Results for “china”
2943 found

Can all European countries be like Germany?

by  Tyler Cowen in

Martin Wolf says no.  For instance:

But Germany can be Germany – an economy with fiscal discipline, feeble domestic demand and a huge export surplus – only because others are not.

To be sure, Greece is unlikely to end up as "like Germany."  But in this argument — which I'm seeing pop up in many places — I think there is a slight conflation between absolute and relative market shares.

Say that Portugal, Italy, and Greece were more like Germany, economically speaking that is.  Toss in Albania to make the contrast starker.  They would have higher productivity and higher output.  They would export more.  But with their higher wealth, they would import more too.  That includes more imports from Germany, most likely.  German *net exports* might well decline, as Germans buy more olive oil and high-powered computer software from Albania.  But German exports need not decline *on net* (over a longer run of continuing global growth they certainly will not decline) and that should prove good enough for the German model to sustain itself.

No economist thinks that being wealthy is a zero-sum game.  "Being like Germany" isn't exactly the same as being wealthy, but the German model succeeds (in large part) because of its high absolute level of exports.  "Net exports" is a zero-sum game at any single point in time, but when it comes to secular growth that's also not the variable which matters.

The bottom line is that people are blaming Germany (and China) a bit too much here.

Mistakes in Grenada

by  Tyler Cowen in

After Hurricane Ivan, the government of the People's Republic of China (PRC) paid for the new $40 million national stadium, and provided the aid of over 300 labourers to build and repair it. During the opening ceremony, the anthem of the Republic of China (ROC, Taiwan) was accidentally played instead of the PRC's anthem, leading to the firing of top officials.

That's from Wikipedia.

*Country Driving*

by  Tyler Cowen in

The author is Peter Hessler and the subtitle is A Journey Through China from Farm to Factory.  It is the account of the author's driving journeys throuh the Middle Kingdom.  Here is one bit:

…Chinese drivers haven't grasped the subtleties of headlight use.  Most people keep their lights off until it's pitch-dark, and then they flip on the brights.  Almost nobody uses headlights in rain, fog, snow, or twilight conditions — in fact, this is one of the few acts guaranteed to annoy a Chinese driver.  They don't mind if you tailgate, or pass on the right, or drive on the sidewalk.  You can back down a highway entrance ramp without anybody batting an eyelash.  But if you switch on your lights during a rainstorm, approaching drivers will invariably flash their brights in annoyance.

I found this to be an excellent travel memoir, a very good book on transportation economics, a wonderful book on China, and most of all a first-rate study of the adjustments and changing norms which accompany rapid economic development.  I also found it to be a very funny book and, for whatever reason, I don't find most books funny. 

Here is another bit on China:

Often I passed billboards dedicated to the planned-birth policy, whose catchphrases ranged from tautology ("Daughters Also Count as Descendants") to unsolicited advice ("Marry Late and Have Children Late") to outright lies ("Having a Son or a Daughter Is Exactly the Same").  As I drove west, the messages became bigger, until barren hillsides were covered with slogans, as if words had swelled to fill the empty steppes, "Everybody Work to Make the Green Mountain Greener" — this in forty-foot-tall characters across an Inner Mongolian mountain that was neither green nor the site of a single working person.

Recommended.

Test your moral intuitions, Kunming edition

by  Tyler Cowen in

This was a truly strange article, not only for its content but also for its odd shifts in tone.  It seems that in China there is a theme park of dwarfs who perform for tourists; this reader felt he had stepped into a Brian Barry article.  Here is one sample of what goes on:

And there is the Swan Lake parody, a crowd pleaser in which male dwarfs dress up in pink tights and tutus and wiggle their derrières.

“The first time I wore that, I felt really awkward,” said Chen Ruan, 20, who used to collect refuse with his parents. “But then I got up on stage and people liked it. People were applauding and I felt proud.”

So is this morally OK?  Among other things, the article suggests that this theme park is raising the status of dwarfs, and the disabled, in China, at least relative to how things had been.  You'll note that Chen Ruan, cited above, used to pick up refuse. 

Is it better or worse that some of the dwarfs seem to enjoy the work?  In this kind of "few other good employment options, culture of face-saving and honor, don't insult the boss to prestigious foreigners" setting, are there any employee reports that a reporter actually could trust and pass along at face value?  What is the proper moral stance of a journalist toward a story like this one?

By the way, the piece claims that the park is not (yet?) profitable.

Speculative thoughts on shadow banking and the fiscal deficit

by  Tyler Cowen in

I've been thinking about my last Gary Gorton post and the use of Treasury securities as collateral for the shadow banking system.  You will read many arguments that we should restrict the shadow banking system and limit its leverage and it is easy to see where these views come from.  At the same time we observe that the U.S. federal government is on an unsustainable fiscal path, and yet able to sell its debt securities at very high prices.

Might there be a connection here?  What is the actual trade-off?  If leverage and shadow banking were much smaller, and we had safe, itty-bitty Canadian-style banks, how much would the demand for Treasury securities go down?

Just asking.  If China stopped manipulating its currency, how much would the demand for Treasury securities go down?  How much harder would it be to finance deficits?

Why are these issues rarely discussed in terms of trade-offs?  I'd like to see a deeper study of the factors — possibly temporary or "artificial" — holding up the demand for Treasury securities.

