The news that really matters

Like many other bloggers I am focused on the US, and to a lesser extent Europe.  But of course the most important economic and political issues lie elsewhere.  Here’s a few interesting stories from China:

1.  All hail Wukan villagers:

A Chinese village protest that tested the ruling Communist Party for over a week ended on Wednesday after officials offered concessions over seized farmland and the death of a village leader, in a rare spectacle of the government backing down to mobilised citizens.

Residents of Wukan, in southern Guangdong province, had fended off police with barricades and held protests over the death in police custody of activist Xue Jinbo, whose family rejects the government’s position that he died of natural causes, and against the seizure of farmland for development.

But after talks with officials, village representatives told residents to pull down protest banners and go back to their normal lives — provided the government keeps to its word.

“Because this matter has been achieved, we won’t persist in making noise,” village organiser, Yang Semao, told an assembly hall of village representatives and reporters, referring to the protests. He said protest banners would be taken down.

This actually seems like a big deal to me, I’m not sure why more people aren’t talking about it.  Here’s more:

Chinese officials sometimes make low-key concessions to local protests, especially after they are over, and also punish protest organisers. But Wukan turned negotiations into a rare public spectacle, watched by foreign reporters and discussed within China — despite domestic censorship of news.

.  .  .

Wang Yang, the Communist Party chief of Guangdong, obliquely acknowledged that the villagers had cause to complain, in comments published on Wednesday in the Southern Daily, the official province newspaper.

“This is the outcome of conflicts that accumulated over a long time in the course of economic and social development,” said Wang, seen by many analysts as nursing hopes of a spot in China’s next central leadership.

Guangdong is a prosperous part of China. But the upheavals of urbanisation and industrialisation have fanned discontent among increasingly assertive citizens, who often blame local officials for corruption and abuses.

Poverty and political repression are highly correlated.  And Guangdong province is getting richer and better educated at a rapid rate.  In about 20 years we’ll all wake up and find the old China is gone.

2.  But there are other problems on the horizon:

Rapid ageing, a lack of children and a sustained low birth rate herald changes in the structure of China’s population, and the real dangers will emerge further down the line. Guo Zhigang believes the existing population structure will mean a rapidly and severely ageing population in the first half of this century, and then a sharp drop in population in the second half.

Many demographers, both inside and outside of China, agree: getting the TFR wrong will result in misjudgements about ageing and labour supply and, ultimately, a family planning policy that is out of step with reality and storing up problems for the future. A report in British magazine The Economist asserts that China will face major population challenges in the future, while India and the Middle East will reap the benefits of their moderate birth rates.

Too few people in China!

3.  Everyone knows about the gender imbalance, but I was unaware of this angle:

The shortage of girls could lead to a warped reversal of the imbalance. Shang-Jin Wei, a Columbia University economist, says that China’s ballooning savings rate, unparalleled in the world, could be a result of families’ pressure to accumulate cash to attract wives for their sons. “If you’re a dirt-poor peasant somewhere,” Edlund says, “maybe your optimal choice would be a daughter, who can get married.” This trend could create a new marriage economy, she says, encouraging lower-class parents to sex-select for daughters while the wealthy continue to have sons. Relegated to the underclass, women’s growing financial value could prime them for exploitation by their impoverished parents who could sell them to wealthier families for ever-increasing bride prices. South Korea has been credited with eliminating its widespread gender imbalance in the 1990s, but it is actually an example of this exact scenario—the rich choosing sons and the poor choosing daughters, Edlund says. “They have not been able to eliminate sex selection.”

The entire article is interesting, particularly the part about the Vietnamese bride.

4.  Nicholas Kristof reports:

A child in Shanghai is expected to live 82 years. In the United States, the figure is not quite 79 years. (For all of China, including rural areas, life expectancy is lower, 73 years — but rising steadily.)

Of course Shanghai’s air is extremely polluted.  I do understand that this data only covers residents, not migrant workers, but it still seems impressive.  It puts Shanghai in a tie with the countries that have the longest life expectancy on Earth; Japan, Singapore, Australia and Italy, all much richer than Shanghai.  But the pollution is what I really wonder about:

a.  Perhaps the data is wrong.

b.  Perhaps it’s correct but horrific pollution doesn’t affect life expectancy.

c.  Perhaps it’s correct and pollution does affect life expectancy.  But with cleaner air the Shanghaiese would live considerably longer than even the Japanese.  Maybe because they are richer and better educated than the average Chinese person.  Selection bias.

