I have lived in Shenzhen for many years, traveled to tons of cities in China, and recently am back to silicon valley. From what I can tell on the ground, China is going to be in decline for the next 10-20 years. (I have a good hunch most people that comment favorabily on China here, have never been)
- Myth: China is developed. Truth: Start in Shanghai Huangpu (very rich neighborhood, in a very rich city). Take a subway a few stops in any direction. When you come out, you are surrounded by dilapidated communist blocks and electric bikees. Take another ride a few more stops, you are surrounded in villages that are right out of middle ages (shoddy huts with shared toilets). This is the same for any of the rich city in China. 90% of people in China live in middle ages. 9.99999% of people live in 1950s. 0.00001% of people live very richly.
- Myth: Chinese citizens saves and are rich. Truth: most rich people have left China already. The remaining middle class ($1000/month, many of my Chinese friends) are able to buy into the massive inflated housing with savings from parents. The savings, borrowed money from relatives, credit card debts are now stuck in real estate. My friends all have (fake) gucci, LV, brand name products. They take out loans to afford conspicuous lifestyle. These things are all for show. Some of them are paying all of their salaries into the mortgage payment every month!
- Myth: Chinese economy is doing fine. Truth: Many of my banker friends (expats and locals) know that it's all propped up by debts that will collapse any day now. There's a massive inflation happening everywhere, from food to housing to foreign products. It's harder to harder to get money out of China (I'm helping some with bitcoins). Most of them aren't optimistic.
- Myth: China is leading in green-tech, research, innovation, etc. Truth: tons of copy, chabuduo (good enough), cheating in classes and in business, pollution in Shanghai and Shenzhen is still cancer causing, most smart people want to go abroad.
Whenever I hear someone claim china is leading on the environment, I know they’ve never been there before.
Your analysis is harsh, however: there are still rich people left who haven’t migrated. China is all developed, developing, and undeveloped at the same time...it is a huge place after all. There is plenty of trouble on the Chinese eceonomy to work through, and the propaganda is incredulous, but they have made a lot of progress that isn’t going to go away even when the inevitable crash comes.
China could go through a decade or two of Japanese-style stagnation if they refuse to reform and allow the market to work out bad economic blood with crashes and failures. They could also go the other way, focus on real growth and start avoiding white elephants. Let’s see.
I agree that there's a ton of progress in conjunction with troubles of growth. However, I think they're past the point of no return with the reform; if they did the reforms when the stock market crashed a few years ago, that could've been different. But now you can see that the communist party is avoiding that pain completely (just like Japan in 1990) and trying to inflate the worries away. However, pegging to dollar and capital outflow is preventing them from doing that successfully (while Japan had the fortune of doing the inflation in the 90s when the world economy was healthy). Along with XiJingPing becoming a dictator, it doesn't bode well at all for China.
They haven’t really been inflating their way out of their debt problems. It’s more like lending money out, which almost immediately goes into inflated asset bubbles anyways. If you aren’t buying a house, you wouldn’t even notice.
Ya, there will be a bunch of losers when things go south, but wealth has been so concentrated that the number of losers will also be. Ya, it will be bad, but totally recoverable as most of what is lost was never really gained in the first place.
Xi isn’t really a dictator yet, he is the most powerful leader since Jiang Zemin, which is saying he is just stronger than Hu jintao. People forget that this isn’t much of a change, that the Hu era was just an exception.
> If you aren’t buying a house, you wouldn’t even notice.
I can't think of anyone I know that did not want to buy a house. It's a prerequisite for getting married. It's a prerequisite for having your kids get married. It's an investment vehicle. It's a store of value. It's all everyone talks about. Besides, rents have been going up everywhere.
> but wealth has been so concentrated that the number of losers will also be
These would-be losers are communist party bosses. I'm sure the peasants will feel the pain, not the bosses
Rents have been going up, but not as much as housing. An apartment that rents for 10k RMB/month will cost 7 million RMB to buy (about $1 million usd), that is just an insane rent to purchase ratio. We foreigners don’t need to buy anyways, and find rents even in Shenzhen quite reasonable. Anyone who bought after 2011, or maybe even 2006, will feel the pain, but at least it will be market based.
You are right that it will depend on if they take their losses themselves or force the people to take it. But they really can’t handle that much worker unrest, I’m sure they’ll eat it, or better yet, have a corruption campaign and get their political enemies to take most of the losses (then it will depend on who has power when the bubble pops).
