Firmer currency and solid growth means China could pass $10,000 per capita GDP in 2019

[onebyone]

Morgan Stanley had a ten year forecast where the mid-range had China surpassing the World Bank High income level in 2027.

At the end of 2016, the exchange was 6.92 CNY to one US dollar. Currently the exchange rate is 6.60 CNY to one US dollar.

China’s 2017 GDP is tracking to about 82.5 trillion yuan.

This would be US$12.5 trillion. Which with a population of 1.41 billion would be a per capita GDP of $8,870.

This would nearly be at the bullish case level of the Morgan Stanley projection for 2018 instead of 2017.

Several forecasts are for the exchange rate to be 6.4 in 2018 and around 6.2 in 2019.

The forecasts for GDP growth for 2018 is projected at 6.9% and 6.8% for 2019.

The combinations would put China’s per capita GDP at about $9800 in 2018 and $10800 in 2019. China would then pass the World Bank high income level by 2021.

This would China on a per capita basis at the projected levels of Malaysia and Turkey in 2020, 2021.

If as predicted the currency was firmer and economic performance was solid then China’s overall economy would surpass the US economy in 2024 on an exchange rate basis.

https://www.nextbigfuture.com/2017/...-could-pass-10000-per-capita-gdp-in-2019.html

 

[Bussard Ramjet]

Morgan Stanley had a ten year forecast where the mid-range had China surpassing the World Bank High income level in 2027.

At the end of 2016, the exchange was 6.92 CNY to one US dollar. Currently the exchange rate is 6.60 CNY to one US dollar.

China’s 2017 GDP is tracking to about 82.5 trillion yuan.

This would be US$12.5 trillion. Which with a population of 1.41 billion would be a per capita GDP of $8,870.

This would nearly be at the bullish case level of the Morgan Stanley projection for 2018 instead of 2017.

Several forecasts are for the exchange rate to be 6.4 in 2018 and around 6.2 in 2019.

The forecasts for GDP growth for 2018 is projected at 6.9% and 6.8% for 2019.

The combinations would put China’s per capita GDP at about $9800 in 2018 and $10800 in 2019. China would then pass the World Bank high income level by 2021.

This would China on a per capita basis at the projected levels of Malaysia and Turkey in 2020, 2021.

If as predicted the currency was firmer and economic performance was solid then China’s overall economy would surpass the US economy in 2024 on an exchange rate basis.

https://www.nextbigfuture.com/2017/...-could-pass-10000-per-capita-gdp-in-2019.html

I thought that Xi jinping said that the economy was 80 trillion yuan.

If this piece also including the economy of Hong Kong and Taiwan?

 

[randomradio]

6.92 CNY to 6.2 in 3 years is a pretty significant appreciation.

 

[Martian2]

The Yuan-Dollar exchange rate today (November 29, 2017) is 6.60 Yuans per US Dollar.

Moving from 6.6 to 6.2 Yuans per US dollar in THREE years is pretty minor appreciation. It's only an increase of 0.4 Yuans over three years, which is about 0.1 Yuan increase per year against the US dollar.

 

[Bussard Ramjet]

The Yuan-Dollar exchange rate today (November 29, 2017) is 6.60 Yuans per US Dollar.

Moving from 6.6 to 6.2 Yuans per US dollar in THREE years is pretty minor appreciation. It's only an increase of 0.4 Yuans over three years, which is about 0.1 Yuan increase per year against the US dollar.

Yeah, but currency appreciation should never be counted upon.

Who knows, the currency may as well decline.

What I don't understand is that Xi Jinping said that Chinese economy will be 80 trillion yuan this year. So how did the figure come to be 82 trillion yuan?

 

[randomradio]

I know. But the Chinese regulators can stop it anytime and even reverse it if necessary. Nobody likes very fast appreciation. In September, it was 6.4, now it's 6.6. Traders don't want the yuan to increase to beyond 6.5, so it depends on how long they are comfortable with the 6.5 yuan limit.

And there's no point in only yuan appreciating if the economy slows down.

 

[Martian2]

The long-term trend is Chinese currency appreciation.

China has the world's largest trade surplus. I think it's about US$400 billion this year. Additionally, China has remittances from overseas Chinese of US$61 billion per year.

In total, China's inflow of hard currency will be about US$461 billion this year. You can subtract the service trade deficit and add back in earnings from China's foreign investments (such as forex reserves parked in US Treasury bonds).

From an economic standpoint, China's currency has only one long-term direction: which is an increase in value. This is driven by basic economics.
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In 2005, the Yuan-Dollar exchange rate was 8.26 Yuans per US Dollar. Today, the Yuan-Dollar exchange rate is 6.6 Yuans per US Dollar. As long as China keeps accumulating large trade surpluses and overseas remittances, the long-term movement is an appreciating Yuan against the US Dollar.

 

[randomradio]

That's for sure. Appreciation is the long term trend, but it won't start happening in just 3 years.

 

[Martian2]

There are three factors working in China's favor.

1. Automation through implementation of industrial robotics. Production costs are going down. Productivity is going up. Profits are going up. This will strengthen China's economy and cost-competitiveness in the export markets.

2. Domestic memory chip production. The scheduled initial production of 3D NAND and DRAM memory chips in 2018 and mass production in 2020 will lead to a significant decrease in China's semiconductor trade deficit. This means China's annual trade surplus should increase.

