China's (US$8,480) nominal per-capita GDP surpasses Mexico (US$7,993)

Martian

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This year is coming to a close. So what's new in economic news? Well, China's US$8,480 nominal per-capita GDP has moved beyond Mexico's US$7,993 (see IMF citation below). This is interesting for a variety of reasons.

Mexico joined NAFTA in 1994. Mexico had 23 years to develop its industries. Nothing happened. Instead, only maquiladora "screwdriver" plants were built along the US-Mexico border.

Some Mexicans had been resentful of China. They thought that if China had never joined the WTO in 2001 then Mexico would have taken China's current position as a great industrial power. This kind of Mexican-nationalist reasoning is delusional.

Firstly, China is a top-ten annual holder of USPTO patents. In sharp contrast, Mexico has only held a negligible number of USPTO patents. There is a stark difference between Chinese innovation (e.g. Huawei in telecom, DJI in drones, Alibaba in online sales, SANY in construction equipment, etc.) and Mexican stagnation.

Secondly, China created a positive feedback loop from its exports. Chinese USPTO patents allowed China to charge above-market prices for its products. The surplus profits were plowed back into the businesses and this created national champions over time. Huawei dominates the worldwide telecom equipment business by being a pioneer in SDN (Software-Defined Networking). DJI has a dominant 70% of the worldwide consumer drone market. I bet you can't name a single Mexican company that dominates its business segment.

Thirdly, China conducts a large amount of basic science research. China is world #2 on the NATURE INDEX for published peer-reviewed scientific research papers. In comparison, Mexico is ranked at a dismal #35. According to the NATURE INDEX, China's science output is almost 100 times the Mexican output.

In conclusion, Mexico can no longer complain that Chinese wages are lower and create unfair competition. Mexico is now the lower-wage country. Unfortunately for Mexico, China will prove that wages are only a small component in manufacturing. China is investing heavily in industrial robotics and the Chinese manufacturing economy will continue to boom. Mexico's problem is that it always tried to blame others for its own failure to innovate and roboticize. A country's destiny has always been in its own hands. If you're willing to work hard and industrialize, it will happen. China has proved it in the last 40 years.
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World Economic Outlook Database, April 2017 | IMF

 
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Martian

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China is an export based country where 40% of its GDP is exported. Hence GDP figures means not mean much.
You are completely wrong.

China's 2016 nominal GDP was $11.2 trillion.

China's exports are about $2 trillion.

That's less than 20%. Not the 40% that you are claiming.

A more accurate view is to look at China's trade surplus. Since Chinese exports (machine tools, electrical equipment, etc.) are dependent on Chinese imports (such as iron ore), it is the trade surplus that matters. Without the Chinese exports of machinery, there would not be the raw-material import of iron ore.

After deducting Chinese imports from Chinese exports, the Chinese trade surplus is about $550 billion per year.

$550 billion / $11.2 trillion Chinese GDP = 5% of China's economy

Thus, China's trade surplus is only a minor 5% of the Chinese economy.
 

nongaddarliberal

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This is actually a significant milestone. Mexico and Brazil are textbook middle income countries, not very poor, not very rich. With catching up with Mexico's per capita income, China has de facto transitioned from a low income to a middle income economy.

And I never agreed with the IMF description of middle income, which categorizes all countries with over 1500 USD per capita as middle income.
 

nongaddarliberal

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This is actually a significant milestone. Mexico and Brazil are textbook middle income countries, not very poor, not very rich. With catching up with Mexico's per capita income, China has de facto transitioned from a low income to a middle income economy.

And I never agreed with the IMF description of middle income, which categorizes all countries with over 1500 USD per capita as middle income.
And before anyone jumps at me calling me pro chinese, I'm not. Nor am I ignorant of their debt problem. But reaching 8500 USD per capita income is a significant milestone, keeping in mind their per capita income was lower than ours in the 1980s.
 

Armand2REP

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And before anyone jumps at me calling me pro chinese, I'm not. Nor am I ignorant of their debt problem. But reaching 8500 USD per capita income is a significant milestone, keeping in mind their per capita income was lower than ours in the 1980s.
When every man woman and child in China Inc collectively owes $30,000 and $8,000 is the median income, how do they pay that back? It is all about the high debt.
 

nongaddarliberal

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When every man woman and child in China Inc collectively owes $30,000 and $8,000 is the median income, how do they pay that back? It is all about the high debt.
Let's see how they work it out. If it blows up in their faces, good for us. If not, then business as usual.
 

Martian

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http://m.theglobaleconomy.com/China/Exports/

Chinese export as % of GDP was 38% from 2008 to 2012 but declined to 24% in 2016 as per world bank. The latter because Chinese economy is on a decline mode in last three years.
I've already said that China's exports as a percent of GDP was about 20%. Your cited figure of 24% is not that different from my own calculation. I don't think it's worth arguing over 4%.

