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Bad, bad, economics.

One cardinal fact governs the world economy today. China produces 31pc of global manufactured goods: it accounts for 13pc of total consumption.

The rest of us must absorb China’s increasing excess capacity. If the country is to meet the Communist Party’s growth target of 5pc over the next decade with the current hyper-investment model, it can do so only by eating further into the industrial core of Europe, America, and India.

“Other major economies must be willing to reduce investment and manufacturing shares to accommodate China. Needless to say, this is very unlikely,” said Professor Michael Pettis from Peking University.

Heathen Chinee are making stuff that we can consume for cheap. Someone make them stop!

37 thoughts on “Bad, bad, economics.”

  1. AEP has jumped the shark when it comes to Climate Change I am sorry to say – and once you start drinking the Kool Aid it infects the rest of your output. Sad to see

  2. “Heathen Chinee are making stuff that we can consume for cheap. Someone make them stop!”

    We were begging for them to not stop when we wanted PPE in the covid crisis (which they created of course). You have to be batshit insane to suggest that giving a authoritarian dictatorship thats hell bend on world domination power over your critical consumption is a good idea. But of course economists just think in LSD so of course if widgets are a few pence cheaper from China just send all the factories over there.

    Really Tim when are you going to wake up? Have you no eyes? This country is on a knife edge. We control nothing of the important things that a country needs to survive. Energy, food, critical manufactures. If supplies of them get cut off we literally starve and freeze to death. Yet all you can think of is more globalisation. I’m rapidly coming to the conclusion you are a CIA plant. No-one could be so fucking stupid and not be being paid to write this shit.

  3. Being a paranoid xenophobe, I would wonder whether the heathen Chinee might invade.

    Except that the universities import them all as foreign students. And then they settle here.

    Got to admit it’s cheaper and simpler than WW1 and WW2.

  4. CCP, CIA, pretty much the same thing these days, given the way the USA is going.

    Seriously the world is rapidly splintering into 2 blocs, with the producers of everything people need on one side and the consumers of more than they produce on the other side, and all you can think is a good idea is give even more of our productive capacity to others, ‘safe’ in the knowledge that we can issue debt for ever and a day and those producers of stuff will always take it. The UK wants to issue £200bn of new debt this year, when there’s no actual recession or economic crisis. What happens when we can’t any more? What do we eat then, or heat our houses with, or maintain infrastructure with? Bits of paper?

  5. I guess Tim’s economic model works in a free, open economic system where all the players are making rational economic decisions. But China isn’t that. There would be absolutely nothing to stop China ceasing exports of important manufactured items to certain or all countries. And then where are you going to be if you don’t have your own manufacturing capacity? That wouldn’t be a rational economic decision by China. But it could be a rational geo-political or even military decision.
    Said this before. Economics is an interesting historical topic. But it is fucking useless for predicting the future. Because the world isn’t all economics.

  6. Remember the far off ancient time of about 15 years ago, when our Betters were sending jobs, knowledge and industrial plant to China as fast as humanly possible and you were a backwards racist if you objected?

    Steve remembers. Also remember our telcos were told to open up to Huawei and now they’re facing massive fines for not ripping out and binning perfectly functional Huawei kit as fast as the government now demands.

    Them bastard Chinese that we helped turn into the world’s workshop are making things and selling them to us. How dare they.

    “Other major economies must be willing to reduce investment and manufacturing shares to accommodate China. Needless to say, this is very unlikely,” said Professor Michael Pettis from Peking University

    How does that work, eh? Seems like “other major economies” decided to commit industrial suicide without China’s help.

    Xi Jinping is not reforming the old model. He is reverting to galactic overinvestment in everything from clean-tech, semiconductors, and steel – all tradeable goods that find their way onto global markets – in order to offset the deflating property bubble and to prevent youth unemployment rising further above the political danger threshold of 20pc.

    We keep getting told Xi is our enemy, but nothing about the above sounds like a threat, does it? Imagine being threatened by low prices.

    Keep threatening me with a good time.

  7. The problem is that people do not price in the ability to produce your own goods. At the moment people price Chinese widget at 50p vs British widget at 60p. If you want to give a value to local production you have to put your money in your mouth and explicity demonstrate that you believe local production is worth that extra 10p by paying that extra 10p. Revealed preferences shows that people value local production at 0p.

  8. Boganboy. we in Australia do very well indeed out of students from China, one of the reasons, along with mining we have a great standard of living. A Chinese branch of the family has spent around half a million $A educating a child here….Uni fees, accomodation, fares etc.

