  I see that ethos as bumping into China – an economy openly controlled by the state, a one party state, and a one party state which does visit some downsides on its own people in terms of their civil liberties and corruption (which I also think exists significantly more than is generally realised in the western world).  So first of all I see the China – Western World dynamic as being in the first instance a state/non state control grasp of the socio economy decision.  I cant really see the western world wanting an enduring state role in the economic decisionmaking, although I do think that (and I think Trump is a good example) there is certainly an increasing mood for increased government activity to limit the downsides of capitalism as we currently see it (first of all low wages, increased debt, but even more importantly the enfilading of all access to higher value self actualisation opportunities for individuals by the generally monied elite ends of town with the financial banking real estate nexus first in line).   In China that control takes some fairly heavy forms of social control that I am not sure would be replicable in a place like Australia (for starters).

        But beyond that dynamic I see something even bigger.  China is in the midst of its own economic development ‘take off’  – so far it has done amazingly well.  However I would argue that it hasn’t done well enough, and that although it can obviously lift vast numbers of its own citizens out of poverty, I don’t think it can lift them all out, and keep them out, and that despite currently having maybe 400 million people living urbanised lifestyles akin to the western middle class, they still have maybe a billion people still living in either poverty or in essentially agricultural, non highly productive circumstances.  I suppose essentially I see China as being in the mother of all middle income traps.  I see this coming into play increasingly at the same time as China is in a position to influence the economic world in which it has carved (and is still carving) its niche.  I see it as ultimately reaching a point where it will be in a position of needing to make economic decisions on the basis of financial management or mainstream economic principles (ie production will gravitate to where costs are lower) in such a way as the Chinese state will need to make economic decisions between the advantage of lifting more of its own people out of poverty, or allowing business to simply manage the labour capital nexus as it sees fit.  I am not sure the decisionmaking processes of the Chinese state would ever be remotely plausible to anyone outside China sufficient for them to have confidence that they still have an economic niche sufficient to support their population.  I tend to see Australia  as a classic case study here. A very small (as seen from China) population, with weak domestic information institutions already accustomed to presenting what it is paid to present, without a meaningful economic base apart from resources, which it has provided its people with a fairly superior quality of life.  My guess would be that Chinese decisionmaking processes would invariably see Australian interests as ‘spoiled’ and ranking somewhere below whatever priorities the Chinese state had in play.

        I reckon all of what we are seeing in this election campaign revolves around the refusal of either the ALP or the LNP to come out and acknowledge the economic straitjacket they have placed us in (beholden to China).  This weeks phenomena of more First Home Owner schemes I found laughable seeing as everyone knows that they simply increase house prices and will do nothing for housing affordability.  But the moves by both the Libs and the ALP are essentially about trying to cultivate some sort of view amongst Australians that everything is OK, and that we should simply continue selling houses to each other at ever inflating prices and tell each other that this is economic growth, and bring in more immigrants to simply play along with the same game – more bums on more seats means more demand for houses – means higher house prices – means continued ‘wealth effect’ – which flows through into retail.  For me the link has palpably died.  Housing construction has rolled over, household spending is so mired in debt management that it isn’t supporting retail, more and more people are finding there are only low paying gigs for them to enter (or switch to) and generally only part time hours.  All this in an economy which has the worlds most expensive employees, the worlds most expensive land costs, and has crafted for itself the worlds most expensive energy costs.   For mine Australia has deliberately crafted an economy which no right thinking investor in economic capacity would ever meaningfully think to invest in (and which they would find inferior to almost anywhere in the world).

        As gloomy as it sounds I think that before Australia can even remotely look at trying to balance China and its place in Australia’s economy, it needs to go right back to the start of the Hawke Keating era and start all over again thinking about economic competitiveness and crafting for itself an economic niche.  Until it does that I think it will continue to have Chinese related interests in Australia (and I think they are all connected with the Chinese state one way or another) buy outcomes within Australian communication and political processes – which effectively amount to a degree of Chinese influence being embedded in Australian decisionmaking.  When I observe that I don’t think there is any significant different between US or UK interests playing a similar game for maybe 70 years, but that game by UK and US interests has been played against a backdrop of suspicion of overt state involvement in economic and legal decisionmaking, whereas the new purveyor of influence  has state primacy at its core.

      • Ah yes….the famous story of “The Rabbit and Turtle Race”, much beloved by children everywhere.

        Or to put it another way, fcuk off you malignant oozing chancrous pustule on the anus of society. We’re not members of any Australian parliament, so we see your CCP bullsh1t, we know what it is and we laugh at your pitiful attempts to influence us in broken English.

        Just to finish off, your mother was a hamster and your father smelt of elderberries.

      • Even StevenMEMBER

        @ Mr Walker – I think that’s inconsistent with crash’s narrative. I’m sure, according to crash, that they produce only the most technologically advanced milk in China. The best you can get anywhere in the world.

      • @LSWCHP …dude..love it, but you missed “I fart in you general direction you …pig dog” a MP classic the SBS replays every few months. On a serious note “we’re f….d”.

      • DominicMEMBER

        I do business in China and have visited several times. In trying to sum up the experience I would describe it thus:

        It’s like visiting someone in a cave in Stone Age times and then discovering the very latest flatscreen Samsung TV in the living area.

      • John Howards Bowling Coach

        @crash . Yes you’ve published the official narrative here. BUT you have overlooked the reality. China is a craphole. Anyone with the ability to leave China is moving their assets and getting themselves a Visa to live elsewhere. Often they return to China once they have that Visa because the system in China works for making money although the environment is disgusting, so most wealthy Chinese struggle to adapt to anywhere outside in regard making money. So they head back to China to keep making money and enjoying the benefits of being wealthy in a 3rd world country, such as low wages for foot massages, maids etc as well as parents to raise their kid. However the really terrible thing in China is that the majority of the people have no manners, they push in, lie, steal, cheat, and will do anything to take your money. You’d think I hated Chinese but in fact I don’t. My wife is Chinese and it is actually her who showed me the reality of the nature of what the CCP have created, a society of greedy selfish peasants.

  3. John Howards Bowling Coach

    Last November my translator, a final year international relations student in a top Shanghai University, was talking to me about the trade war. Her statement to me was that the Chinese know they can’t win the trade war with the USA. So even the students know it. Chairman Xi is the same model Chinese dictator as the last 100+ who have installed themselves as leaders throughout the history of China. He is ready to sacrifice anyone for his own lust for power, it’s always been thus in China. However the other uncomfortable reality of China is that each dynasty (yes the CCP is just another dynasty) ends in bloodshed with the incumbent Emperor being executed. Chairman Xi knows that’s his destiny but like all before him, he’ll keep on fighting to retain sole power of the middle kingdom right up to the last breath is drawn.