However, your original claim that China's exports were 40% of GDP is still completely wrong.
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Regarding Chinese debt, it is a non-issue.

China's debt is owed to itself. If it wanted to, the Chinese government can simply write off the debt.

China does not owe massive debt to foreigners. There will be no default and no change to China's credit rating.

Currently, China's international credit rating is AA-. This stellar credit rating is justified by China's $3 trillion foreign exchange reserves that can easily pay off foreign debt.

China's domestic debt doesn't matter. It is simply an accounting issue of Chinese firms owing Chinese Yuans to the Chinese government. China's Yuan is a fiat currency. The Chinese government can issue as much Yuan as it wants; just like the US Federal Reserve engaging in Quantitative Easing.

China's currency, the Yuan, is holding steady at around 6.5-6.8 Yuans per US Dollar. There is zero chance of China defaulting. Since China's debt is domestic, it should be ignored. There is no risk to foreigners in being repaid in US dollars.
 
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IndianHawk

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China's debt is owed to itself. If it wanted to, the Chinese government can simply write off the debt.
This is borderline delusion. A debt is a debt and somebody has to pay it. If chinese govt writes off the debt than it's revenue would collapse and fiscal deficit will need to be increased to insanely proportions.

That will take chinese credit rating to junk standard. Investment in china would collapse.

If it was so smart to write off debt every country would be doing exactly that. China faces utter disaster if it does not pay debt.

One way or the other the debt will be paid.
Money doesn't grow on tree anywhere .
 

Martian

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Most countries currency is Fiat currency.
:facepalm: why do even bother posting about economics.
Many countries owe their debt in foreign currency. Thus, they have a very poor credit rating. For example, India's credit rating is BBB- (which is only one step above junk level). The reason is that India has a huge trade deficit of about $100 billion annually, which is denominated in US dollars.

In sharp contrast, China has a trade SURPLUS of about $550 billion annually. Thus, China's credit rating is AA-.

In China, SOEs (State-Owned Enterprises) owe money to the Chinese government. An example is a steel company that owes debt to the government. This is an odd situation. The steel company is owned by the Chinese government. Thus, the Chinese government owes money to itself.

Unlike the free market, there is no one to call in the debt. The Chinese government can write off the debt to itself whenever it wants. Alternatively, the Chinese government can print more Yuans to pay the debt to itself. Thus, China's Yuan debt-level has had no effect on its credit rating.
 
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IndianHawk

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Many countries owe their debt in foreign currency. Thus, they have a very poor credit rating. For example, India's credit rating is BBB- (which is only one step above junk level). The reason is that India has a huge trade deficit of about $100 billion annually, which is denominated in US dollars.

In sharp contrast, China has a trade SURPLUS of about $550 billion annually. Thus, China's credit rating is AA-.

In China, SOEs (State-Owned Enterprises) owe money to the Chinese government. An example is a steel company that owes debt to the government. This is an odd situation. The steel company is owned by the Chinese government. Thus, the Chinese government owes money to itself.

Unlike the free market, there is no one to call in the debt. The Chinese government can write off the debt to itself whenever it wants. Alternatively, the Chinese government can print more Yuans to pay the debt to itself. Thus, China's Yuan debt-level has had no effect on its credit rating.
You didn't even read what I posted above did you. Deficit is not debt. And no china can't write off debt whether it's in yuan or popcorn . Printing more money creates more debt not absolves it.!!!!!

But I guess no point arguing economics with you. You clearly are living in another world. So I give up.
 

Martian

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You didn't even read what I posted above did you. Deficit is not debt. And no china can't write off debt whether it's in yuan or popcorn . Printing more money creates more debt not absolves it.!!!!!

But I guess no point arguing economics with you. You clearly are living in another world. So I give up.
No. You are the one who clearly does not understand that deficit means an incurred debt.

A foreign trade deficit means that India OWES MONEY to other countries in US dollars. A deficit is a debt that must be paid. Thus, India's trade deficit is a main reason for its almost-junk-level credit rating.

India does not have sufficient dollars to pay for its imports. Hence, India pleads with Iran to pay for oil in Indian Rupees.
 
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KumarG

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No. You are the one who clearly does not understand that deficit means an incurred debt.

A foreign trade deficit means that India OWES MONEY to other countries in US dollars. A deficit is a debt that must be paid. Thus, India's trade deficit is a main reason for its almost-junk-level credit rating.

India does not have sufficient dollars to pay for its imports. Hence, India pleads with Iran to pay for oil in Indian Rupees.
You seem to have your economics all tangled up. I'd suggest reading up on BoP and how current accounts and capital accounts work.

