tag:blogger.com,1999:blog-3591186784456519139.post5745821102186221133..comments2024-01-02T17:38:32.872+00:00Comments on Economics of Imperialism: China & US PowerTony Norfieldhttp://www.blogger.com/profile/03896437404164741498noreply@blogger.comBlogger13125tag:blogger.com,1999:blog-3591186784456519139.post-50748390893487564812020-07-26T12:32:30.646+01:002020-07-26T12:32:30.646+01:00@Tony Norfield Comment 2
So, as the above articl...@Tony Norfield Comment 2<br /><br />So, as the above articles state, there is a clear and well known issue with nominal GDP and PPP GDP being very close in developed countries but being widely different in developing countries and this affects China too. It is highly possible that developed economies nominal GDP is overvalued due to overinvestment in their *Reserve* currencies and the developing countries are undervalued, thus the large difference between nominal GDP and PPP/GDP to be found mostly in developing countries, which large difference points that their economies (including China's) are undervalued under nominal GDP. <br /><br />So in the comparison between US and China basically you have:<br /><br /><br />60 % bigger energy consumption in China. <br /><br />30 % bigger nominal GDP in the US.<br />40 % bigger PPP/GDP in China.<br /><br />2,5 times bigger consumer market in the US according to WB.<br />3 times bigger E-commerce market in China.<br />Bigger retail (consumer goods) market in China.<br /><br />70 % bigger manufacturing production in China. Nearly 30 % of global manufacturing production.<br /><br />Total combined import + export (trade) bigger for China. China being a bigger trading partner to most of the world compared to the US. <br />https://charts.lowyinstitute.org/charts/china-us-trade-dominance/us-china-competition/<br /><br />To sum it up: in some economic areas, US beats China, and in other economic areas, China beats US by far.<br /><br />These are very contradictory numbers. It is this contradiction that makes me think that the Chinese economy is probably already as big as the US one. If you have secure and clear US economic lead, you would not get such widely contradictory numbers in so many economic areas. Most numbers will be generlly favorable to the US.<br /><br />It is highly possible that these contradictions arise due to currency exchange rates distoring nominal GDP of both countries.Passer byhttps://www.blogger.com/profile/16365301255222047382noreply@blogger.comtag:blogger.com,1999:blog-3591186784456519139.post-34200243231766831032020-07-26T12:31:58.510+01:002020-07-26T12:31:58.510+01:00@Tony Norfield Comment 1
On the issue of the cons...@Tony Norfield Comment 1<br /><br />On the issue of the consumer market, yes, WB probably includes other metrics, still chinese retail (and E-commerce) lead in the world does sound very good for the weight and importance of the chinese market. <br /><br />For examle China's E-commerce market is more than 3 times (!) bigger than the US. <br /><br />https://www.alizila.com/china-is-world-leader-in-ecommerce-new-retail-innovation-emarketer/<br /><br />Importantly - definition of retail: "Retail is the process of selling consumer goods *or services* to customers through multiple channels of distribution to earn a profit."<br /><br />These are very contradictory numbers, bigger retail and far bigger E-commerce market in China, but far lower according to other metrics by WB..<br /><br />This does mean that the Chinese retail and E-commerce markets (consumer goods and services) carry more weight than the US one, which should have implications for China's importance in the world economy, as a market. We could certainly say that China is more important as a consumer goods (retail) market. <br /><br />On currency over or under-valuation, thanks for article. Companies such as PwC expect continued rise of the CNY in the future as the Chinese economy opens up and becomes even larger. While JP Morgan expects a weakening of the US dollar in the medium and long term as US debt swells just as the country loses share in the global economy.<br /><br />Another point about China is that its manufacturing sector is 70 % bigger than the US. Ir is nearly 30 % of global manufacturing capacity! So these are very contradictory numbers. <br /><br />I think if the US was clearly the biggest economy you wouldn't be seeing such large differences in favor of China. Maybe 20-30 % bigger, but 70% bigger manufacturing production? Nearly 30 % of world's manufacturing production? It points that China's economy is underestimated.