  9. Jgh – well, Cretaceous Parasol and all that.

    People do sometimes pay more for local (see any number of farms that sell direct) but you’ve got to give them a reason.

    How does economic nationalism work when importing over a million foreigners a year tho? It doesn’t. We’ve no reason to privilege foreigners working in a factory in Sunderland over foreigners working in a factory in Shenzhen. At least we don’t have to pay tax credits, healthcare costs and pensions to the Chinese.

    China may be a problem, but it’s not our problem as gammon-plebs who enjoy net zero democratic representation in our own country. China is a problem for our Betters. They keep blaming China for things they’ve done to us. But all our enemies speak English and most of them are white.

    If Premier Xi was engaged in a dispute with Lord Piglover of Greensill, should we rush to the defence of the latter? All signs point to nah. Bring popcorn instead.

  10. Bloke in North Dorset

    jgh,

    In the early ’80s when I was in Germany we’d occasionally invite the Sgt’s mess equivalent of the Panzer Battalion next door to our mess for drinks and they’d return the favour. On one occasion we got in to a discussion about buying German with a couple of them who spoke very good English.

    In short, they bought German even if it was more expensive, although we couldn’t get them to accept that sometimes foreign goods were better quality. That’s partly why most of the foreign built cars you saw and BFG plates on them, even then a lot of BFG cars were German built. The shops were full of mostly German made white goods as well.

  11. @Steve – January 13, 2024 at 10:35 am

    Also remember our telcos were told to open up to Huawei and now they’re facing massive fines for not ripping out and binning perfectly functional Huawei kit as fast as the government now demands.

    A good idea IMHO.

    It may be “perfectly functional” but it’s not possible to dive into integrated circuits to look and see if there are some “interesting”, undocumented features included. How do we know that, if sufficiently provoked, those helpful and altruistic members of the CCP can’t simply order a “switch” to be flicked which would shut-down the entire UK’s communications and internet services, possibly irrevocably..? Just as effective as an EMP weapon but without the collateral physical damage.

  12. BJ – How do we know that, if sufficiently provoked, those helpful and altruistic members of the CCP can’t simply order a “switch” to be flicked which would shut-down the entire UK’s communications and internet services, possibly irrevocably..? Just as effective as an EMP weapon but without the collateral physical damage.

    Because printed circuit boards and microcontrollers and whatnot aren’t magic, and we can tell if a device is trying to surreptitiously pass IP packets.

    Enterprise customers bought hundreds of millions of pounds worth of Huawei switching kit. In all the years of scaremongering about Huawei, we’ve yet to find any evidence of malware in any of the hardware they shipped to the West. They are all, by any practical definition of the words, foolproof and incapable of error… as much as that’s achievable in Layer 2/3 networking.

    You’ll notice the people telling you scary stories about Chinese hardware usually aren’t techies. And if they are techies, they usually work for the big American company with the bridge logo.

    But yes, they theoretically could put gremlins in their IT kit. They could also poison your sandwich, or sell your child a toy car that’s full of plastic explosive, or kill a policeman and steal his helmet. China could do any number of self-harming things that would instantly destroy their markets. It depends on how paranoid we think we ought to be about Chinamen. My suggestion is: not very.

  13. Given that the Chinese people are relatively poor (compared to the U.S. and Europe), shouldn’t they be consuming a lot more than 13/31 pct of their production?

    I’d also be cautious about assuming any statistics coming out of China are reliable – not the most open & honest types (Communists, not necessarily Chinese).

    I understand the argument that we shouldn’t be dependent on a potentially hostile foreign power for essential products, but once started down that road it’s very hard to stop – every industry & business will be explaining how they’re essential & must be protected.

  14. Well, at the end of his extremely alarmist article that uses all manner of inflammatory, red top tabloid tier danger-words to describe how the nefarious Chinese are conspiring to “foist” cheap consumer goods on us, AEP concludes the Chinks are doomed – doomed, I tell ye:

    The outcome will not be kind to China

    If that’s the case, just wait until their economy collapses then. Unless AEP is peddling lies, and it’s actually our Net Zeroed, immigration cursed and generationally indebted Western economies that are more likely to collapse.

    But I’m sure the Conservatives would never let that happen.

  15. It’s terribly hard for two countries to go to war when trade is important to them even if the balance of trade is pretty one sided. If however one country bans imports from, or exports to, the other and they reciprocate you end up in a situation where they are economically independent. Excess capacity then goes to weapon production. War will follow, and the only winners are politicians and weapon manufacturers.

