China's Economy Grows and Grows...Forever?
We're all supposed to be impressed by the Chinese economy. It just grows and grows. During the recent crisis, the Chinese economy contracted less than the U.S. Then it turned around much faster. And now it's growing again with no end in sight. It continues to grow faster than the U.S. and Europe. So how does it do that? Is it because the Chinese work all that much harder than Americans and Europeans?
That's definitely a big part of it. The Chinese work seven days a week. They simply work all the time. They do have time off for certain holidays. Chinese New Year's one example. People travel to see their relatives and take time off. But their regular work week is longer, certainly than the typical American or European worker.
But there's a whole other side of the Chinese economy that doesn't get much attention. It's the government's involvement in the economy. Sure we all know that China's not the U.S. We know that the Communist Party still runs the government. But somehow many of us think that the Communist rulers there just let the business people do what they want as long as they don't threaten the rule of the Party.
And to some degree that's true. The rulers won't let you criticize them beyond a certain point. And they do encourage the famous Chinese "entrepreneurial spirit." They do let business people make stuff and make money and keep lots of their profits for themselves. That's definitely different than how things were when the Chinese Communist Party was ruled by Mao.
But the government's doing more than just keeping their "hands off." I mean, you didn't really think that they were doing that, did you? A big government standing aside and letting the economy run on its own? C'mon.
The government's been making cheap money available to Chinese business people for years. They do something similar to what our government's encouraged since the 1980's. They make money cheap and plentiful every time there's a little slow down in the economy.
Of course, that's what led to our collapse recently. Only the Chinese didn't collapse as bad as we did. They're still creating jobs, while we've got a big unemployment problem. So do the Chinese do the loose money thing better than we do? Will they be able to keep things humming by keeping money cheap and plentiful?
Well, it looks like the Chinese themselves are getting a bit worried. They've been tightening the money supply and raising interest rates. They're worried about inflation, which has been going up. They're trying to put a break on economic activity just enough to slow down inflation without slowing down the economy so much that the economy goes into recession and unemployment goes up. Will they succeed?
So far, it looks like they are. So are their government officials smarter than ours? Are their central bankers more skilled than ours? Are they going to be able to goose economic activity and avoid recession? Will they keep the economy churning and churning, creating more and more jobs for the millions of young Chinese who need them? And will they be able to do all that without creating inflation?
As far as inflation is concerned, they're already seeing quite a bit of inflation right now. So will it get worse? Will it reach a point where it gets out of control?
What do you think? Will their economy follows different rules than ours. I might mean that they've found a way to create prosperity forever, right? Does that make any sense. Do you think that the Chinese have found a way to create prosperity for all Chinese forever?
That's definitely a big part of it. The Chinese work seven days a week. They simply work all the time. They do have time off for certain holidays. Chinese New Year's one example. People travel to see their relatives and take time off. But their regular work week is longer, certainly than the typical American or European worker.
But there's a whole other side of the Chinese economy that doesn't get much attention. It's the government's involvement in the economy. Sure we all know that China's not the U.S. We know that the Communist Party still runs the government. But somehow many of us think that the Communist rulers there just let the business people do what they want as long as they don't threaten the rule of the Party.
And to some degree that's true. The rulers won't let you criticize them beyond a certain point. And they do encourage the famous Chinese "entrepreneurial spirit." They do let business people make stuff and make money and keep lots of their profits for themselves. That's definitely different than how things were when the Chinese Communist Party was ruled by Mao.
But the government's doing more than just keeping their "hands off." I mean, you didn't really think that they were doing that, did you? A big government standing aside and letting the economy run on its own? C'mon.
The government's been making cheap money available to Chinese business people for years. They do something similar to what our government's encouraged since the 1980's. They make money cheap and plentiful every time there's a little slow down in the economy.
Of course, that's what led to our collapse recently. Only the Chinese didn't collapse as bad as we did. They're still creating jobs, while we've got a big unemployment problem. So do the Chinese do the loose money thing better than we do? Will they be able to keep things humming by keeping money cheap and plentiful?
Well, it looks like the Chinese themselves are getting a bit worried. They've been tightening the money supply and raising interest rates. They're worried about inflation, which has been going up. They're trying to put a break on economic activity just enough to slow down inflation without slowing down the economy so much that the economy goes into recession and unemployment goes up. Will they succeed?
So far, it looks like they are. So are their government officials smarter than ours? Are their central bankers more skilled than ours? Are they going to be able to goose economic activity and avoid recession? Will they keep the economy churning and churning, creating more and more jobs for the millions of young Chinese who need them? And will they be able to do all that without creating inflation?
As far as inflation is concerned, they're already seeing quite a bit of inflation right now. So will it get worse? Will it reach a point where it gets out of control?
What do you think? Will their economy follows different rules than ours. I might mean that they've found a way to create prosperity forever, right? Does that make any sense. Do you think that the Chinese have found a way to create prosperity for all Chinese forever?
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