Revisiting Simon-Ehrlich

by  Alex Tabarrok in

Paul Kedrosky revisits the famous Simon-Ehrlich bet:

Without getting into it too deeply, here are some things worth knowing. Given
the above graph of the five commodities’ prices in inflation-adjusted terms, it
will surprise no-one that the bet’s payoff was highly dependent on its start
date. Simon famously offered to bet comers on any timeline longer than a year,
and on any commodity, but the bet itself was over a decade, from 1980-1990. If
you started the bet any year during the 1980s Simon won eight of the ten decadal
start years. During the 1990s things changed, however, with Simon the decadal
winners in four start years and Ehrlich winning six – 60% of the time. And if we
extend the bet into the current decade, taking Simon at his word that he was
happy to bet on any period from a year on up (we don’t have enough data to do a
full 21st century decade), then Ehrlich won every start-year bet in the 2000s.
He looks like he’ll be a perfect Simon/Ehrlich ten-for-ten.

ehrlich-table-2

So, what does all this mean? A few things. First, and most importantly, it
means Simon was right but fairly lucky. There is nothing wrong with being lucky,
of course, but compulsive Simon/Ehrlich-citers need to be reminded that it is no
law of nature (let alone of rickety old economics) that commodity prices
(inflation-adjusted or otherwise) trend inexorably downward, even over a
decade.

If the conclusion is that prices go up as well as down, even over a 10 year period, then there isn't much to complain about in Paul's analysis.  But I think he misses the key point.  The bet was never fundamentally about prices, the bet was about scarcity, living standards and whether we were running out of natural resources–remember that at the time Ehrlich was predicting hundreds of millions would die of starvation and even that England would not exist in the year 2000!  Prices were just a convenient but imperfect way to mark the bet to market.

The reason prices have risen in the 1990s is not that things are getting worse but that things are getting better–especially in China and India where things have been getting much better.  As China and India have become richer demand has increased tremendously in these countries putting upward pressure on prices.  In other words, prices have risen because the value of resources has risen.  That's quite different–indeed the opposite–of what Ehrlich was predicting.

To see this concretely take a good which is really fixed in supply, Picasso paintings.  Now consider two worlds – in one world the price of a typical Picasso is $50,000; in the other, it's $5 million.  Which world would you guess has a higher standard of living? 

Words of wisdom

by  Tyler Cowen in

From Felix Salmon:

…if you decided to short only countries whose foreign exchange reserves reached some large proportion of gross world product, you’d be batting 2 for 2 right now as you started shorting China. First you would have shorted the USA in the 1920s, and then you would have shorted Japan in the 1980s.

You can make a lot of mistakes by analogizing governments to countries, but every now and then it is worth doing.  If I were a major investor, I would get nervous each time I saw a company with massive cash reserves on its balance sheet.  That's often a sign that discipline is headed out the window.

To be sure, it is possible for a government (or company) to make mistakes in the other direction as well.

Why do the Chinese save so much?

by  Tyler Cowen in

Yes, it's Eric Barker day.  Here is another entry from Eric's blog.  We all know that there are many more men in China than women and here is what that equilibrium looks like:

“The increased pressure on the marriage market in China might induce men and parents with sons to do things to make themselves more competitive,” Wei says. “Increasing savings is one logical way to do that, to the extent that wealth helps to increase a man’s competitive edge. Parents increase household savings mostly by cutting down their own consumption.”

Wei worked with Xiaobo Zhang of the International Food Policy Research Institute in Washington, D.C., to see if his hypothesis held up, comparing savings data across regions and in households with sons versus those with daughters. “We find not only that households with sons save more than households with daughters in all regions,” Wei says, “but that households with sons tend to raise their savings rate if they also happen to live in a region with a more skewed sex ratio.”

The effect is significant. The household savings rate in China rose from about 16 percent of disposable income in 1990 to over 30 percent today, which is much higher than most countries. About half of the increase in the savings rate of the last 25 years can be attributed to the rise in the sex ratio imbalance. “It’s a very high ratio of savings to income,” Wei says. “The comparable savings rate in the United States would be 2 or 3 percent before the crisis, and about 6 percent since the crisis.”

Even those not competing in the marriage market must compete to buy housing and make other significant purchases, pushing up the savings rate for all households.

The original source is here.  You'll note, by the way, that low wages and a high savings rate are the fundamental reasons for global imbalances, not Chinese currency policy.  If this is true, one implication is that the Chinese attempt to cut population leads indirectly to those global imbalances.  If you "fear China" (whatever that means), the current imbalances might be better than the relevant alternatives, namely a China with high and growing population and all the environmental problems which that involves.

There's plenty of talk from people wanting to make China "do it right" but only rarely do those discussions recognize all the constraints which China is laboring under.

Words of wisdom

by  Tyler Cowen in

You could construct a whole blog of mishnah on Scott Sumner, but no, I cannot link to every post he writes.  Nonetheless I especially liked this passage:

If our banking system absorbs trillions in losses you can be sure the government will step in, regardless of whether we have big banks or small banks.  And if our banking system isn’t in crisis, then FDIC is perfectly capable of handling an isolated bankruptcy, even at a large bank.  In any case, I can’t imagine a future where the US doesn’t have any large banks, but Europe, China, Japan and Canada have lots of large banks.  Can you?  Wouldn’t it make more sense to try to prevent the banking system from suffering trillions in losses after a bubble bursts, perhaps by requiring sizable downpayments?

But then I read that the FHA is about to set much tougher standards for FHA mortgages–they plan to require borrowers with a 590 credit score to put down at least 3.5% downpayments.  As Tyler Cowen recently argued, you knew Congress wasn’t serious about global warming when they refused to make Americans pay more for gasoline.  And I would add that you can be sure that the populists who want to “re-regulate the banking system” aren’t serious when all they can do is talk about 3.5% downpayments for bad credit risks.  It is so much more fun to bash big banks.