Cracking the China Conundrum, Yukon Huang, book

Cracking the China Conundrum, Yukon Huang, 2017, book review

Ch 1
-growth model, pp 8
-unbalanced growth: low personal consumption, high investment -> huge trade surplus -> risk to lt growth
-uneven growth due to urbanization and regional differences
-personal consumption cannot grow without increased govt expenditures in social services to supplement personal consumption
-property bubble: most of debt is public, emerging private property market still finding balance
-excessive lending for huge growth: banks can pass poor decisions to state -> no risk of collapse
-competition in China also depends on local govt entities
Ch 3
orgins of Growth model
-p 42, late 1990s privatization of housing -> housing worth more that what they paid -> wealth effect spurred consumption
-wealth gap is growing, rural vs urban
1. unbalanced growth
2. debt during economic slowdown
3. external trade, FX, FDI

Ch 4 Unbalanced Growth
-p42 critical role of urbanization
-instead of artificially promoting investments or household consumption should have been raise productivity, increase public funds for social programs
-urbanization: declining share of household income, increased savings rates
-financial repression: artificially low interest rates. income taxes didn’t owrk -. too poor, easier to tap into savings, lend at higher rates -> jump start economy
-urbanization: labour intensive to capital intensive -> higher investment, more capital intensive -> reduced share of consumption
-labour scarce, wages rise, move from mfg to services increases labour costs
-migrant labour lack social services for kids -> savings rates higher
-demand for migrant labour increased -> wages increased -> urban savings rate increased -> consumption rates decreased overall -> unbalanced
-balanced growth !-> increased consumption
-rebalanced ecnomy: fully urbanized, workers mote to higher skilled jobs in services -> higher wages
-need to increase productivity, not artificially increase consumption
-hukou distorts balanced growth -> forces higher savings -> reduces consumption
-not overinvest in infrastructure but into social services, environmental -> distort balanced growth
-unbalanced growth shows China’s move from rural to urban is successful

Chi 5 debt Dillema
-debt confined to state, not consumer
-cosntruction/property firms, state sponsored, can pass problems to state
-SOEs do not bear full costs of bad decisions
-China: strong balance of payments, modest fiscal deficits, high savings rate
-bulk of debtors are SOE
-china has no credit boom
-banks highly liquid, rely on high savings rates
-corporate debt 60%: private reduced, SOE increased
-property market correction: overbuilt housing
-productivity has fallen
-urbanization will be controlled, cities will be limited in size, hukou will not hve full rights
-demand increase for transport infrastructure, highways, high speed rail

Ch6 Social
-migrant workers: limited social services, no status, limited in cities -> reduces productivity, growth prospects
-cities less densely packed than other countries
-skews income disparity, reduces ability to sell excess new housing
-migrant workers cannot buy, cannot move

2019 Dec 01 Yukon Huang: Debunking Myths About China’s Economy

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