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China speeds up 'innovating', which has to 'dismantle old things', affecting 'GDP growth'


Jul 2, 2014
China speeds up 'innovating', which has to 'dismantle old things', affecting 'GDP growth'
Publish: 27 Oct 2021 23:45 amend: 27 Oct 2021 23:45 By: David P. Goldman
(Taken from the Asia Times WWW.asiatimes.com)

China's destructive creation hits GDP growth
by David P. Goldman

Chinese leaders want to move investment away from construction and real estate. and turned towards the high-productivity channels. By taking the reins of the new technologies of the "Fourth Industrial Revolution", but such a huge change It caused pain in some areas.

The second major transformation of China's economy is on its way now. And it wouldn't happen without some kind of pain.

China's GDP growth rate in the 3rd quarter (July-Sept 2021) was 4.9%, which for the Chinese country must be considered small. It's a story that's both worse and better than it looks on the outside. If the export issue has been eliminated The growth rate of GDP will fall to only around 1% of the major reasons due to a bubble in the real estate sector, which now accounts for 1 in 4 have a ratio of GDP,

which is good news. China's industrial supply chain has been successfully revived. and to compensate for inputs in the manufacturing industry elsewhere of the world, which is still facing a stumbling block As can be seen in September China's export sales rose 28% compared to the same period last year.

China has a desire to shift investment to high-productivity channels in the manufacturing and service sectors. by retreating from the construction Dragon Land's strategy relied on taking the reins of new technologies. of the so-called The "Fourth Industrial Revolution" offers a path of high growth for a country in which the labor force is at rest.

This is a beautiful omelet. as promised by the Chinese Leaders But what we will get together for some time now, some eggs are still broken eggs.

As I reported on Sept. 24, China's financial authorities want to lower the price of housing. Consider this a matter of social policy. And they used the Evergrande Crisis as a tool to do this without any disguise. As soon as the government signals that it wants housing prices to fall The current sales have collapsed. The top 100 real estate developers reported a 37% drop in September sales compared to the same month of 2020, while anecdotal reports say prices for new homes are lower. Down by about 30% to 40% in Tier 3 and some Tier 4 Cities
(Written by David P. Goldman, Sept. 24, available at https://asiatimes.com/2021/ 09/evergrande-bubble-popped-in-time-no-lehman-moment/)
(China divides major cities of the country into layers See more at (https://en.wikipedia.org/wiki/Chinese_city_tier_system -translator)

Top-tier city dwellings such as Beijing, Shanghai, and Shenzhen now sell for about 50 times the price of Chinese average income This ratio is a number that is much higher than it actually is. This is because employees in these top-tier cities typically earn several times the average income. However, the fact remains that There are many Chinese people who are unable to afford their own homes.

In modern tier 2 cities such as Chengdu or Wuhan, the average housing price-to-income ratio is 20:1, roughly the same as in Singapore. and to see a wider picture Homes in Taipei are sold at 34 times the median income.

This is a social issue that Chinese officials want to mitigate. But at the same time, he did not want to cause turmoil until the housing market collapsed. The ratio of housing debt to property value is still very low. In China, compared to most other countries, the nationwide credit-to-value ratio was just 36 percent in 2016, according to an International Monetary Fund (IMF) study. In 2019, housing prices will fall in a catastrophic way. Therefore, it will affect the credibility of the broad housing market.

Chinese authorities began to pressure lending to the real estate market in 2019 when the growth rate of new real estate loans slid sharply. Before then, loans for the manufacturing industry had stalled at year-on-year growth. by 5% over most of the 2010s, while property development loans grew by 10% to 20% annually, as illustrated in the table below. But this was reversed in 2019 when real estate lending growth began to slow. and was only 5% in the second quarter of 2021. At the same time, the industrial loan growth rate jumped to 20%.

As China moves its 600 million citizens from rural areas to major cities during the past 40 years, the real estate sector has swelled up. Moreover, rising land and housing prices have made real estate investment a one-stop gambling game for Chinese real estate companies. This will seek to borrow as much money as possible to buy the property at higher prices. inexhaustible According to one estimate of Nomura Securities Security The amount of loans granted to these developers exceeds $5 trillion. This equals about 10% of the overall social lending balance. (The sum of all credits released into the economy) of China, which is about 50 trillion dollars.

China's debt-to-GDP ratio grew rapidly during the 2010s, but has plummeted over the past two years, largely due to restrictions on real estate lending. This is something that deserves special consideration. Taking into account that every other major economy in the world is rapidly rising in debt. due to the government having to issue various stimulus measures During the COVID-19 pandemic

In 1992, the real estate sector was just over 10% of GDP. But by the time of 2020, it has risen to 25% over the past several decades. China builds homes for 600 million people – this is equal to the population of the whole of Europe. from the Ural Mountains to the Atlantic Ocean By the 2010s, real estate expansion had become a drag on productivity. The long-term growth rate of total factor productivity is the change in output compared to the change in capital and labor inputs. It has dropped from about 3% per year at the end of the 2000s to around 1% per year by the end of the 2010s.

Deng Xiaoping's Strategy for Changing Sustainable Farmers to become a semi-skilled industrial worker However, only 2% of workers who entered the industrial workforce when Deng launched China's market reform in 1979 had a university education. But 27% of Chinese who entered the workforce in the past five to 10 years have a degree. And most of China's high school students today are committed to tertiary education. About a third of Chinese university students are now majoring in engineering.

China is building the human capital for the productivity transformation it needs to do. Western analysts don't know how many. which prophesied that The source of China's growth and expansion will run dry. and China will be trapped in The “middle-class trap” – that is, too weak to move on. And stuck with the level of per capita income (per capita income), which is much lower than those of the countries of the industrialized world.

This is a very important period in China's second period. Since the revolution that brought the Communist Party to power in 1949, Mao Zedong has suffered a worse setback in his efforts to turn rural China into an economy that can continue to thrive. from implementing the policy The "Great Leap Forward" which caused the death of so many people from starvation. Perhaps as many as 45 million, while Deng Xiaoping solved this problem by destroying the old Chinese countryside. and create a manufacturing giant in the big city instead.

This time, China needs to transform its semi-skilled industrial workforce. Become the pilot of the 4th Industrial Revolution. which must be prepared in advance It exists in the form of infrastructure, technology, and above all, human capital, as former World Bank Chief Economist Justin Yifu Lin puts it in his new book. So now it's time for China to make a real change
(what Justin Yifu Lin said, see: https://asiatimes.com/2021/10/china-must-lead-the-new-industrial-revolution/ or the Thai language archive at https://mgronline.com/around/detail/9640000104221)

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