It is definitely an autocracy, but it isn’t a dictatorship (well, they call it a dictatorship of the people). My point is that Xi’s power is nowhere near absolute, there are plenty of king makers behind the scene that duke it out with each other, Xi is just an obvious one.
Any dictatorship has a ruling coalition, so I think you are making an artificial distinction. What keeps a dictator in power is his/hers ability to compensate their ruling coalition to keep in place a system where you do not have to rule in the best interest of the majority.
A core tenet for a successful dictator is the power and willingness to replace anyone that acts against your interest with someone from a large pool of replacements. A dictatorship also only thrive when most people are relatively uneducated so that they can't challenge you and that most people do not have enough resources to afford dissidence.
If you want to learn more about the topic "The Dictators Handbook: Why Bad Behavior is Almost Always Good Politics" is highly recommended.
Maybe we are just being pedantic, but it sounds like you are looking for autocracy. I would class china’s system as more aristocratic now with multiple red families running most of the politics and much of the economy. But even that isn’t exactly right, china’s political system is difficult to categorize.
On second thought I think you are right that it is its own thing. I do not remember the details, but political scientist Fukuyama classifies the Chinese political system in "The Origins of Political Order" and due to the cultural context it has many unique properties.
>I have lived in Shenzhen for many years, traveled to tons of cities in China, and recently am back to silicon valley. From what I can tell on the ground, China is going to be in decline for the next 10-20 years.
Most of what you've written are arguments for China to be on the up-and-up in the next 10-20 years, not in decline as you seem to think (undeveloped parts = still has areas for future growth).
Others are just on par with the situation in the West (credit debt, propped up etc).
>(I have a good hunch most people that comment favorabily on China here, have never been)
Which doesn't say much. There are tons of people who don't understand anything about their own society despite having been born and raised there (which entails more familiarity than merely living in some place for some years).
Disagree there. I didn't even mention China's middle income trap, 300% gdp to debt, pollution crisis, demographics crisis, gender crisis, censorship impact on innovation and research, wage inflation impact on factories leaving, etc.
The wage inflation is why I've never been too scared about these China will take over soon scaremongering tactics. We've heard the same a few years ago about Japan. Now Japan has high salaries and we can still compete with them. As soon as Japanese produced the same quality as Europe and America, they also got the same prices. The same happened with South Korea now. A Kia car costs basically the same as a European car, it's a good car, but it's not super cheap.
And Chinese products first have to show care for craftsmanship to command these prices, which is something I haven't seen so much until now. India is probably worse.
>As soon as Japanese produced the same quality as Europe and America, they also got the same prices.
That's not the point though.
It's that if they have the same quality AND high wages, then they would be like a 1.6 billion strong USA.
It's not just about market competition -- and even if it was, their huge domestic market (further developed to Japan levels as you expect it to) would be a huge advantage in itself.
>And Chinese products first have to show care for craftsmanship to command these prices, which is something I haven't seen so much until now.
Craftmanship? The kind of stuff they can make, few if any factories in the US can. There's a reason almost all high end stuff is made in China as well (from Apple and Armani, to BMW parts). If they make and sell cheap stuff too is not because they can't make the good stuff, it's because that sells.
(And of course in the level of high artistry and craftmanship China as a culture, has had extreme global masters for millennia, in painting, sculpture, woodwork, and tons of other arts. Of course they don't compete with that -- which are very low yield -- but with mass products for the industrial age).
>There's a reason almost all high end stuff is made in China as well (from Apple and Armani, to BMW parts).
Yeah, they're cheap. If you've ever worked with Chinese suppliers unless you give them a lot of crap they will send you parts where 10-20% aren't useable. They only pay attention to quality if there's a foreign company putting lots and lots of pressure on the factory to produce to their standards.
>China as a culture, has had extreme global masters for millennia, in painting, sculpture, woodwork, and tons of other arts.
Yes, but they lost them in the last century because of some movement, where they killed artists, intellectuals, etc... They still haven't recovered from this. If you kill a whole generation of intellectuals it will take probably a few more centuries to regain that culture they lost.
I used to be at importer/exporter equipment exhibitions when I was younger, the unfortunate truth is that a lot of products are assembled in other countries but that the materials made come from China or some cheap place for production and/or simply rebranded as made in a certain location to increase the prices. But yeah apple iphones etc are made in China since about 2012 or before.
Whenever China is discussed on HN, someone usually pops up with overly negative and biased comments that explain why China is doomed prefaced with "I have lived in China" like it adds extra validity.
