re: If you want an inside track of the trade war impact on China follow China Observer on YT.

quote:

---

The wage increases come from company profits.

---

quote:

---

Wow...
You have some socialist stupidity in your head.

---

Interesting. Where do you think wages come from? Is paying wages from corporate profits socialist?

quote:

---

Profits are a product of total sales.

---

This is true. Some people call that call that net profit margin or just net margin.

quote:

---

China isn't making Swiss watches.

---

True again. And they're not growing Vidalia onions or making Scotch Whiskey either. They do make some nice stuff that we can't even make.

quote:

---

They profit via bulk. When overall sales go down, profit drops like a rock for low margin business.

---

What's their profit margin? Their top 3 exports are electronic equipment (27%), machinery/nuclear reactors/boilers (15%), vehicles (6%). That's about half their total exports. Do you have a number for their margin on those items off the top of your head? Maybe you think it's something like the margin on long grain rice? 2% maybe? No, much higher, and guess what, they could raise many of those prices by 10% and still undercut the US and Europe and the UK and Japan, etc. Raising wages enough to buy their own stuff won't be a huge problem.

US wages increases have averaged 5% annually over the last 5 years. Two years of 5% wage increases would allow Chinese workers to purchase nearly their entire trade surplus with the rest of the world. Just two years. If that's a precursor to runaway inflation, we're in real trouble.

quote:

---

You are going to have to watch and learn.

---

I've been doing that for a long time and plan to continue as long as I can. Haven't learned anything tonight though.

quote:

---

Money quote...
quote:
Yes. Both China and America want to pretend that China is poorer than America, but for different reasons.

China wants to rise in stealth.
America wants to say it's still on top.

---

Interestingly there are people on both sides of the political debate in this country that want to pretend the same thing, not sure why. It makes me angry, because we're sleepwalking into big trouble.

quote:

---

wdhalgren,

Never try and solve an economic problem with a socialist answer.

---

Please point out to me where I tried to solve a problem with a socialist answer. China is a centrally planned economy and I'm discussing their options. If China sells less goods to foreign markets, they have two choices; close factories or sell more stuff at home. But their workers are poor and can't afford to consume more. So the workers either get a slightly bigger piece of the pie, or the govt tells the factories to close and send the workers home to forage for food.

I guess I could've suggested that the Chinese govt stop centrally planning the economy and let if flourish under free markets, but I prefer to stick to realistic scenarios. Realistically, if China wants a bigger consumer class to make up for lost exports, one way or another they'll need more money in the pockets of consumers. Instead of giving other nations the benefit of their internal production, they'll have to return a bit more to their own citizens.

quote:

---

Not for the US
Vehicles is 8th, furniture is 3rd. The US isn't a friendly market to Chinese vehicles.

---

It doesn't matter where they sell those electronics and cars and nuclear reactors, those aren't low margin products, they're low cost because the workers get very low wages at home.

quote:

---

You do realize the inflation and the cause of said inflation over the past 5 years...Has buying power gone up or down? Real earnings are down from that spike in 2020. Why? Because your wage growth you want for China is a lagging indicator of inflation.

---

I'm starting to see the problem; you don't understand supply and demand curves and how they affect prices. You don't understand that rising wages don't automatically translate to inflation. You apparently don't understand the difference between a lagging and leading indicator because you said increasing wages would be inflationary and then you said "your wage growth you want for China is a lagging indicator of inflation."

Why did we get an inflation spike starting in 2020? Supply and Demand. We shut down the economy, production plunged, supply plunged. Printed three trillion dollars and flushed it into the economy to stimulate demand at the same time. Demand exceeds supply, that's inflationary. In fact, I predicted exactly that in early 2020, after we shut down the economy, the federal reserved announced their latest round of debt monetization, and the govt started mailing out checks of stimulus money.

Here:
LINK

quote:

---

In my opinion, "completely irrational" describes folks who think that the Federal Reserve has discovered a free lunch; an almost childlike idea that we can reduce poverty by putting more and bigger government checks under the pillows, using the Fed in the role of tooth fairy. It's quite alluring to think we can use fresh new money to paper over and thus mitigate the economic and social impact of the lockdowns. In truth, monetizing debt may well end up being the deadliest aspect of the whole thing, simply because people can't feel the pain right away so they assume it's all going to work out just fine. I'd rather feel the heat immediately when I touch hot iron. If the govt tried to levy a direct income or asset tax to pay for those trillions in bailouts, or even committed to an immediate and permanent end to Fed debt monetization, I suspect it would clarify the true cost in a hurry.

---

quote:

---

Will this be a permanent weekly stipend for all the folks who lose their jobs or their businesses, financed by printing press? Will those folks making more staying at home be happy when they go back to work for less pay, or will we fire up the wage price spiral of inflation, resulting in even more poverty?

---

And here:
LINK

quote:

---

the economic damage, destruction of small business (middle class), destruction of currencies (inflation), destruction of the incentives that are the glue of our civil society (personal responsibility), is the real pandemic now.

---

I understood the risk of what we were doing and why it would cause inflation. I understood that stimulating demand would cause inflation in a production vacuum, and that it could feed on itself in a wage price spiral. And I understood that damage was being piled onto decades of pre-existing inflationary damage. But inflation's not a formulaic process driven by wages, the economic circumstances matter.

