China Transitioning to Credit/Consumer-Based Economy

[Frodo]

China is currently in the midst of an economic transition being attempted by the central government. Does anyone think that China can make a successful transition from an investment/export-led economy to a credit/consumer-based economy? 

[Blue3]

It's going to have to.

The road will be bumpy, but it will get done.

I am worried about Chinese banks in general though.

[Ban my account ffs!]

Since everything there is driven by the central government, I'd expect the transition to be bumpy... though generally doable.

I think the paradigm of the post war "export industry to the poorest nations" might be coming to an end as the poor nations really begin developing.

We just don't have the massive exploitable poor populations we had because enough of the world is developing that they too put pressure on these poor nations for cheap labor/resources.

So unfortunately China's transition might not be as prosperous as the U.S.' was because we had such a long period to draw from cheap labor.

[opebo]

They're going to have a lot of difficulties with this, for many different reasons.  Are there any real success stories among Asian nations which have attempted this sort of transition?

[Ban my account ffs!]

They're going to have a lot of difficulties with this, for many different reasons.  Are there any real success stories among Asian nations which have attempted this sort of transition?

I wouldn't call Japan a huge success story.. but it has probably been the most successful.

[robbin_hunting]

China is currently in the midst of an economic transition being attempted by the central government. Does anyone think that China can make a successful transition from an investment/export-led economy to a credit/consumer-based economy? 

This depends on how fast Europe's Economy recovers. China's Invesment/ Export lead economy is starting to suffer due to decline in it's exports. Consumption in China is on the Increase, so if Europe's economy recovers fast and its exports increase again this will give China a chance to have a smooth transition, otherwise, China is gonna have a harsh landing.

[opebo]

They're going to have a lot of difficulties with this, for many different reasons.  Are there any real success stories among Asian nations which have attempted this sort of transition?

I wouldn't call Japan a huge success story.. but it has probably been the most successful.

No, its a big failure.  They still underconsume terribly, and save far too much.  However not doubt it isn't as bad as China.

[Frodo]

Here's an encouraging sign that Chinese are beginning to get an appetite for credit:

You must be logged in to read this quote.

[Ban my account ffs!]

As things are right now, China is in a unique position.  Their rural farmers are being somewhat propped up by the central government... but because of the chinese climate and landscape, mechanizing these farms is nigh impossible.  If they stop subsidizing these farmers it will lower China's food output and allow a lot of land that would be considered non-arable in the U.S. to return to nature.

Will China keep subsidizing such farmers even as the allure of city dwelling middle class Chinese continues to grow rapidly?

[opebo]

Will China keep subsidizing such farmers even as the allure of city dwelling middle class Chinese continues to grow rapidly?

They bloody well better as the cities are already flooded with vast numbers of deeply dissatisfied poor low wage migrant workers.  If even more moved there there'd be absolutely massive unemployment and social disruption. 

The middle class has nothing to do with this issue as no one from the countryside can become middle class.

[jaichind]

I think this transition is less dramatic then one would think.  Note that the vast majority of the grey economy are really consumption and not investment. 

See

http://nextbigfuture.com/2013/11/adjusting-china-gdp-shows-china-economy.html

which has



An adjusted view shows that investment is really about 40% of GDP which while high is really in line with other Asian tigers.