This is like an Chinese international student coming to the US, reading about the opioid epidemic, obesity epidemic, the rust belt, black gang violence, out-of-wedlock birth rates, the world's highest incarceration rates, Hurricane Maria destroying Peruto Rico, mass shootings in Vegas, Flint water crisis, healthcare bankruptcy, the rise of alt-right Trump voters, 11M illegal immigrants, high P/E in the stock market, unsustainable pension obligations, social security crisis etc. and coming to the conclusion that the US is doomed. Obviously, the US has many problems but to only focus on the negatives but not the strengths is not an objective analysis.
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Regarding your anecdotes:
1) I a cousin who grew up in rural Shandong, who moved to Shanghai with nothing and live in one these neighborhoods "a few subway stops away" and drives an electric scooter. While the living standards is not as good as the city center or rich western cities, his apartment is small but clean with running water and functional toilets. His standard of living is not any worse than when my family first immigrated to Canada. To say 90% of Chinese people in Shanghai lives in squalor is absurd and shows how biased you are.
2) These anecdotes of some your rich friends are pretty meaningless. I'm sure you can find vain people in any western city including the bay area as well. I know rich Chinese families who "half" immigrated to Canada who still have plenty of assets and business in China and want their children to go back after graduating from a Canadian university.
4) Make similar comments like this about African American achievement and you'll quickly realize how racist it is and stop. But it's suddenly okay to say the same thing about Chinese since westerners aren't socialized to understand the racism and do not feel the same amount of shame.
I agree with most of your observations but disagree with your interpretations.
China's per capita GDP is only 8000 USD (vs 57000 for USA). So average Chinese people are still poor, and only few people are rich. But that's what is supposed to happen in a developing country undergone huge socio-economic changes.Also impoverished districts and poor people on streets can be found in pretty much any country, developed or not.
Older Chinese people (born before 1980) are mostly savers with mortgage paid off. Younger Chinese in big cities are more open to spending. Because those older people still hold majority of the existing wealth, China is a saver economy overall. That may change when younger generations start to take over. Housing is expensive and bubbly in big cities and certain regions but more affordable in smaller cities and rural areas. There is no property tax on housing in China and rent is expected to rise for many years to come. So high property cost is not as crazy as the price comparison suggests.
Chinese economy has some problems. Its debt load and housing bubble may bring major slowdown to the economy. But a recession will not be the end of China. Economic cycles should occur in China anyway. USA has experienced many financial crises and recessions and is still doing fine.
Pollution is bad in China, as in many other developing countries and in US and Europe a hundred years ago. That does not contradict its leading status in green-tech investment and research. Big problems lead to big problem-solving effort and political support.
I've also traveled to tons of cities in China and what I found is that many expats and local Chinese that hang around the expat bubble have a similar "doom and gloom" viewpoint.
Whereas when I started to hang around local, blue collar Chinese workers (who don't speak English or hang around expats at all), their outlooks were extremely optimistic about China's future.
It makes me wonder if this is more of a class issue. The poorer, blue collar workers will start to prosper more, but the upper-middle class will start to face difficulties.
I would also add that all my Chinese friends that stayed in China are wealthier than those that left. And of those that left, many are returning to China. But again, these are all people that are outside the expat bubble so perhaps their viewpoints would be different.
Almost any foreigner who lives in china for more than a few years develops a healthy amount of cynicism to keep going (those that don’t inevitably leave). It has nothing to do with an expat bubble (most of us work jobs around mostly Chinese, and spent way more time in zhongguancun than sanlitun).
A lot of my Chinese coworkers left for the states while I was there. Something about “pollution and young kids” was their reason, not to make more money. You can make a lot of money in china, as long as you don’t mind knocking a few years off your lifespan (and just forget about it if you have kids, unless you can afford the private schools with full bubbles around them, and even then....).
I've made friends with many local Chinese workers; I speak Mandarin as well. The (very few) workers that are intelligent and knows about foreign things, usually tends to be very pessimistic about China. Most of the workers that only reads stuff put out by the government, and reads censored mobile contents, are optimistic (logically, since the government approved contents are optimistic). or they're just very afraid to speak their minds.
Ironically that's why China will fall sooner rather than later. It's because most people aren't aware of the downfall until it's too late, because of censorship.
"Local, blue collar workers" are generally completely uninformed outside of their little bubbles, much more so than the "expat bubble" you speak of.