3. China is expanding into new technology markets. The ARJ-21 regional aircraft has entered serial production. The C919 single-aisle passenger jet will follow suit in the future. This will contribute to China's trade surplus by reducing the need for imported aircraft.

When you look at the powerful forces that are strengthening China's economy, the obvious conclusion is a continued increase in China's currency exchange rate.

 

[Bussard Ramjet]

The long-term trend is Chinese currency appreciation.

China has the world's largest trade surplus. I think it's about US$400 billion this year. Additionally, China has remittances from overseas Chinese of US$61 billion per year.

In total, China's inflow of hard currency will be about US$461 billion this year. You can subtract the service trade deficit and add back in earnings from China's foreign investments (such as forex reserves parked in US Treasury bonds).

From an economic standpoint, China's currency has only one long-term direction: which is an increase in value. This is driven by basic economics.
----------

In 2005, the Yuan-Dollar exchange rate was 8.26 Yuans per US Dollar. Today, the Yuan-Dollar exchange rate is 6.6 Yuans per US Dollar. As long as China keeps accumulating large trade surpluses and overseas remittances, the long-term movement is an appreciating Yuan against the US Dollar.

You forgot to subtract all the profits and returns that foreigners take back home from China, AND capital outflows.

Many wealthy Chinese like parking their money abroad in real estate. Sometimes they even buy citizenship.

Net flow of money should be visible in forex reserves which were declining for two years and are holding steady or slightly increasing right now.

 

[Martian2]

You forgot to subtract all the profits and returns that foreigners take back home from China, AND capital outflows.

Many wealthy Chinese like parking their money abroad in real estate. Sometimes they even buy citizenship.

Net flow of money should be visible in forex reserves which were declining for two years and are holding steady or slightly increasing right now.

Capital outflows have been staunched. Now, any large foreign investment has to be approved by the Chinese central government. Thus, China's forex reserves are rising again.

Most foreign profits are due to Taiwanese companies on the mainland. For example, Taiwanese manufacturers produce 150 million notebook computers on mainland China. Similarly, Taiwanese manufacturers produce most of the 145 million computer tablets on mainland China. I would guess most of those Taiwanese profits remain in mainland China. Taiwan is too small a market to warrant large corporate investments.

 

[nang2]

Capital outflows have been staunched. Now, any large foreign investment has to be approved by the Chinese central government. Thus, China's forex reserves are rising again.

Most foreign profits are due to Taiwanese companies on the mainland. For example, Taiwanese manufacturers produce 150 million notebook computers on mainland China. Similarly, Taiwanese manufacturers produce most of the 145 million computer tablets on mainland China. I would guess most of those Taiwanese profits remain in mainland China. Taiwan is too small a market to warrant large corporate investments.

Without capital outflow, inevitably, the housing market in China will continue to be bloated. Money has to go somewhere to seek profit. By blocking the outflow with laws and regulations, it distorts the market and forces the money to the places that are less profitable.

 

[Martian2]

Without capital outflow, inevitably, the housing market in China will continue to be bloated. Money has to go somewhere to seek profit. By blocking the outflow with laws and regulations, it distorts the market and forces the money to the places that are less profitable.

That's not what I said.

I said any large foreign investment requires the Chinese central government's approval.

For example, China bought Kuka (robotics), Syngenta (agri-technology), OmniVision (digital-imaging technologies), etc.

There is multi-billion dollar capital outflow from China. It just has to be approved as a legitimate business purchase in the national interest and not an attempt to move capital offshore (such as buying sports teams).

 

[nang2]

That's not what I said.

I said any large foreign investment requires the Chinese central government's approval.

For example, China bought Kuka (robotics), Syngenta (agri-technology), OmniVision (digital-imaging technologies), etc.

There is multi-billion dollar capital outflow from China. It just has to be approved as a legitimate business purchase in the national interest and not an attempt to move capital offshore (such as buying sports teams).

That is the problem. How to invest the private assets is a private matter. When you buy a stock or a bond, do you have to think if it is in the national interest? why moving capital overseas is a problem?

 

[Martian2]

That is the problem. How to invest the private assets is a private matter. When you buy a stock or a bond, do you have to think if it is in the national interest? why moving capital overseas is a problem?

For many of those companies, it is not private assets.

Many large companies in China are SOEs (State-Owned Enterprises). Other companies have funding from SOEs, the central/regional government, or state banks.

Those are not private assets.

You cannot own land in China. You can only lease land from the government.

Every company office and manufacturing plant are earning money based on leased government land, which is a national asset.
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Let's look at the success of Baidu. The Chinese government blocks Google. Isn't part of Baidu's success attributed to the Chinese government? Thus, isn't Baidu's profits not entirely private?

How about Alibaba? The Chinese government makes life difficult for Amazon in China. Alibaba has no foreign competition in China. Isn't part of Alibaba's success attributed to the Chinese government?

How about Chinese carmakers? China has high tariffs on foreign car imports. Aren't the profits from "private" Chinese car manufacturers attributable to the Chinese government's policies?

The Chinese government provides low interest loans for large oversea projects. Aren't those "private" Chinese construction companies benefiting from low-interest Chinese government financing and export credit guarantees?

Aren't most of China's corporate profits attributable to the Chinese government in one way or another? If that is the case, what "private assets" are you talking about?