In short, India's trade deficit is funded by capital account surplus from various sources (largely FDI). India has sufficient capital account surplus and FCY reserves. China's trade surplus requires it to send its investment out, hence the massive US govt debt bought by It (counted under USD reserves).

On Chinese debt, again, economic panties all in a twist. The debt is through the banking and shadow banking sector, to the commercial sector. When commercial sector debt goes bad due to any issue (overcapacity being one), it needs to be written off from the bank assets. Writing off assets has an equivalent effect on the other equity side of the balance sheet. Massive write offs erode capital and cause bank collapse. When multiple banks are at a risk of capital inadequacy, other systemic risks come into play: increase in credit spreads, lack of liquidity, bank runs, etc. If the Chinese govt tries to pad this up US Fed style by easing, it will need to print massive amount of RMB, thereby causing hyperinflation. To prevent this, PBOC will need to buy massive amount of RMB in international FX markets by selling its FCY reserves.

If Chinese economy is 11Tn right now, and systemic debt is 3x (33Tn), a mere 3Tn (9%) worth of bad debt would mean collapse of RMB and PBOC. [figures have not been verified by me, rather been used as examples].

Now you know why the alarm bells have been going off for many economists re China.
 
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Hari Sud

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I've already said that China's exports as a percent of GDP was about 20%. Your cited figure of 24% is not that different from my own calculation. I don't think it's worth arguing over 4%.

However, your original claim that China's exports were 40% of GDP is still completely wrong.
----------

Regarding Chinese debt, it is a non-issue.

China's debt is owed to itself. If it wanted to, the Chinese government can simply write off the debt.

China does not owe massive debt to foreigners. There will be no default and no change to China's credit rating.

Currently, China's international credit rating is AA-. This stellar credit rating is justified by China's $3 trillion foreign exchange reserves that can easily pay off foreign debt.

China's domestic debt doesn't matter. It is simply an accounting issue of Chinese firms owing Chinese Yuans to the Chinese government. China's Yuan is a fiat currency. The Chinese government can issue as much Yuan as it wants; just like the US Federal Reserve engaging in Quantitative Easing.

China's currency, the Yuan, is holding steady at around 6.5-6.8 Yuans per US Dollar. There is zero chance of China defaulting. Since China's debt is domestic, it should be ignored. There is no risk to foreigners in being repaid in US dollars.

Do not say anything. Look at the internationally generated statistics. You have been given the reference. Trust in those statistics more than Chinese generated statistics.
 

mattster

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I laughed at the posting at the top of this thread by Martian. Maybe Martian is really living on Mars.

He talked about Chinese doing basic research and filing patents. Name me one just one freaking Chinese invention or patent in the last 20 years that was significant. The Chinese are good at reverse engineering and building on what others have innovated. Huawei is the classic example.......they copied everything that Cisco did and gradually built up the skill base to compete with Cisco at every level. Huawei dominates the market in many countries because they charge less for similar or lower quality stuff......not because of innovation.

China's economic miracle came at the cost of hundred of millions of rural Chinese who worked like slaves to sustain their low-cost export economy coupled with endless government subsidies for uncompetitive industries, and a real-estate sector driven by shady underground shadow banking sector. The real-estate sector is now so over-valued in big cities that everyone knows its going to crash sometime soon.

This formula for growth that only works for one generation of poor masses.....the next generation of young Chinese are not going to work 15 hours a day for a measly USD400 bucks a month salary. Their environment is a disaster and their aging population of one-child princeling families will not be able to handle the mess that the previous generation has dumped on their lap.
 

Armand2REP

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I've already said that China's exports as a percent of GDP was about 20%. Your cited figure of 24% is not that different from my own calculation. I don't think it's worth arguing over 4%.

However, your original claim that China's exports were 40% of GDP is still completely wrong.
----------

Regarding Chinese debt, it is a non-issue.

China's debt is owed to itself. If it wanted to, the Chinese government can simply write off the debt.

China does not owe massive debt to foreigners. There will be no default and no change to China's credit rating.

Currently, China's international credit rating is AA-. This stellar credit rating is justified by China's $3 trillion foreign exchange reserves that can easily pay off foreign debt.

China's domestic debt doesn't matter. It is simply an accounting issue of Chinese firms owing Chinese Yuans to the Chinese government. China's Yuan is a fiat currency. The Chinese government can issue as much Yuan as it wants; just like the US Federal Reserve engaging in Quantitative Easing.

China's currency, the Yuan, is holding steady at around 6.5-6.8 Yuans per US Dollar. There is zero chance of China defaulting. Since China's debt is domestic, it should be ignored. There is no risk to foreigners in being repaid in US dollars.
Apparently you don't understand what a write-off is. That refers to tax write-offs when companies suffer losses. When you are the government that collects taxes there is no one to write it off to. The people who pay the taxes are the ones who pay the losses.
 

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