<br /><br />On the issue of GDP/PPP, this is interesting comment i will repost. It is very critical to the nominal GDP method for countries economic size comparison:<br /><br />https://pastebin.com/EEdCcde0<br /><br />Interestingly enough, IMF estimates and publishes the official economic growth rates of countries around the world in GDP/PPP<br /><br />https://www.imf.org/external/pubs/ft/fandd/2007/03/basics.htm<br /><br />Here there are two more articles highly critical to the nominal GDP method for comparing countries economic size.<br /><br />https://www.econlib.org/so-you-dont-believe-in-using-ppp-data/<br /><br />https://www.awaragroup.com/blog/despite-sanctions-russias-gdp-shoots-over-4-trillion/<br /><br />Passer byhttps://www.blogger.com/profile/16365301255222047382noreply@blogger.comtag:blogger.com,1999:blog-3591186784456519139.post-4957140791849091032020-07-25T20:52:06.917+01:002020-07-25T20:52:06.917+01:00Reply to 'Passer by':
I think the World B...Reply to 'Passer by':<br /><br />I think the World Bank and others look at a broader measure of consumption, probably including services and other things, not just goods as seems to be indicated in the article you cite. Retail sales are not as big as total consumer expenditure, anyway. On this broad measure, the US is way ahead of China.<br /><br />On the US$ over-valuation (and the CNY under-valuation), it depends what you mean by valuation! The FX market has a price, but one that includes influences not just from goods (& services) but also investment income, and from all the impact of financial flows into bonds, equities,. property, etc.<br /><br />For an explanation, see my article on this blog: FX & Imperialism, 7 October 2019, where I discuss how FX theories are generally crap and how, in particular, they exclude the impact of the imperialist structure of the world economy. Link here: https://economicsofimperialism.blogspot.com/2019/10/fx-imperialism.html<br /><br />Tony Norfieldhttps://www.blogger.com/profile/03896437404164741498noreply@blogger.comtag:blogger.com,1999:blog-3591186784456519139.post-77295084440958156662020-07-25T19:42:23.737+01:002020-07-25T19:42:23.737+01:00@Tony Norfield
On electricity, there is even bett... @Tony Norfield<br /><br />On electricity, there is even better statistic than it: total primary energy consumption and production (all types of energy), in british thermal units. <br /><br />Even back in 2017, China produced and consumed much more energy than the United States.<br /><br />https://www.eia.gov/international/overview/world<br /><br /><br />On the consumer market, here is the article: <br /><br />"China to surpass US as world's biggest consumer market this year" (2019)<br /><br />China is expected to overtake the U.S. to become the world's largest consumer of goods this year despite a slowdown in the economy and retail sales, according to a research report.<br /><br />In the latest forecast by New York-based research company eMarketer released Wednesday, analysts predict China will end the year with total retail sales of $5,074 trillion, exceeding that expected for the U.S. by more than $100 billion.<br /><br />https://asia.nikkei.com/Economy/China-to-surpass-US-as-world-s-biggest-consumer-market-this-year<br /><br />Probably they estimate the consumer market in different way than the WB, who knows?<br /><br />Another point is the issue of yuan undervaluation, which will make GDP look lower.<br /><br />So you can have the US dollar being overvalued and the Yuan being undervalued at the same time. Getting rid of such a double exchange rate distortion will make the two economies much closer than they look today.<br />Passer byhttps://www.blogger.com/profile/16365301255222047382noreply@blogger.comtag:blogger.com,1999:blog-3591186784456519139.post-13532690869276066872020-07-24T21:52:10.797+01:002020-07-24T21:52:10.797+01:00Reply to 'Passer by': I am well aware of t...Reply to 'Passer by': I am well aware of the points you make on nominal GDP, and I could add several others.<br /><br />I don't know if your figures for relative electricity production/consumption are correct, but given that China's population is around 4x bigger than the US population, +70% would not be surprising. But it also not that relevant to the question of economic power.<br /><br />The Chinese consumer market is bigger than the US? Well, tell that to the World Bank and others who have the value of the market in the US at more than double that in China. You can focus on PPP dollars, etc, if you like, but the last time I looked companies selling goods & services normally wanted to be paid in money, not economic abstractions.<br /><br />I am not saying nominal GDP predicts anything very well, and that is why it is only one of five components I use in my Index of Power (see this blog, 17 Sep 2019). Even then, I explain there that each of the components is only a broad indication, and that other things also need to be taken into account.<br /><br />I would agree on military data that spending lots of, or less, money does not mean you have a commensurately powerful, or weaker, military. That point is also made in my Index of Power article.<br /><br />Tony Norfieldhttps://www.blogger.com/profile/03896437404164741498noreply@blogger.comtag:blogger.com,1999:blog-3591186784456519139.post-63970145265054795012020-07-24T20:03:07.854+01:002020-07-24T20:03:07.854+01:00