  16. @Steve…

    In all the years of scaremongering about Huawei, we’ve yet to find any evidence of malware in any of the hardware they shipped to the West. They are all, by any practical definition of the words, foolproof and incapable of error… as much as that’s achievable in Layer 2/3 networking.

    You’ll notice the people telling you scary stories about Chinese hardware usually aren’t techies. And if they are techies, they usually work for the big American company with the bridge logo.

    I am (or more correctly was as I’m now retired) a “techie” – a positive dinosaur who cut his teeth on plugboard-programmed Univac kit in the 1960s – who doesn’t, and never has, worked for any big American company…

    I reckon that if the chip manufacturer so desired it would be possible to design a trapdoor into the actual chip hardware that would be impossible to find because you can’t examine the inside of an integrated circuit without destroying it (as far as I’m aware). I’m not talking about “malware” either at the software or microcode level but an actual chunk of micro-electronics that could be switched on or off upon a specified bit sequence passing through it… An apparently random bit-string embedded in a completely normal IP packet could be the trigger, or if you want to be cautious it could be a sequence of strings in several packets, each of which would prime the “bomb” with the final one acting as the detonator, and “bazonka” the WWW is down.

    China could do any number of self-harming things that would instantly destroy their markets. It depends on how paranoid we think we ought to be about Chinamen. My suggestion is: not very.

    You’re probably right, but this wouldn’t be about “destroying their markets” so much as crippling their enemies… Re paranoia – they did a bloody-good job of nobbling the economies of the West by quietly loosing-out a relatively-innocuous virus backed up with a few scary “news” films of folk dropping-dead in the street, so what could they be capable of if they wanted the solids to hit the air-conditioning bigtime?

  17. “China could do any number of self-harming things that would instantly destroy their markets. It depends on how paranoid we think we ought to be about Chinamen. My suggestion is: not very.”

    Chinamen in general are probably as interested in making money, drinking and getting laid as the next man. The CCP on the other hand has very different ideas about what the role of Chinese companies should be, and its the one with the guns who are telling all the Chinamen what to do. Ask Jack Ma what happens to people who do things contrary to what the CCP want.

  18. The CCP doesn’t appear to supply the UK with much in the way of food, fuels, fertilisers or cement.
    No Haber-Bosch process in the whole of the UK and Ireland since summer 2023 is nowt to do with outsourcing production to the far east and entirely down to domestic energy policy and the most influential politician of all time, Ed Miliband.

  19. Seriously the world is rapidly splintering into 2 blocs, with the producers of everything people need on one side and the consumers of more than they produce on the other side, and all you can think is a good idea is give even more of our productive capacity to others, ‘safe’ in the knowledge that we can issue debt for ever and a day and those producers of stuff will always take it.

    Unarguably that is the position of the US and U.K. governments and sundry academics on the political left.

    The UK wants to issue £200bn of new debt this year, when there’s no actual recession or economic crisis. What happens when we can’t any more? What do we eat then, or heat our houses with, or maintain infrastructure with? Bits of paper?

    We begin to starve and die – as is required by the UN, WEF and sundry other supranational bodies. They are deadly serious about ‘rewiliding’, ‘Disease X’ and all the other Shit – I would guess Chinese intelligence has either compromising pictures of or compromising information on almost every major politician in the U.K., USA and EU.

    By the same token, bear in mind what Steve says. It isn’t China that’s putting trannies into our children’s schools. It isn’t China pushing ‘DEI’ and ‘CRT’ and the alphabet soup crap. It isn’t China unilaterally destroying the economy through ‘Net Zero’. Undoubtedly the CCP is a crock of shit but we have quite enough issues without their assistance – and I’ll be advocating a good 2 to 3 million Britons will need to be processed by the Multi person gallows prior to anyone from China..

  20. “I would guess Chinese intelligence has either compromising pictures of or compromising information on almost every major politician in the U.K., USA and EU.”

    Nope, there’s too many people complicit in whats happening for it to be actual blackmail. Its a mind virus. Pretty much the entire Establishment class in the West has been infected with evil ideas, diseased philosophies, warped views of reality. There’s very little that can be done to counter it – we are talking millions of people here, who control the entire (considerable) apparatus of the State. Any peaceful and democratic attempt to confront the virus will be met with the full force of the State, as we have seen with what happened to the Canadian Truckers.

    The only way it dies is either a violent overthrow of the State as it exists today, or the collapse of the State as a result of the consequences of the policies being followed. Neither are very enticing scenarios, both will result in thousands if not millions of deaths. Equally neither have any guarantee that something better will come from the ashes.