The situation we're discussing in China will be totally different if they redirect exports inward and raise wages. Supply goes up at the same time as demand, that's less inflationary. Reduce growth rate at the same time via less investment, that's less inflationary.

Get an Econ 101 textbook and look at the pictures. Maybe that will help.

quote:

---

Americans can largely afford to buy American made products even if more expensive than Chinese products

---

Not only can they largely afford it, I think they will largely want to if they don't already.

I don't know about y'all but the rise of Amazon has left me with a surplus of stuff and a lack of quality stuff. And you turn around and suddenly you can't really even find quality alternatives for lots of things. I can't speak for everyone but I think a rise in "made in the USA" will be a welcome sight if even accompanied by higher prices.

quote:

---

I'm starting to see the problem; you don't understand

---

The fundamental problem is that you don't understand any of the words you type.

Everyone saw inflation coming. There were plenty of articles online.

You made claims about Henry Ford.

You made claims that China could inflate salaries nationwide to eat up the loss of US trade.

You really don't understand what we import from them.

https://tradingeconomics.com/united-states/imports/china/nuclear-reactors-boilers-machinery

Then you act like omg econ 101.

Let me make it simple for you.
Please read the detailed list of the items China exports to the US.

Those are heavily low margin items.

They will lose trade, for a number of those items there is no domestic desire.

Then read about prices and price controls in China, it is not a supply and demand country.

Food is kept artificially low to keep labor low. A top meal in China is super cheap. An IPhone is months of a workers salary, it's like buying a car.

Every export to the US generates far more Yuan than it would domestically because of the artifical weakening of the Yuan.

Here's an example.

A chicken could cost 5 Yuan in China, it could cost $10 in America. A Chinese worker could buy 500 chickens a month and a US worker 900 chickens a month in their respective countries.

But due to exchange rate manipulation, $10 American could in China buy 20 chickens.
5 Yuan couldn't buy one chicken in America.

This keeps Chinese export prices low via low salaries.
But now:

quote:

---

United States Imports from China of Tools for Working in the Hand was US$2.87 Billion during 2024

---

That's basically 21 billion Yuan.

Now let's turn that into actual chicken prices.

Chicken in China is 5 Yuan per kilo or 2.27 Yuan per lb
So that's 9.25 billion lbs of chicken.

So how many hand tools do they need to sell in China where a really good hammer costs 100 Yuan to make up the difference.

Facts matter.
You have to show your work and actually use real costs and imbalances.

This isn't a theoretical econ 101 problem.

This is why China needs a trade agreement with Europe, they know they can't continue absorbing the loss of US trade domestically.

quote:

---

This is why China needs a trade agreement with Europe, they know they can't continue absorbing the loss of US trade domestically.

---

I'm all for a good debate, but if you can't organize your thoughts on paper it's hard for anyone else to follow your train of thought. Try choosing a single point and then develop it. Paragraphs work well for separating the various parts of your argument.

If I had to guess at what you're trying to say (cobbled together from multiple posts), it's that China can never replace their export driven economy with one balanced between consumption and production, because it would be hyperinflationary. Even though the output of their production is quite technologically advanced and industrial capacity to meet increased domestic demand is already online, shifting another 5% or so of the GDP pie to incomes would cause runaway inflation. And even though employee compensation as a % of GDP is considerably higher in places like the US and Europe, China can never make that transition.

After that it gets pretty muddled up in things like low profit margins (which you have no data to back up because it doesn't exist outside of China) and artificial exchange rates, which are absolutely manipulated across all currencies and are obviously destined to change as trade becomes more balanced and/or countries destroy their currencies.

As I said earlier, I don't know how well their version of central planning will manage the transition from export driven to more balanced. I can't even quite figure out how much debt they have, or the size of their broad money supply. But they have to attempt that transition and to do it successfully will require shifting more purchasing power to a growing middle class as they balance trade. That middle class is a hallmark of what we call developed economies.

Anyway, here is the introduction to their plan that was put out a month ago.

quote:

---

BEIJING, March 16 -- China on Sunday made public a plan on special initiatives to increase consumption, as the world's second-largest economy moves to make domestic demand the main engine and anchor of economic growth.

The plan, issued by the General Office of the Communist Party of China Central Committee and the General Office of the State Council, aims to vigorously boost consumption, stimulate domestic demand across the board, and increase spending power by raising earnings and reducing financial burdens.

---

And below is part of my first post that started this string (I omitted my admittedly loose Henry Ford analogy to avoid triggering you again). Whether China follows through or not, and that future remains uncertain as does ours, their plan obviously agrees with my assertion about the path that would be necessary to achieve that goal.

quote:

---

China will have to sell a lot more to their own people, which means they have to raise wages so more people can afford their own products...A larger part of the profits from China's production has to reach the consumers' level.

---

quote:

---

Chinese will sell to next best customer or consume these goods themselves

---

That's like saying if everyone stopped buying from Walmart, Arkansas would just consume the inventory itself. Moronic as moronic can get.

quote:

---

Dude, you're just uneducated and ill informed

China CANNOT, IN ANY WAY,, lose their international trade and still prosper. It won't happen, they'll implode

---

...

That's what I was saying?

quote:

---

I meant that for the other guy...lol

---