[Op-ed] China will rule the world in 30 years!

[mr friendly guy]

I never slammed their "uncompetitive practices" in and of themselves: They're obviously in China's best interest so it behooves them to have them. What I do condemn is their insistence on "having their cake and eating it too", that is keeping these measures in place while at the same time expecting us to grant them completely unfettered access to our markets (which we currently do for the most part). Every time a first-world country erects some barrier to Chinese goods they scream bloody murder and either retaliate or run to the WTO, even though these barriers are often temporary and less severe than the ones the Chinese already have in place. Fuck, they even have an army of Washington lobbyists on their payroll to pressure the US government to retain trade agreements favorable to China (think Israel is the only country who does this?). The double standard you just accused me of is in fact the one by which China is guilty.

Even so, I admit it may still be necessary to have some tariffs in place in light of China's natural cost advantages which are impossible to offset any other way, even if China did not have any direct barriers in return. Even in that scenario I don't see why it's unreasonable for a national government to level the playing field in favor of it's own producers if the alternative is watching them be exterminated by cheap imports in their home market. If the Chinese can't accept that rationale, then that's their problem and they can do whatever they want about it.

1. The US since I was a child protected their farmers with trade subsidies making it harder for ours to compete in, wait for it.. The Chinese market. So I find it hypocritical of the US or those supporting their arguments (and you are obviously arguing for them despite that you are Canadian) to cry foul at China doing the same thing.

2. The double standard accusation is 100% accurate when you have just admitted you want protectionist measures in place even if China has none. Pointing out China also has the same double standards is a tu quoque fallacy.

[K. A. Pital]

Can I honestly ask what I did to upset you?

This represents the structure of Russia's labour force by occupation from raw resources like oil and gas, and metal ores (very bottom layers) to light industry (very top layer), the Y axis in millions of people.


The share of raw materials in Russian exports hit a maximum in the 2000s (while share of exports of machines and consumer goods hit an absolute minimum) - at the same time, the share of import of raw materials INTO Russia hit a minimum, whereas the share of import of consumer goods into Russia hit an absolute historical maximum. These are facts.

And while the relative share of metal processing, raw resources and the like in the overall (declining) Russia industrial output stayed the same or rose (the oil industry share rose from 8,5% to 9,2%, for example, the share of electric energy production basically more than doubled (from 5% to 11%), and so did the black metal ore industry rise, whereas coloured metals industry fell, which indicates primitivization), the light industry was simply decimated - a 4 times reduction of share from 8% to ~2%.

The following industrial sectors contracted more massively than the usual metal ore and raw resource sectors: food industry, chemical industry, wood processing industry, machine construction and finally light industry showing worst decline.

The decline in light industry was nigh 3 times greater than in the fuel+oil+raw materials industries, the decline in heavy industry (machine tools construction) was 2 times greater than in primitive raw resource industries. You can read it all here in the special analytical report on the 100-year development cycle of the Russian industry from Rosstat - it's in Russian, however, so you might have some difficulties.

So pardon me, but at least you should familiarize yourself with the dynamics of the industrial primitivization of Russia before we can even start a talk. Perhaps next time you will familiarize yourself with the statistics and the situation that caused the Russian industrial sector to become massively more primitive - which is the opposite of diversification of industry, that many other nations implement.

The crisis of 2008-2009 actually exacerbated the primitivization: http://www.iea.ru/article/econom_rost/2.htm, the fall on the order of 10-20% (average) in industrial production mostly touched complex industries (machine tool construction), poor light industry collapsed 30%, while in particular the oil production and processing industry GREW 1%.

[Surlethe]

Stas, is the y-axis "million people (employed)"? Wouldn't it be more accurate to represent it as proportion of workforce?

[Surlethe]

In reality, actually, a collapse in global economy does not mean China will somehow end up worse than others. It's economy now occupies the unique position of being able to produce both high-tech, high-cost and low-tech, low-cost products.

For example, the economic collapse of the USSR led to the immediate collapse of the Soviet and Warsaw Pact light industry - clothes, sewing, etc. China then swamped the market with cheap clothes and used this as a growth opportunity. In case global demand shifts for cheaper goods (which is rational in a condition of recession), this can actually benefit China.

Domestic industries of other nations can suffer malaise or collapse due to an economic crisis, which is also, surpirisngly, beneficial for China the exporter of goods based on the logic above.

I'm not so certain the explanation for the USSR's collapse and the concurrent Chinese growth is generalizable. I would want to assume the USSR's central planners intentionally propped up light industry against Chinese competition. Under that assumption, the collapse of WARPAC and the USSR would therefore cause the collapse of the trade barriers. So it would make paradoxical sense for Chinese light industry to grow: even though total demand in WARPAC fell, demand for imports could have risen with the removal of the trade barriers. This would have disproportionately harmed WARPAC light industry and caused the market to be flooded with Chinese imports.

The same story would of course not be applicable when trade barriers are not present initially.