The first choice is the easy way out, but I suspect the third answer might be correct.

5.  Despite the current economic slowdown, long term I’m still bullish on China.  Here’s a golden bull placed in the lobby of the 1100 foot tall “Farmer’s Apartment” built by a wealthy rural village in Jiangsu province:

The link has more pictures of the building, which I briefly discussed when it was under construction.

Also check out this link of Tianjin, where an entire commercial district is under construction.  Note that in the bottom picture every single building is under construction.  And many more (even taller) are on the way.  And if that’s not enough, scroll the bottom bar to the right and see there’s even more across the river.  And this is all far for downtown Tianjin.  That’s one third of Manhattan’s entire office space–in a Tianjin suburb.  Ten years ago there was discussion of “overbuilding” in Chinese cities like Shanghai.  Those predictions weren’t just wrong, they were laughably wrong, as the construction was trivial compared to what’s going on now (and compared to the office space that’s been fully absorbed since 2001.)  But this time I think the critics will be right–I suspect Tianjin is overbuilding on a massive scale.

6.  The US payroll tax cut extended 2 months?  Read about the Vietnamese bride and then tell my why I should care.



14 Responses to “The news that really matters”

  1. Gravatar of Chris Stucchio Chris Stucchio
    23. December 2011 at 08:15

    Scott, fun fact about Shanghai’s life expectancy of 82. You are correct that this is higher than the life expectancy of the average American.

    But to provide proper context, Asian Americans live to 87.

  2. Gravatar of Cthorm Cthorm
    23. December 2011 at 08:35

    Good stuff on China. I don’t have much to say about that, I’m also a long-term bull on China. Sure, they may have a massive construction bubble, but the fundamentals for demand are so strong I’m certain it will steam-roll any lasting damage.

    On #6, I hate all of this focus on the optics of the tax cut. It’s better than nothing, but it’s not a lot of money even if it was for the full year. This is what, $80-$160 for the average American? It’s a rounding error. Worse, it only reinforces the “optics” that politics in the US is obsessed with gimmickry and unable to come to productive solutions. We’d be much better off eliminating the payroll tax altogether, with a corresponding increase in rates or loophole closures elsewhere if we can’t get a simultaneous offset in SS/Medicare spending. Even a dysfunctional Congress should be able to decrease dead-weight-losses on a regressive tax.

  3. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    23. December 2011 at 09:50

    ‘Read about the Vietnamese bride and then tell my why I should care.’

    The evil that men do lives after them, Harry Dexter White et al.

  4. Gravatar of Benjamin Cole Benjamin Cole
    23. December 2011 at 10:00

    South Korean men from rural areas are importing wives from all over SE Asia. This will become commonplace in China and S Korea.

    Of course, the day may come when people in China go back to big families.

    In French Canada, within a single generation, (Catholic) families went from eight or more as the norm to not even replacement.

    Of course, it doesn’t take much to go back to full-on population booms. In modern society, many women are capable of eight or more if they want. If there is plenty of land and jobs available, they may want.

  5. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    23. December 2011 at 10:14

    Speaking of important economic news:

    ‘When two off-duty Tukwila officers, hired by the mall to deal with the shoe’s release at four different stores, arrived at Southcenter at 3 a.m. the crowds were manageable, Murphy said. Within two hours, however, the number of hopeful buyers swelled to nearly 2,000. People there for the shoe release were cutting in line, pushing, fighting, drinking and smoking marijuana, Murphy said.’

    Must be evil 1%ers if they can afford $180 tennis shoes.

  6. Gravatar of Benny Lava Benny Lava
    23. December 2011 at 10:25

    Interesting to hear about this, especially the first spot. Times are changing in China, criminally under reported. I still don’t know what to make of the Chinese ghost towns and the coming demographic problems.

  7. Gravatar of ssumner ssumner
    23. December 2011 at 12:35

    Chris, The data on Asian Americans and Hispanic-Americans is very interesting, but I believe it is contested. I’m shocked that we don’t have sold data for those two groups, as they are such a large share of the population. If the Hispanic data were correct, it would completely blow out of the water many critiques of the US health care system. But I’m not sure it is correct.

    Does anyone know why accurate data is not available by race?

    Cthorm, I’d rather massively increase the payroll tax and eliminate the personal and corporate income taxes.

    We should tax consumption, not income.

