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Chinese Economy Getting Worse

Discussion in 'Too Hot for Swamp Gas' started by G8trGr8t, Sep 16, 2019.

  1. danmann65

    danmann65 GC Hall of Fame

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    Our trade imbalance with China is in the hundreds of billions and it's not like it isn't a global market. Other people buy our soybeans and ship them to china.
     
  2. mdgator05

    mdgator05 Premium Member

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    To which, we just added $15 billion. Of course, that doesn't really matter. My trade imbalance with my grocery store is very high. Of course, I receive food easier than I would if I had to raise all my own food in my backyard, so it makes sense.

    Any evidence of this? Because that would be highly unlikely in a commodity market, as you wouldn't be able to make enough profit to make up for the risk you were taking.
     
  3. danmann65

    danmann65 GC Hall of Fame

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    Look at the overall soybean market. I dont have the energy to parse this now but saying that the market for us soybeans has tanked is not accurate.
     
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  4. mdgator05

    mdgator05 Premium Member

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    20% cut in price (but no corresponding decrease in cost to produce) is a pretty bad tank. Do you think the average soybean farmer had a 25% profit margin on their products?

    Soybeans | 2019 | Data | Chart | Calendar | Forecast | News
     
  5. G8trGr8t

    G8trGr8t Premium Member

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    5% growth doesn't work for China. Not enough to keep their country going. Their Prez may not have to run for office but their populace is much closer to rebellion if things keep headed south that would force him out. They might not get to vote but the small group of elite leaders know how precarious their position is if they lose the respect of the general population.

    And if they are officially reporting 5% growth you can bet big $$ that the growth is substantially less.

    Opinion | A revolt is brewing in China, but don’t expect Tiananmen Square

    The proletariat is very unhappy. And it’s happening in Communist China. According to a New York Times report, “Factory workers across China are staging sit-ins demanding unpaid wages for ‘blood and sweat’. Taxi drivers are surrounding government offices to call for better treatment. Construction workers are threatening to jump from buildings if they don’t get paid."

    The Chinese economy has been slowing for some time now. Official figures put the gross domestic product growth rate at 6.6% for 2018, the lowest in a decade, but hardly anyone believes official Chinese economic figures. If the Chinese government itself is admitting to a low growth rate, the actual number must be far lower.
    …………………
    However, now Xi is facing some difficulties. Factories all over China are sending workers on unpaid leave or cutting work-weeks to four days. The country’s big push from an export-driven economy to a consumption-driven one has not worked so well. Ford Motor Co. cut output at its Chongqing joint venture by 70% in November, in what Ford says was a move to reduce inventories of unsold cars. Chemical industry experts said that mostly Chinese-owned chemical factories in Jiangsu had been shutting down because of weak demand.

    The numbers that the Chinese government releases have always been unreliable. It will also never release unemployment figures. After all, “unemployment" does not figure in Communist theory, right? However, when thousands of workers are laid off or asked to go on leave, there is something going wrong with the system.

    A Political Economist on How China Sees Trump’s Trade War

    Authoritarian regimes, because they’re not elected, can, in theory, impose a great deal of hardship on their population without suffering political repercussions. There certainly would be economic repercussions, but I would argue that for Xi Jinping and the current leadership economic growth is an important objective for them for its own sake. They’re not worried about voters voting them out of office, obviously, and there are many ways in which they prevent that from ever happening. But Xi Jinping himself has made a number of speeches where he has said that, interestingly, making China great again is an important objective, and continual growth, continual development, continual innovation, and technological breakthroughs are, according to him, important components of this great revival of China. So to the extent that an all-out trade war would jeopardize many of these objectives, it does behoove the Chinese leadership to think of ways of getting out of it.
    ………………………….
     
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  6. gjgator

    gjgator Freshman

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    Exactly, the main 3 commodity markets prices began declining in 2014-2015. Problem is, world supplies have been hitting record highs, commodity prices haven’t bounced back and input costs have not adjusted according for US farmers.
    Soybean Prices - 45 Year Historical Chart
    Corn Prices - 59 Year Historical Chart
    Wheat Prices - 40 Year Historical Chart
     
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  7. oragator1

    oragator1 Premium Member

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    I am not going to write a long response, but basically my point since this started is that yes, authoritarian regimes can hold on longer, China is still growing (even if it has slowed), but more importantly, the way Trump approached this has largely rallied the populace behind leadership, who must appear strong against a bullying America. Especially given China’s history in their dealings with the west. And reports of China’s economic demise have been a decade in the making - remember the housing bubble, the vacant cities that portended doom? The market crash there a few years ago that was the harbinger of the end of their miracle run? China’s government has full levers over their economy, and can use them, especially knowing Trump could very well be gone in a year.

    If they do decide to make a deal though just to end this and not tank the global economy over a pissing contest,, it will be one that both sides can claim victory and face saving on, but not much will change. Other than the damage already done for very little in the end.
    Jmo, guess we will see.
     
  8. mdgator05

    mdgator05 Premium Member

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    Soybeans were down but declined a pretty significant amount more (it was usually averaging in the $10 range in the 2014-April 2018 and now is averaging in the mid $8s), something we didn't see in those other graphs (neither of which appears to have a continuing negative slope over the past 5 years). Obviously, that is a pretty big impact, especially considering the already challenging prices. That makes the idea to do this now even worse.
     
    Last edited: Sep 18, 2019
  9. oragator1

    oragator1 Premium Member

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