Lots of good points in here. I don't think, however, that it is likely we will see a China Shock 3.0. Growth is inexorably declining in China since peaking under Hu-Wen. More likely is that history remembers these shocks as aberrations. Unless the Party really can turn against history and do what it takes to rebalance its growth model. I spent six essays unpacking why I don't think this is likely.
The trajectories in the graphs assume no end, but they must actually become asymptotic to some level at some point, because of inherent limitations: saturated marketplaces, low birthrate leading to reduction in the number of people who can work in Chinese factories, effects of protectionism, loss of a market if people don't have the money to buy the products. Are there predictions/models about how this will play out in the 2030's? Does continued growth from the Chinese standpoint assume overwhelming the emerging markets in Africa and South America? How does development of advanced industry in India play into all of this?
"China Shock" implies the source of the disruption to the global economy was China. That may be true as far as it goes, especially in your China 1.0 Shock in the early 2000s, but I believe that there is a larger failure on the part of the West that deserves more attention. The US failed to mitigate the China 1.0 Shock in affected industries, as you mention, but Europe's response to China 2.0 is far more negligent because it is structural. Europe outsourced its economy to China, outsourced its energy to Russia and outsourced its security to the US. That worked well for a time, but all three supports are no longer valid. China does not need/want European goods, Russia is an unreliable supplier of energy where dependency carries serious security risks, and the US has made it clear it will no longer provide for Europe's security. Europe is faced with a far greater challenge than a China Shock. Europe must re-engineer its economy away from trade, develop secure energy supplies and build a defense industry from scratch while, presumably, attempting to maintain the high social safety net and living standards it has in place. It seems very unlikely that all this can be accomplished, and is a far bigger issue than a China Shock, be it 2.0 or 3.0 or beyond.
Can I put in another explanation, which is probably wrong but anyway.
China Shock 2.0 is just the inverse of what the west had after the GFC. Due to correcting the housing market China has effectively been in a recession/slow growth model for an extended period and potentially for a while longer as there may still be property overhang. As a result consumption is weak and imports are weak. Responding to this weakness in domestic demand, corporations are focusing on exports for growth. Meanwhile the west has supplying lots of stimulus through chronic deficits and able to absorb much of China's surplus just as China's stimulus after the GFC benefitted western luxury goods and auto exports as well as commodities. This is what is leading to the huge trade surplus. If China could get past the property downturn then its consumption and imports will rise. It's exports would fall due to more expensive wages and inflation in a reflated economy and the trade surplus will magically get back to manageable levels?
Thanks for this - excellent recap/summary of China's economic evolution. My biggest unanswered question(s) is around demographics. China is rapidly aging - will there be a point where they don't have the workforce needed to meet both internal and external demand, and if so, what are their options?
china is simply gonna max-out ai-driven robots & double-down mercantilist economic policy. question will become "who's got the best (as in most efficient) robots"?
and, one can be sure, china's not gonna suffer any of the qualms about nuclear electricity generation that might slow western implementation of the same strategy
EU protectionism is inevitable, but in ROW outside the protected counties, there China builds the roads/railroads and markets their cars/trains. This is all part of China Shock 2.0 .
Whether China growth continues to a 3.0 shock, well, that is a separate question, isn’t it?
Lots of good points in here. I don't think, however, that it is likely we will see a China Shock 3.0. Growth is inexorably declining in China since peaking under Hu-Wen. More likely is that history remembers these shocks as aberrations. Unless the Party really can turn against history and do what it takes to rebalance its growth model. I spent six essays unpacking why I don't think this is likely.
The trajectories in the graphs assume no end, but they must actually become asymptotic to some level at some point, because of inherent limitations: saturated marketplaces, low birthrate leading to reduction in the number of people who can work in Chinese factories, effects of protectionism, loss of a market if people don't have the money to buy the products. Are there predictions/models about how this will play out in the 2030's? Does continued growth from the Chinese standpoint assume overwhelming the emerging markets in Africa and South America? How does development of advanced industry in India play into all of this?
"China Shock" implies the source of the disruption to the global economy was China. That may be true as far as it goes, especially in your China 1.0 Shock in the early 2000s, but I believe that there is a larger failure on the part of the West that deserves more attention. The US failed to mitigate the China 1.0 Shock in affected industries, as you mention, but Europe's response to China 2.0 is far more negligent because it is structural. Europe outsourced its economy to China, outsourced its energy to Russia and outsourced its security to the US. That worked well for a time, but all three supports are no longer valid. China does not need/want European goods, Russia is an unreliable supplier of energy where dependency carries serious security risks, and the US has made it clear it will no longer provide for Europe's security. Europe is faced with a far greater challenge than a China Shock. Europe must re-engineer its economy away from trade, develop secure energy supplies and build a defense industry from scratch while, presumably, attempting to maintain the high social safety net and living standards it has in place. It seems very unlikely that all this can be accomplished, and is a far bigger issue than a China Shock, be it 2.0 or 3.0 or beyond.
Can I put in another explanation, which is probably wrong but anyway.
China Shock 2.0 is just the inverse of what the west had after the GFC. Due to correcting the housing market China has effectively been in a recession/slow growth model for an extended period and potentially for a while longer as there may still be property overhang. As a result consumption is weak and imports are weak. Responding to this weakness in domestic demand, corporations are focusing on exports for growth. Meanwhile the west has supplying lots of stimulus through chronic deficits and able to absorb much of China's surplus just as China's stimulus after the GFC benefitted western luxury goods and auto exports as well as commodities. This is what is leading to the huge trade surplus. If China could get past the property downturn then its consumption and imports will rise. It's exports would fall due to more expensive wages and inflation in a reflated economy and the trade surplus will magically get back to manageable levels?
Thanks for this - excellent recap/summary of China's economic evolution. My biggest unanswered question(s) is around demographics. China is rapidly aging - will there be a point where they don't have the workforce needed to meet both internal and external demand, and if so, what are their options?
china is simply gonna max-out ai-driven robots & double-down mercantilist economic policy. question will become "who's got the best (as in most efficient) robots"?
and, one can be sure, china's not gonna suffer any of the qualms about nuclear electricity generation that might slow western implementation of the same strategy
EU protectionism is inevitable, but in ROW outside the protected counties, there China builds the roads/railroads and markets their cars/trains. This is all part of China Shock 2.0 .
Whether China growth continues to a 3.0 shock, well, that is a separate question, isn’t it?