    Patrick, There are several lessons in that tale. One lesson is the evil of many men (and women), as you say. Another is how bad things must be in Vietnam if she viewed her life in China as being better. A third is how little choice many people have in their lives, indeed how little they know about the outside world.

    Ben, Good point. But whereas there are enough SE Asian women for Korean men, there aren’t enough for Chinese men.

    Patrick, Why didn’t anyone tell me that those shoes were on sale now! Seriously, haven’t Air Jordan shoes been around for decades?

    Benny Lava, My hunch is that the property bust of Japan will eventually hit China, but not before prices move considerably higher. On the other hand the EMH predicts . . .

  8. Gravatar of TGGP TGGP
    23. December 2011 at 14:41

    Edlund from link #3 is wrong about the effect of surplus males. As mentioned, there’s been about 20 years of it in China without the outbreak of violence everyone expects. When will the “bare branches” folks admit they were wrong?

  9. Gravatar of Declan Trott Declan Trott
    23. December 2011 at 15:11

    Irrelevant to post, but one more convert to NGDP level targeting:

    John Quiggin is one of Australia’s best theoretical economists, not a macro specialist but very Old Keynesian & ‘progressive’ on policy. I.e. the kind of person you have been trying to get through to.

  10. Gravatar of kai kai
    23. December 2011 at 18:34

    Nice post, Prof. Sumner. It is a big issue in China. The Communist Party recognized the legitimacy of a village-elected organization to sort out problems, which is a big compromise in 62 years.

    Nobody expected there would be Arab Spring and Mrs. Clinton visited Burma, but it happened. It is getting harder and harder to predict the future. Who knows if North Korea still exists 5 years later, or the Communist party in China 10 years later. Or we all can be kidnapped by aliens in 2012. Sorry, I just love 2012 stuff.

    Child mortality rate (under 5) has great influence on the calculation of life expectancy. Pollution can kill, certainly if you are born with asthma, but mainly gives you cancer. A life expectancy of 82 does not mean no long-term sickness and suffering from pain. I read a news article somewhere several years ago about a research on life expectancy without disease and Japan came top. (73 years, if I remember correctly) Still, at the present day, there are still more cancer and diabetes per capita in the US than in China, but things could get ugly fast.

    Thanks so much for teaching me about NGDP this year. Prof. Sumner, I have learnt a lot. I hope you can always find time to relax besides work and blogging. Merry Christmas.

  11. Gravatar of Lorenzo from Oz Lorenzo from Oz
    23. December 2011 at 19:57

    Sort of related. The Indian middle class is over 100m people and getting richer. The Chinese middle class is over 200m people and getting richer. Gold is a status asset in both Indian and Chinese culture. 350m people who like gold being added to the global market. Why is anyone surprised the gold price has surged?

  12. Gravatar of Lorenzo from Oz Lorenzo from Oz
    23. December 2011 at 19:58

    The extra 50m are Koreans, Thais, Malays, Indonesians, etc who are newly very-prosperous and have similar views of gold (many of aforementioned Thais, Malays, Indonesians etc being overseas Chinese).

  13. Gravatar of Tommy Dorsett Tommy Dorsett
    23. December 2011 at 20:25

    Based on the data I have, China NGDP compounded at about a 12% annual rate until 2002. Since then, excluding 2008, NGDP has compounded at a 17.5% annual rate. Evidence of escalating price pressures and a property bubble obviously have prompted policy makers to step on the breaks. I think the slowdown will be sharper than expected and I do not believe they can pull a 2009 – monetizing a debt binge when NGDP is above its trend level – unless they want a even bigger problem down the road.

  14. Gravatar of ssumner ssumner
    25. December 2011 at 08:51

    TGGP, It’s actually a fairly recent phenomena (in terms of adult males) but I have no reason to disagree with your assertion–I also think a high level of violence is unlikely. On the other hand, it doesn’t seem like a desirable situation for the males.

    Declan, Thanks, I may do a post later.

    kai, Thanks for the comments, I certainly agree that pollution can reduce quality of life.

    Lorenzo, I agree, but got lots of push back from the goldbugs when I made that argument. They all thought it was US inflation.

    Tommy, I certainly agree they may have a problem in real estate. But I don’t put most of the blame on NGDP growth (although that’s contributed) but rather to a politicized banking system in bed with the local governments and developers. Moral hazard on steroids.

    Are your NGDP figures in yuan terms? That seems a bit high.

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