  21. BJ – I am (or more correctly was as I’m now retired) a “techie” – a positive dinosaur who cut his teeth on plugboard-programmed Univac kit in the 1960s

    How splendid! Computer men were brave and bold in them days, no sarc intended.

    I reckon that if the chip manufacturer so desired it would be possible to design a trapdoor into the actual chip hardware

    Yarp it’s technically possible to put nasty undocumented features in hardware but these aren’t necessarily as hard to find as you’d think and Top Men are indeed looking for them with sophisticated tools.

    Put it another way, there’d be billions of dollars in it (market share) for anybody who could prove the Chinese are doing this to their kit. Nobody has done so to date.

    But the thing about IP packets is, remember the Huawei switching kit shouldn’t be connected to the dirty Internet in the first place. It should be firewalled at a minimum, with proper authentication and segmentation rules enforced by US or Israeli cyber security hardware. Lotta shoulds there, but the point is this exploit, while possible, gets less plausible the more you think about it.

    The Red Chip Scare is a fake Because. The real Because is They are desperate to stop China achieving first mover advantage in AI. Nobbling Huawei in 5G is part of a suite of sanctions aimed at preventing denying China access to next generation AI scale chips.

    What scares me about AI is not AI. What scares me about AI is that our rulers are scared of AI. There seems to be a belief in Washington (and therefore London and Brussels) that AI is a society-transforming, world-upending, epochal technology. I can’t tell if that’s magical thinking and desperate straw-clutching or eerie presentiment.

    Re paranoia – they did a bloody-good job of nobbling the economies of the West by quietly loosing-out a relatively-innocuous virus backed up with a few scary “news” films of folk dropping-dead in the street, so what could they be capable of if they wanted the solids to hit the air-conditioning bigtime?

    That’s the thing, eh?

    Remember, the UK government spent the majority of the pandemic in full TikTokstep with official state Chinese messaging. American pols were hugging random Chinese people for the cameras and the media was browbeating you over the imaginary racism of naming conventions for viruses.

    Now, China is the enemy on both sides of the Atlantic. Those kids are fast as lightning!

    Jim – Chinamen in general are probably as interested in making money, drinking and getting laid as the next man. The CCP on the other hand has very different ideas about what the role of Chinese companies should be, and its the one with the guns who are telling all the Chinamen what to do. Ask Jack Ma what happens to people who do things contrary to what the CCP want.

    The Chinese Mafia have been active in our country for many decades. In all that time, how much trouble have our Chinese friends caused their white neighbours? You know the answer.

    That seems to be the template for intra-Chinese oligarch disputes. Their world, their rules. Outwardly… I don’t think we have anything to fear from the Chinese armed forces unless we want to fight them. Expansionism doesn’t work when you’re contracting – not enough Chinese babbies being born to conquer Asia.

    As the esteemed Dr. Rev. Rodney King once asked, “Can’t we all just get along?”.

    VP -; with the fondest and saddest of Yarps.

    Our enemies in Russia and China are authoritarian gangsters who are trying to improve the material conditions of their own societies so people can do normal things such as get married and have babies.

    Our enemies in London, Brussels and Washington are insane lunatics who want us to live in airtight hutches (electricity supply: optional) and eat tasty insects while the muezzins ululate outside and the police check in with your tranny daughter to make sure you’re respecting his neopronouns.

    This situation seems unreasonable to me. ¯\_(ツ)_/¯

  22. Baron Jackfield,

    Would that plugboard-programmed Univac kit happen to be a UNIVAC 1004/1005?

    Those were the days.

  23. Given that China shut down far more thoroughly for Covid, with worse civil disturbance even, I think we should lay to bed the idea that it was a move to destroy the west.

  24. Given that China shut down far more thoroughly for Covid, with worse civil disturbance even, I think we should lay to bed the idea that it was a move to destroy the west.

    The rest of the world should still be demanding reparations from the CCP, even if the bioweapon release was accidental.

  25. @Chris in Texas – January 13, 2024 at 11:34 pm

    Would that plugboard-programmed Univac kit happen to be a UNIVAC 1004/1005?

    Indeed it was… 1004 to be precise. 962 “things” of core memory (IIRC 6 bits plus parity – like “Polo Mints” on a bead-frame!), card input and card and/or lineprinter output.

    Those were the days.

    Aye… The only programming job I ever had that needed a reasonable degree of physical strength – those boards were heavy when fully plugged and needed to be slotted in very carefully to avoid dislodging a plug or few.. 🙂

  26. Given that China shut down far more thoroughly for Covid, with worse civil disturbance even, I think we should lay to bed the idea that it was a move to destroy the west.

