Something strange is happening in China (The economy is going up just made a 4.5% increase) but unemployment and homelessness has become rampant

[Mista]

Compared to a few years ago, there is indeed a pervasive atmosphere of melancholy and anxiety. People generally feel that opportunities have decreased.

China is just transitioning from a period of rapid catch-up growth to a more mature, slower growing economy. China used to grow at around 10% annually, then 7–8%, and now around 4–5%. In another decade, growth could probably slow further to 2–3%.

The low-hanging fruits of economic development have largely been picked. The rate of improvement has slowed, so it's only natural that people become more realistic and less optimistic about their future prospects.

China's economic deceleration has been more dramatic compared with the more gradual transitions experienced by the four Asian Tigers; probably more like Japan.

That's due to China's property boom over the previous decades. Real estate, construction and related industries were major engines of economic growth. Now that the property market is contracting, a sector that previously propelled growth has become a significant drag on it.

一个曾经推动经济增长的引擎，如今反而变成了拖累增长的因素，因此经济放缓的体感会特别明显。

I am no expert on this subject, but both I and the people around me have prioritized investing in real estate, while putting the rest of our capital into the stock market—which has consistently performed poorly. I suspect it will continue to underperform. In my limited view, this is because we live in a socialist country where the state aims to safeguard the livelihoods of the poor and the middle class; consequently, the development of capital is—whether intentionally or inadvertently—kept in check. Since the stock market serves as the primary and most effective instrument for both domestic and international capitalists to extract wealth from the poor and the middle class, it remains perpetually weak. Therefore, for ordinary people with limited funds, investing in the property market is a better option.

That's not the right way to look at it. A poorly performing stock market is not necessarily evidence of successful wealth redistribution.

The Chinese government has repeatedly attempted to stimulate its stock market in recent years. Does that mean it is trying to widen inequality? Have ordinary people's lives improved because the stock market has underperformed?

I've personally made money investing in the US stock market. The Singapore government and its sovereign wealth funds have also generated hundreds of billions from global financial markets (mainly US) over the years. Does that mean we're extracting wealth from poor and middle-class Americans?

I don't think so. The stock market is not inherently a zero-sum game. When investors purchase shares in companies, they provide liquidity to the capital markets, and companies can raise capital to expand their businesses, invest in research and development, improve productivity and create better products and services.

Over the long term, successful companies can grow their earnings, generate additional economic value and distribute some of those profits to shareholders through dividends and share buybacks. Of course, not every company succeeds, and stock market investing involves risks. But the underlying mechanism is fundamentally different from simply transferring ownership of an existing asset like a property.

The property market, on the other hand, is largely a zero sum game.

You buy a house now and expects a young chap to buy from you 10 years later at twice the original price. Is that transaction resulting from twice as much housing or twice as much economic value? No, right?

You're actually robbing his monthly cashflow for 30 years, which could otherwise have gone towards consumption, starting a business or investing in more productive activities.

Property speculation is largely a transfer of wealth rather than the creation of new productive value. This is precisely why I find it strange to argue that stock market investment is inherently exploitative while property investment is somehow a better way for ordinary people to accumulate wealth. It's actually the other way round.

Both markets can generate wealth but do so through different mechanisms. It's important to distinguish between investment that expands productive capacity, and speculation that is just a transfer of wealth without creating additional value.

 

[Mista]

I live in Hangzhou, a second-tier city in China

Anyway, I'm intending to visit Hangzhou at the end of the month. Any recommendations other than 西湖? Any nice place to see red/yellow leaves for autumn?

 

[wangdefa]

If discussing the Chinese economy, I suggest you need to observe it over the long term. The decline in Chinese housing prices aligns with government expectations. The government had already issued warnings when housing prices were at their peak. China needs housing prices that are affordable for people after working for a few years. Although this may slow down economic growth, in the long run, it is in line with the government's direction. This indicates that the government has indeed controlled the growth of housing prices.

The second is the unemployment rate. China's unemployment statistics differ from those of other countries; we include resignations, students, and retirees in our calculations. To determine the true number of unemployed individuals, you need to exclude the student and retiree groups.
The third source of income: As the economies of all countries around the world slow down, China, being a country closely tied to the global economy, will also be affected. The most significant impact will be the rise in oil prices and the depreciation of export foreign exchange earnings. However, the impact on food prices, housing prices, and commodity prices will be minimal. What I want to say is that the cost of living will not be greatly affected, but income will decrease due to the impact of factory orders and foreign exchange.

The fourth is the new industries. The Chinese government is increasing investment in new industries, including new energy, robotics, and the Internet of Things, all of which are continuously advancing technological innovation. We need to phase out or transfer some low-end products that are easily affected by foreign exchange, increase the export share of high-end products, and take control of pricing power in our own hands.

Fifth, we often talk about the "China speed." For example, if a person does not own a private car, their activity range is usually limited to within a five-kilometer radius. However, the Chinese government has built extensive urban subways and intercity high-speed railways in this area, expanding the activity range to over a hundred kilometers. This allows people to work in one area during the day and live in another area at night. Such low-cost travel was impossible twenty years ago.