Of course, to a certain extent this depends on China's ability to swiftly re-orient investment from goods that will lose demand (steel, etc.) back to the cheap light industry (clothes, etc.), but to say China does not have such an advantage due to it's mix of export goods that is highly diversified, from computers to raw steel and industrial components to light industry like clothes, etc. is being blind. China is not a one-item exporter, which makes it's exports do surprisingly well even in an atmosphere of global downturn.

Figures? Also, if China's central bank continues to be a net demander of foreign currency, its exports will continue to do well at the expense of foreign industry: the excess Chinese currency will inevitably translate into an excess demand for Chinese-made goods.

[Surlethe]

Stas, is the y-axis "million people (employed)"? Wouldn't it be more accurate to represent it as proportion of workforce?

Sorry about the first question - I didn't clearly read your post!

[K. A. Pital]

The same story would of course not be applicable when trade barriers are not present initially.

To a certain extent an abstract overall economic recession can act as a demand pressure that would lead to more expensive goods' production collapsing and more cheap goods taking their place. For example, currently the Russian light industry market has Chinese cheap clothes, Chinese mid-cost clothes, Belorussian mid-cost clothes, some European clothes. In a recession, the demand for high-cost clothes falls and then the low-cost clothes enjoy greater demand, a process somewhat similar to the rising share of food in the spending basket - luxury items share' contracts, the share of cheap products rises (or at least falls more slowly than the share of high-cost products).

That's what I was trying to say.

Since Chinese industry, from light to heavy, is on the average having a natural cost advantage, this trend in my view can be applied to the entire Chinese export sector, because it's pretty diversified.

Figures?

Um... more precisely, which figures? I'll have to dig through some China statistics to see how their exports diversified.

[Surlethe]

To a certain extent an abstract overall economic recession can act as a demand pressure that would lead to more expensive goods' production collapsing and more cheap goods taking their place. For example, currently the Russian light industry market has Chinese cheap clothes, Chinese mid-cost clothes, Belorussian mid-cost clothes, some European clothes. In a recession, the demand for high-cost clothes falls and then the low-cost clothes enjoy greater demand, a process somewhat similar to the rising share of food in the spending basket - luxury items share' contracts, the share of cheap products rises (or at least falls more slowly than the share of high-cost products).

If I might rephrase your argument: substitution away from luxury goods as aggregate income falls pushes up demand for products in which China has a comparative advantage, favoring its export situation. Or, to put another way, China has a comparative advantage in inferior (in the technical sense) goods. Is that right? That makes sense.

More for the sake of arguing the point, I would still submit that the situation when WARPAC crumbled is not generally applicable for the reasons I cited. Was my assumption about USSR planners' attitude toward light industry and low-cost imports correct?

Um... more precisely, which figures?

Speed of switching production from one sector to another, and export figures (1995-present might do it - see how the various regional and global recessions affected them).

[Blayne]

Can I honestly ask what I did to upset you?

This represents the structure of Russia's labour force by occupation from raw resources like oil and gas, and metal ores (very bottom layers) to light industry (very top layer), the Y axis in millions of people.


The share of raw materials in Russian exports hit a maximum in the 2000s (while share of exports of machines and consumer goods hit an absolute minimum) - at the same time, the share of import of raw materials INTO Russia hit a minimum, whereas the share of import of consumer goods into Russia hit an absolute historical maximum. These are facts.

And while the relative share of metal processing, raw resources and the like in the overall (declining) Russia industrial output stayed the same or rose (the oil industry share rose from 8,5% to 9,2%, for example, the share of electric energy production basically more than doubled (from 5% to 11%), and so did the black metal ore industry rise, whereas coloured metals industry fell, which indicates primitivization), the light industry was simply decimated - a 4 times reduction of share from 8% to ~2%.

The following industrial sectors contracted more massively than the usual metal ore and raw resource sectors: food industry, chemical industry, wood processing industry, machine construction and finally light industry showing worst decline.

The decline in light industry was nigh 3 times greater than in the fuel+oil+raw materials industries, the decline in heavy industry (machine tools construction) was 2 times greater than in primitive raw resource industries. You can read it all here in the special analytical report on the 100-year development cycle of the Russian industry from Rosstat - it's in Russian, however, so you might have some difficulties.

So pardon me, but at least you should familiarize yourself with the dynamics of the industrial primitivization of Russia before we can even start a talk. Perhaps next time you will familiarize yourself with the statistics and the situation that caused the Russian industrial sector to become massively more primitive - which is the opposite of diversification of industry, that many other nations implement.

The crisis of 2008-2009 actually exacerbated the primitivization: http://www.iea.ru/article/econom_rost/2.htm, the fall on the order of 10-20% (average) in industrial production mostly touched complex industries (machine tool construction), poor light industry collapsed 30%, while in particular the oil production and processing industry GREW 1%.

I wasn't arguing that the Russian industry hadn't primitivized though, only suggesting that Russia is still in a position for competitive potential due to a) its Soviet legacy b) its high turn out of high quality college and university graduates and c) that from the figures I had read previously there was growth in other sectors. And according to wikipedia its population has this year finally had more births then deaths suggesting a improvement in demographics, though I am considerign Russia's prospects however from a long term standpoint, ie they should be in good shape in x many decades.