They have a job and are making a reasonable salary? Things are great.
There may be all sorts of looming major issues for the country, but their existence is local, not looking at national debt loads, workforce statistics, and the like.
I don't think their outlooks are particularly useful other than as a measure of consumer confidence in their little area.
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"The poorer, blue collar workers will start to prosper more, but the upper-middle class will start to face difficulties."
Why? It's a serious question. Poor, blue collar workers in China (and elsewhere) are generally that because they lack useful skills to do anything higher-paying.
Are they going to suddenly develop those skills as adults?
Is China's economy going to have big increase in it's need for unskilled labor and a decline in it's need for skilled labor? (And if so, do you expect that is somehow also going to be paired with rising economic opportunity rather than a decline and return to sweatshops?)
Well, I dont think those are "Myths", because I dont see anyone who say China is developed, Citizens are Rich, Economy is doing fine, and they are leading the green tech.
No mainstream media are saying that, and anyone thinking like that is very much uninformed.
I very much agree with your view, although i believe it is a little over exaggerated. Because if you take the whole world into account, US, EU, I dont think China is in such a bad shape at all. Especially the EU i dont even know if it is fixable. China comparatively speaking has lots and lots of upside, that is why they are battling to bring those undeveloped parts to balance things out.
And it is not they are running out of tools and waiting for the bubble to burst.
Yes there are lots of things i dont like about China, but truth to be told I dont think they are going to be in decline anytime soon. I think, with the government power now all concentrated in Xi's hand and relatively stable. Their best has yet to come.
Same of your opinion or arguments have raised 10 or 20 years ago, and lots of economists predicted China's economy would collapse 10 years ago several times, but it didn't. As most western couldn't fully understand how Chinese economy working, and how Chinese society different with US.
About the first point: in the 60s Paris suburbs were also filled with wood cabins and shared toilets. I wouldn't take this as that important.
But the rest hints at real problems, actually about my comment above, France has suffered problems due to the way they tried to improve things at mass-scales (which backfired into social problems 30 years later and now people back pedal a bit).
Now if we extrapolate this to the scale of China, and the frailty/falsity of their infrastructure.. and a sensation that they mostly want to feel like a great nation on the international scene .. I could see a catastrophic implosion.
There are several residential blocks in central Shanghai, just a couple miles from the bond, that are still not fully served by indoor plumbing i.e. most dwellings have mains water but no sewage lines. Waste buckets are dumped by hand in communal septic tanks which is then emptied by regular vacumm truck visits.The neighborhoods are otherwise quite clean so people from the outside will rarely notice. It's more of an interesting anectode but people should know.
Anyway, there is a looming demographic catastrophy that nobody has mentioned: The working age population in China is due to crash in a decade or two thanks to irrational family planning policies of the past and it may already be too late to prevent it. Japan's decline coincided with their own demographic crisis and some even claim that the USSR collapsed because the Soviet society have never fully recovered from the massive population loss iN WWII. I don't see how China could get themselves out of the same fate.
- Myth: China is developed. Truth: Start in Shanghai Huangpu (very rich neighborhood, in a very rich city). Take a subway a few stops in any direction. When you come out, you are surrounded by dilapidated communist blocks and electric bikees. Take another ride a few more stops, you are surrounded in villages that are right out of middle ages (shoddy huts with shared toilets). This is the same for any of the rich city in China. 90% of people in China live in middle ages. 9.99999% of people live in 1950s. 0.00001% of people live very richly.
- Myth: Chinese citizens saves and are rich. Truth: most rich people have left China already. The remaining middle class ($1000/month, many of my Chinese friends) are able to buy into the massive inflated housing with savings from parents. The savings, borrowed money from relatives, credit card debts are now stuck in real estate. My friends all have (fake) gucci, LV, brand name products. They take out loans to afford conspicuous lifestyle. These things are all for show. Some of them are paying all of their salaries into the mortgage payment every month!
- Myth: Chinese economy is doing fine. Truth: Many of my banker friends (expats and locals) know that it's all propped up by debts that will collapse any day now. There's a massive inflation happening everywhere, from food to housing to foreign products. It's harder to harder to get money out of China (I'm helping some with bitcoins). Most of them aren't optimistic.
- Myth: China is leading in green-tech, research, innovation, etc. Truth: tons of copy, chabuduo (good enough), cheating in classes and in business, pollution in Shanghai and Shenzhen is still cancer causing, most smart people want to go abroad.