    More probably that Mr Eleven ignored the cardinal principle that when Mother Nature is the fuckee, the bum she will always bite.

  27. ” it’s technically possible to put nasty undocumented features in hardware but these aren’t necessarily as hard to find as you’d think and Top Men are indeed looking for them with sophisticated tools.”

    Presumably that would be same sort of ‘Top Men’ that built the Post Office Horizon system?

    There are no ‘Top Men’ any more. There are no rooms full of white men in white shirts with slide rules sending rockets to the moon and designing bigger and faster jet fighters. Instead there are load of Karens and diversity hires playing at running a country by pretending reality doesn’t exist. Do you really think that lot are going to spot whether the CCP has sent us a load of compromised IT equipment?

  28. Every chip, every Huawei router or phone, every MG car and every toy in your Christmas cracker has a piece of Global Warming built into it.

    See that bubble in the plastic comb ? See that dodgy solder ? That’s where they hid the Global Warming and as soon as you unwrapped ut/ switched it on, the Global Warming got out.

  29. Jim – Presumably that would be same sort of ‘Top Men’ that built the Post Office Horizon system?

    Narp. I don’t think there’s a lot of transferable lessons between a quasi-public sector organisation fucking up a bespoke software procurement due to poor corporate and project governance, and what we’re talking about.

    There are no ‘Top Men’ any more.

    Of course there are, what do you think cyber security bods do?

    Do you really think that lot are going to spot whether the CCP has sent us a load of compromised IT equipment?

    I think we have enough real problems that we can afford to not fixate on what are essentially unfalsifiable accusations, being made for obvious political and commercial reasons.

    NB you refuse to be satisfied with the complete lack of any physical evidence for this, so there’s probably nothing the Chinee or anyone else can do to change your mind. Seems like the mere possibility that they “could” do something is enough to blacklist them – but if we can’t trust the Chinese to sell us IT kit, what can we trust them to supply us? Is the answer nothing?

  30. “we should lay to bed the idea that it was a move to destroy the west.”

    Ah no. The lab was financed by the USA anyway and the leak was indeed an accident.

    BUT
    The enemies of democracy and freedom in the West saw what a roaring success welding prople into their own homes had been in China and decided to try it out in these parts.

    Filled with propaganda provided by Sky and BBC news and by bunging the newspapers and authoritarian enforcement by the police, ‘they ‘ were able to convince peopl that ut was for their own good.

  31. AachenBolognaNitwits

    “What’s the view on Peter Zeihan’s view of things, basically China, along with Germany and others, are fucked”

    The CCP demands reunification; perhaps their wish should be granted: Taiwan, against the run of play, should launch a surprise invasion of mainland China. The CCP probably have the wrong sort of weapons to defend against such an assault and resistance will quickly crumble.

  32. “What’s the view on Peter Zeihan’s view of things, basically China, along with Germany and others, are fucked.”

    The fact that China is teetering on the edge of a depopulation cliff makes them all the more dangerous right now. They know its now or never. They know that tomorrow doesn’t belong to them if they just wait. So if they want to challenge the US its got to be now, while they have an excess of young males to fight with. My guess is they will precipitate that confrontation within the next decade, by 2030 most likely.

  33. Re: the Wu Flu, as I understand it, it was a lab accident, but supposedly once the Chinks knew what was happening, they stopped all travel from Wuhan to the rest of China, but not internationally.

    Naughty, very naughty!

  34. Baron,

    “You’re probably right, but this wouldn’t be about “destroying their markets” so much as crippling their enemies… Re paranoia – they did a bloody-good job of nobbling the economies of the West by quietly loosing-out a relatively-innocuous virus backed up with a few scary “news” films of folk dropping-dead in the street, so what could they be capable of if they wanted the solids to hit the air-conditioning bigtime?”

    What enemies? When was the last time that the UK and China had a fight, or the US and China? Something about the Chinese trying to stop us making money flogging smack to them back in the 19th century, I think. There’s a vague sense of them being wrong ‘uns because they’re communists or they invaded Tibet, but so what? We don’t view Saudis as enemies even though they have a worse record on human rights than China.

    What most people think about China is in their heads, not reality. There is no anti-western blob to China. No Smersh plan of people building the power in China to then turn it into a massive War Machine. There are individuals whether growing rice, making iPhones or in the cabinet of the communist party. And they all have individual motivations. Some people in the cabinet want more reform, some less. The people growing rice perhaps have a more conservative perspective, the iPhone people are more liberal. And the more that the Chinese economy industrialises, the more it will become a liberal economy.

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