China's producer prices plunge the most in seven years as deflation hangs over economy

[GON]

China has slowly embraced free markets. I don't think there was a single Chinese Billionaire 25 years ago. Now there are quite a few. When a population becomes more educated the less they're willing to work low end factory jobs.

War leader and strategist Chinese military general Sun Tzu, who is the doctrinal playbook for the advisory:

All warfare is based on deception. Hence, when able to attack, we must seem unable; when using our forces, we must seem inactive; when we are near, we must make the enemy believe we are far away; when far away, we must make him believe we are near.

 

[buster]

I don't think it's black/white to be honest, in the sense that there is not one factor or single variable that is going to control the outcome of China. They have a demographic issues, but also 1.3bln people to draw from. They're also well educated. Like the U.S., they're a big country with big problems.

I believe this is why they're acting towards Taiwan:

 

[PandaBear]

Their problems is another reason why they may want Taiwan.

Highly doubt it. Taiwan is much more developed in the middle class and raiding Taiwan would destroy the mainland's middle class for sure. The biggest problem of ghost town real estates (there are more rural ghosts town real estates than the number of families in China, despite large cities have shortage), loans to these real estates, and developers going out of businesses before finishing the construction.

If you ask the younger generations in China, most would agree that Taiwan is already independent in practice, and they don't really care much about conquering it for pride reason. They have a bigger problems with patriotic PR personnel on public media secretly immigrating to the US or sending their kids to foreign countries, while shaming the public for doing the exact same thing in public.

 

[PandaBear]

Thats true, but they also have far fewer people to work in those factories. China has the worst baby bust the world has ever seen - both due to the one child policy, and drop in general. Every country that is industrialized has a declining young population, China is the worst of all of them.

I think the unwillingness to have kids or even getting married would be the bigger problem than the past 1 child policy. They still have a law mandating children to financially support their parents, and only recently did the law excludes abandoned or abused children from having to support their parents. If anything they are likely more willing to have children as a "retirement plan" than say, S Korea or Japan.

 

[PWMDMD]

Actual asset deflation is very dangerous in any economy.
Watching the value of an asset decline even as the nominal currency in which you pay it off becomes more dear is a really bad situation.
Also, deflation sends the wrong signal to producers, telling them to produce less as prices decline. Declines in wages cause a contraction in workforce participation, so less wealth can be created since an economy ends up with fewer workers relative to its population.
This is the reason that central banks target a low level of inflation rather than actual currency stability. They want to stay well away from the dangers of actual deflation.

Deflation is also indicative of a fundamentally sick economy that is not easy to fix. With inflation, we are still at this point dealing with an economy that is TOO productive and that's a better problem to have than a sick and shrinking economy.

 

[PWMDMD]

It's sounds like the economic "good times" are over in China. I wonder if maybe this is why they're suddenly getting so frisky militarily? Perhaps they're trying to keep the good times rolling by forcibly trying to acquire more territories, and more captive markets in newly developing countries (and poorly developed countries such as Mexico and Cuba), outside of mainland China.

I agree it doesn't appear to be going well for China...deflation as a result of insufficient population growth is not easily fixed.

I was constantly told in the 80s and 90s that we were losing to Japan and that by the time I was an adult Japan would overtake the US as the next economic superpower. Then in the 2000s I was told China was going to be the new global economic superpower and that the US would fall hard.

All it's taught me is no one can predict the future which I also apply to the many doom and gloom pontificators here on BITOG.

 

[Rmay635703]

Actual asset deflation is very dangerous in any economy.
Watching the value of an asset decline even as the nominal currency in which you pay it off becomes more dear is a really bad situation.
Also, deflation sends the wrong signal to producers, telling them to produce less as prices decline. Declines in wages cause a contraction in workforce participation,

Hmm, in the real world where asset depreciation actually occurred over an extended period it actually lifted up the poorest people to become landholders and the then lords and rulers to loose influence and power. This only happened once during the plague and coincided with a reduction in population.

The danger is mainly the reactions of those with money and power during such an event.

Workforce participation drops because it becomes far easier to obtain the basics of life.

What is mostly untested is deflation during a population boom.

The depression caused deflation but would not match up to deflation outside a depression.
One causes the other but not necessarily the other way.

It would be an unknown with uncertainty in our current environment the end result of the volatility caused would not be predictable , likely mix up who has wealth and who does not as there would be no safe home available to those above the insurance caps, land holdings and other real goods would become toxic as an investment but a boon to the people who should actually have the land. Could clear a lot of foreign bums sitting on assets out of the country

 

[JHZR2]

Sounds like China is investing in Cuba.

We’re investing in China with our purchasing decisions. Make no mistake.

 

[Just a civilian pilot]

We’re investing in China with our purchasing decisions. Make no mistake.

Very well said.

I am willing ( and do ) to pay more to not do it

 

[ripcord]

With Chinese exports flagging, excess manufactured goods inventories are probably high forcing sellers to lower domestic prices.

 

[PWMDMD]

Very well said.