@Tony Norfield
Nominal GDP is affected by the s...<br />@Tony Norfield <br /><br />Nominal GDP is affected by the strength of currencies, and since the whole world is investing in US dollars, the US currency is overvalued with no relation to the actual domestic economy size. This is why it is questionable how effective at measuring the economy nominal GDP is.<br /><br />And that artificially overvalued dollar led to the well known decline of manufacturing in the US. So who has a bigger economy? China with its far bigger manufacturing sector and production, or the US, with its smaller manufacturing sector, but artificially overvalued dollar? I would say China. And that manufacturing capability will matter a lot during a war or a pandemic for example. As many in the West just found out.<br /><br /><br />2. If chinese electricity production and consumption is far bigger than in the US, it tells me that there is something there. Yes, some of the difference is due to energy efficiencies and structure of the economy, but still when chinese production and consumption is 70 % bigger than the US, it tells me that there is something significant there. The difference is large.<br /><br />3. Same for consumer market. If the chinese consumer market is bigger than the US, it gets hard to think that the chineses economy is 30 % smaller than the US. Why do they have bigger consumer market than the US if the economy is 30 % smaller?<br /><br />4. On the issue of prices. Nominal GDP predicts that the average american is 6,5 times richer than the average chinese. This is definitely not correct. Poverty is strongly related to low life expectancy, yet chinese life expectancy is getting very close to that of the US. If there was such a huge difference in living standards that is not reflected in life expectancies, which tells me that the nominal GDP method of estimating how rich are americans (or chinese) is off.<br /><br />5. Nominal GDP predicts that Russia (for example) should be a small military power. Is this what we observe in the real world? No. President Obama called it the second military power in the world in year 2015. <br /><br />Therefore it looks like nominal GDP does not predict very well the countries economy and thus, power.<br /><br />The Global Power Index, which is used by the US National Intelligence Council, uses a combination of nominal GDP and PPP/GDP, together with other measures, to estimate a countries power. Why do they use GDP/PPP? Are they stupid? I do not think so.<br /><br /> Passer byhttps://www.blogger.com/profile/16365301255222047382noreply@blogger.comtag:blogger.com,1999:blog-3591186784456519139.post-42000469061487801722020-07-24T18:30:58.426+01:002020-07-24T18:30:58.426+01:00Reply to 'passer by': There are many ways ...Reply to 'passer by': There are many ways to compare economies. Before GDP numbers were calculated and became more common (from the 1930s?), people often focused on steel production, cement production, railway mileage, etc. Nominal GDP is an easy method these days, although the calculation of this number has its own distortions.<br /><br />I don't use PPP versions of GDP, since you cannot buy anything with PPP dollars, which do not exist. PPP is a method of judging relative living standards, but says little or nothing about a country's weight in the world economy. For a more comprehensive measure of that aspect, I use my Index of Power with 5 components.<br /><br />You should not look at electricity production, etc, as a good sign of economic strength or power. It is also influenced by what type of economy there is - how energy intensive are the key sectors, eg aluminium smelting, etc - and how efficiently the electricity is used.<br /><br />On weapons, etc, it is probably true that a large US spending is partly a function of extravagant Pentagon bills and arms producer rip offs. It does not necessarily means that military clout is higher. That is why I mention these things in what I write, but also include things like military bases and NATO. The latter are largely at the beck and call of the US, but not all are included in total US military spending.