Week-end Wrap – Political Economy – January 28, 2024

Week-end Wrap – Political Economy – January 28, 2024

by Tony Wikrent

Global power shift

Maersk ships in US Navy convoy forced to retreat under Houthi missile attack 

[Trade Winds, via Naked Capitalism 01-26-2024]

As Armchair Warlord noted on X(Twitter): “Lost amid all the other news breaking in the last 24 hours is one particularly disturbing story: the United States Navy lost a battle at sea yesterday.”

[X-Twitter, via Naked Capitalism 01-25-2024]

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The Reason China Can’t Stop Its Decline

Among specialists who follow China most closely, the two main causes cited for this new conventional wisdom have been known for years. The first is that China’s growth model has been overreliant on policies such as financial repression and extraordinary levels of investment. Here, repression has nothing to do with the usual political usage of the word. It means, rather, that the state controls domestic interest, exchange rates, and capital outflows in such a way that citizens receive little accrual or benefit from their high rates of savings. Instead, these are captured by the state and channeled into industries that are favored or prioritized by bureaucrats, including many that are state-owned.

Some of the problems that might arise from financial repression can seem apparent even to lay people. Bureaucrats tend to know little about business and are unlikely to be in the best position to make the smartest and nimblest economic bets about the industrial future. Some features of this setup may be less than obvious, though. When the state captures and invests the nation’s savings according to its own whims, capital becomes scarcer and more expensive for private investors. This also suppresses the domestic consumption that most mature economies depend on for growth. Finally, as the state channels more and more investment into industries of its choosing, average return on investment falls. China is now at the point where it must invest huge amounts of capital to produce each new dollar of economic growth, and everything points to this continuing to worsen….

[TW: I included this because of its use of the term “financial repression” in an example of clumsy and terribly inaccurate Western analysis of China.  In fact, financial predators are the very reason the USA industrial base was “hollowed out” inevitably resulting in the inability to produce enough ammunition. or to build safe and cost-effective aircraft.]

Week-end Wrap – Political Economy – January 21, 2024

Week-end Wrap – Political Economy – January 21, 2024

by Tony Wikrent

Global power shift

China Is the World’s Sole Manufacturing Superpower

Richard Baldwin [VoxEU, via Naked Capitalism 01-17-2024]

...The US is the world’s sole military superpower. It spends more on its military than the ten next highest spending countries combined. China is now the world’s sole manufacturing superpower. Its production exceeds that of the nine next largest manufacturers combined. This column uses the recently released 2023 update of the OECD TiVA database to paint an eight-chart portrait of China’s journey to superpower status and the asymmetric impact that its dominance has had on global supply chains….

When it comes to gross production, China’s share is three times the US’ share, six times Japan’s, and nine times Germany’s. Taiwan, Mexico, Russia, and Brazil now have higher gross output than the UK. Canada is further down the ranking, in 15th place….

China’s dominance is less stark in exports (Figure 3), though the rise is equally amazing. In 1995 China had just 3% of world manufacturing exports, By 2020, its share had risen to 20%. The corresponding fall in the G7 share was less dramatic than for its share of production….

Figure 4, left panel, shows that the US relies far more on Chinese manufacturing production than vice versa. ² While shocking at first sight, this should not be unexpected. It is natural that a country with 11% of the world output buys more from a country that produces 35% than vice versa, but the numbers are astounding. China was more exposed to US inputs before 2002, but the US has had greater exposure since then. In 2020, the US was about three times more exposed to Chinese manufacturing production than vice versa….

Robust growth in 2023: China maintains top position in global shipbuilding sector for 14 years

[news.cgtn.com, via Naked Capitalism comments 01-17-2024]

In the past 12 months, China's shipbuilding output reached 42.32 million deadweight tonnes (dwt), a year-on-year increase of 11.8 percent, accounting for 50.2 percent of the world's total.

The new orders rose 56.4 percent year on year to 71.2 million dwt during the period, taking up 66.6 percent of the world's total.

By the end of December, the volume of orders on hand was 139.39 million dwt, up 32 percent year on year, accounting for 55 percent of the world's total.

In 2023, five Chinese shipbuilding enterprises ranked in the global top 10 in output, seven in top 10 for new order volume, and six for holding orders, said the MIIT.

The US, Israel Have Lost Battlefield Control – Houthis Have Attacked US Destroyer, Hit Greek-US Owned Bulker; Iran Has Hit US Base in Kurdish Capital, Erbil

John Helmer [via Naked Capitalism 01-17-2024]