I am willing ( and do ) to pay more to not do it

This of course assumes there is a non-Chinese made option. Sadly, there often is no choice.

 

[Just a civilian pilot]

This of course assumes there is a non-Chinese made option. Sadly, there often is no choice.

Yep.

Most people’s morality is aligned with their wallet and price is always number one even if they can afford to do what’s right.

 

[Dave Hess]

Very well said.

I am willing ( and do ) to pay more to not do it

Me too, unfortunately most consumers have the Walmart-ification attitude where the cheapest product is the best.

 

[JHZR2]

Yep.

Most people’s morality is aligned with their wallet and price is always number one even if they can afford to do what’s right.

Agree. And the scenarios where there are no other options are unfortunate.

Me too, unfortunately most consumers have the Walmart-ification attitude where the cheapest product is the best.

Yes! Unfortunately many can’t afford different, and even those who can often don’t care. Unfortunate they’re also often the ones who don’t want to offer welfare or unemployment (granted overused and abused programs) to folks who can’t find work. Yet their buying decisions were a part of the scenario unfortunately.

As the Davidson Window gets precariously close I’m not interested in providing one cent for spy balloons or Cuban bases or anything.

 

[fdcg27]

Hmm, in the real world where asset depreciation actually occurred over an extended period it actually lifted up the poorest people to become landholders and the then lords and rulers to loose influence and power. This only happened once during the plague and coincided with a reduction in population.

The danger is mainly the reactions of those with money and power during such an event.

Workforce participation drops because it becomes far easier to obtain the basics of life.

What is mostly untested is deflation during a population boom.

The depression caused deflation but would not match up to deflation outside a depression.
One causes the other but not necessarily the other way.

It would be an unknown with uncertainty in our current environment the end result of the volatility caused would not be predictable , likely mix up who has wealth and who does not as there would be no safe home available to those above the insurance caps, land holdings and other real goods would become toxic as an investment but a boon to the people who should actually have the land. Could clear a lot of foreign bums sitting on assets out of the country

I would have to disagree with you on this.
Inflation is the friend of the lower income masses because it makes their debts ever easier to service.
Inflation is not the friend of the monied classes who hold these debts as assets and see their real value constantly eroded.
The primary difference between those considered wealthy and those not is that the former earn most of their current income from financial claims while the latter earn it through their labor. The dollar value of all US debt is about double that of all US publicly traded equity, incidentally, and most of that debt is securitized. Debt is only a problem when the value of the assets securing it drops below the amount lent, as happened in 2008. Taking the collateral then becomes a loosing proposition.
In an economic epic of eroding wages, commodities values and an increasing real cost of servicing debt, it's hard for me to see how the poorest people would benefit in any way.
Deflation is also typically a precursor to economic contraction and without both fiscal and monetary intervention may serve to deepen any contraction. I think most of us recall the collapse in commodities prices starting in early 2008, for example.
The primary difference between the early thirties and the late oughts is that there was heavy contracyclical intervention in the latter case and none in the former. We know where that led.

 

[Ronsant]

Very well said.

I am willing ( and do ) to pay more to not do it

Can’t get enough people to go along with that to make a difference.
good on you, but most would rather pay less for what they buy.

 

[BISCUT]

China is just another has been... The world has moved on to greener pastures

Agree in terms of manufacturing and finance. They’ve had intricate knowledge of this since the early 90’s; makes them on the dangerous side for international relations.

 

[Shel_B]

China's producer prices plunge the most in seven years as deflation hangs over economy.​

Interesting read. Going through the article, I wonder if the story of what is truly happening is missed. Seems the USA and most western nations might welcome this news in many aspects.

As always, one should excercise extreme caution on any number, fact, or figure coming out of China. Nothing released from China is ever verified, validated, or accredited -ever. The entire story could in fact be propaganda/ information campaign, and the author took the bait.

I bet there are people in China that are saying pretty much the same thing about us.

 

[Rmay635703]

I would have to disagree with you on this.
Inflation is the friend of the lower income masses because it makes their debts ever easier to service.
Inflation is not the friend of the monied classes who hold these debts as assets and see their real value constantly eroded.

The effects of the plague, population reduction, deflation and the subsequent creation of bourgeois is simply apart of history, can’t really argue it.

Inflation only helps those with current debt but not in the matter of getting a loan , the truly poor normally don’t have traditional loans and thus typically don’t get most of the positive transitory affects of inflation.

Once inflation sets in banks predict for it and the positive affects are mostly mitigated

 

[fdcg27]

The effects of the plague, population reduction, deflation and the subsequent creation of bourgeois is simply apart of history, can’t really argue it.

Inflation only helps those with current debt but not in the matter of getting a loan , the truly poor normally don’t have traditional loans and thus typically don’t get most of the positive transitory affects of inflation.

Once inflation sets in banks predict for it and the positive affects are mostly mitigated

Maybe we're in agreement then?
While one may not be able to deny historical fact one can certainly disagree as to the cause.
In the case of the birth of a European middle class, mass death among all classes was probably the main cause.
As the saying goes, it's an ill wind that blows no good.