<br /><br />Tony Norfieldhttps://www.blogger.com/profile/03896437404164741498noreply@blogger.comtag:blogger.com,1999:blog-3591186784456519139.post-71521025341484696362020-07-24T16:05:01.650+01:002020-07-24T16:05:01.650+01:00No mention of the fact that Chinese economy is nea...No mention of the fact that Chinese economy is nearly 40 % bigger than the US in PPP terms? Or the far bigger chinese electricity production and consumption?<br /><br />GDP PPP does matter, for example in military spending (see Russia's small nominal economy not predicting its military power, but its military power is very well predicted buy its equal to Germany GDP/PPP and large electricity production/ consumption).<br /><br />It is much more likely that the US and Chinese economies are already of equal sizes.<br /><br />On the one hand you have the US economy being 30 % bigger in nominal terms.<br />But on the other hand you have a chinese economy 40 % bigger than the US in PPP terms and 70 % bigger electricity production in China. And as a consumer market - China overtook the US this year.<br /><br />These numbers are very contradictory and point that China is probably not bigger economy but also not smaller economy than the US. It is much more likely that the two economies are already of equal size, especially in light of the Covid 19 crisis, which hit the US far harder than China.Passer byhttps://www.blogger.com/profile/16365301255222047382noreply@blogger.comtag:blogger.com,1999:blog-3591186784456519139.post-71133879241300295032020-07-15T21:40:32.943+01:002020-07-15T21:40:32.943+01:00Thank you Tony. As you worked in the City, high po...Thank you Tony. As you worked in the City, high position, I take for granted that You know the business more than I do.John Amaralnoreply@blogger.comtag:blogger.com,1999:blog-3591186784456519139.post-26631703431703652352020-07-15T18:33:36.910+01:002020-07-15T18:33:36.910+01:00Reply to John: the 'goldseek' website arti...Reply to John: the 'goldseek' website article you cite is full of the usual conspiracy theories & exaggerations of 'gold bugs'. Its lack of coherence should also make you suspicious of anything it claims to have happened.Tony Norfieldhttps://www.blogger.com/profile/03896437404164741498noreply@blogger.comtag:blogger.com,1999:blog-3591186784456519139.post-87108661418562593192020-07-15T17:26:38.137+01:002020-07-15T17:26:38.137+01:00Well there had been rumours that I am in no condit...Well there had been rumours that I am in no condition to check that following the tech-telecom bust of 2000 the FED or some of the big banks of Wall Street leased around 5000 tons of gold from China that were supposed to be returned in 2005 but it didn't happened then but it started being returned in 2013.<br />It said some of this returned gold (some thousands of tons in 2016)went from LBMA to the refineries in Switzerland and then sent to Hong Kong and from there to Shanghai<br />This returned gold allowed China to establish the Shanghai god market and to launch in August 2017 the Shanghai-based oil for gold future contracts. It seems Russia sells petrol for RMBs and convert them in Gold at Shanghai. Source: www.goldseek.com Jim Willie: Longstanding Chinese War: Intrigue And Betrayal<br /><br />Johnhttps://www.blogger.com/profile/13743221104027822909noreply@blogger.comtag:blogger.com,1999:blog-3591186784456519139.post-76857703850880474752020-07-15T08:46:07.540+01:002020-07-15T08:46:07.540+01:00Reply to John Amaral: Yes, I agree that the data o...Reply to John Amaral: Yes, I agree that the data on gold holdings may not be accurate. But note that China has significant domestic gold mine production, and it would not necessarily have had to buy on the open market (via merchants) to add to its official reserve holdings. It is likely that some gold is stored outside the official FX reserves within China, although it is unlikely that China has any official gold held in other countries (eg in the Bank of England vault, or in the US!), but I haven't checked this.Tony Norfieldhttps://www.blogger.com/profile/03896437404164741498noreply@blogger.comtag:blogger.com,1999:blog-3591186784456519139.post-58537890720304529742020-07-14T23:46:17.926+01:002020-07-14T23:46:17.926+01:00Although it's quite hard to trust what people ...Although it's quite hard to trust what people who got gold say about how much they have, some gold merchants dispute the amount of gold given in this article.The figure varies to the double that figure to 30.000 cubic tons. And is said not all these gold is stored with the Chinese Central Bank.John Amaralnoreply@blogger.com