Right, agree with your argument that the state bureaucracy is not necessarily worse than that of big corporations. But pse find some positive incentives for these poor bureaucrats, why would anyone want a job like that! My point is simply that I expect that Chinese imports will be less of a support for world trade than possible, if they were spending a little more recklessly. On the other hand, I expect China/Chinese owned firms not to engage in predatory exports and thus add to deflationary pressures. It will simply become a bit more autarchic for a while.

As to large non-SOE domestically owned firms. Sure, but do you believe that these construction related companies are completely independent of the state? Construction is, everywhere, the most politically connected industry of all!

Not necessarily. You can change the incentives of the bureaucracy so that they do things that maximize total performance, and China has done a pretty good job at that, because the people at the top are incentivized to increase economic growth, or less they mob comes and cuts their heads off.

One thing that people miss when they discuss public versus private, is that large private companies are themselves huge massive bureaucracies.

Something else to point out is that not all of the “infrastructure economy” is state-owned. Most Chinese construction companies are funded by non-state capital, and a pretty large fraction of cement and steel companies are “non-state.”

One reason China looks different from Japan or South Korea is that economic ideas from Hong Kong have been extremely influential in Chinese circles, and Hong Kong frowns on the type of economic structures you see in Japan. Also saying that China is against neo-liberalism is too simplistic. China has adopted parts of the neo-liberal program (open capital investment policies and market resource allocation for example) and rejected other parts.

purple: It looks like China’s AMC’s aren’t too eager about buying up any more NPL’s from the Big 4. I think that tells more about the true state of China’s financial situation then their official growth numbers.

No new NPL’s have been transferred to the asset management companies for almost a decade. That was the whole point of the banking reform. The AMC’s set up as a one time injection of state funds to recapitalize the banks. If you keep transferring NPL’s to the AMC’s then you defeat the whole purpose of the system.

What the Chinese government did in 1998 was to tell the banks that they would trade yuan for yuan bad assets. In this situation the banks would start moving their worst assets to the AMC’s. That was the whole point.

There isn’t a central economic planning agency, and what directives come out from the central government are often ignored within the SOE’s and local governments. One reason that China relies a lot on market mechanisms is that those are often more effective at enforcing central government policy than administrative decrees.

http://www.chinastakes.com/2009/6/China-Explores-International-Investment-Agreement-as-a-Method-to-Resist-Protectionism.html

fair enough. Though the base year for the current drop is 2008, and AFAIK, Chinese exports doubled from 2005-08, so the ratio probably went up quite a bit from 2005 to 2008. Not likely that it went up all the way to 40 %, though.

No construction, agriculture, mining, utilities.

That works out to the need for a 21.5% rise in non-exported industrial production to generate a 9% rise in total industrial production. Call it a Rmb2 trillion increase in non-exported manufactured (only) goods.

= = = = =

jonathan,

US Civilian Employment (SA), May 2008: 146.05 mn
US Civilian Employment (SA), May 2009: 141.01 mn
Job loss: 5.04 million. We’re reeling alright.