China’s Consumption Downgrade: Skip Avocados, Cocktails and Kids

https://www.nytimes.com/2018/08/22/business/china-consumer-downgrade.html

by petethomas • 8 years ago

79 87 8 years ago

r00fus• 8 years ago

Is this a real problem or just a tempest in a teapot? Many anecdotes != data.

About the only thing that popped out at me is the line "She makes about $1,400 a month after taxes, but nearly half of it goes to the rent on her one-bedroom apartment."

Maybe housing costs are what's causing the slump (if there is one)? Around where I live I see stores closing all the time and I'd bet the #1 reason is that rent is too damn expensive.

BadassFractal5• 8 years ago

Sounds like a very common story of people living in SF, NY, LA, Seattle, Portland etc. unless they're very successful, even by the standards of that city. I hear the same can be said of Paris, London, Berlin, Moscow, Tokyo, Hong Kong etc.

Shoot, having a place all to yourself is one heck of a luxury in those cities. Plenty of people there are having to skip nice things if they want to live in a place like that. All while paying off student loans, while their careers are still in the early stages.

jacobolus6• 8 years ago

One reason that property values have gone up in these places is that property in world cities is now often used as an investment vehicle for foreigners who made fortunes in politically unstable places, and want to park their money somewhere safe, or at least diversified. This kind of investment is problematic even when the money’s source is legitimate.

Having housing owned by absentee landlords who live halfway around the world is mostly negative for a city’s residents (though might benefit some local property owners whose property values are thereby inflated). Remote owners for the most part don’t care about maintaining their property, improving the local neighborhood or city, forming relationships with tenants, etc., and sometimes even leave units unoccupied for extended periods of time, taking housing stock off the market.

I hope governments figure out some way to impose substantial additional taxes on non-owner-occupied housing, especially when it gets to large scale, or when units are kept unoccupied. The purpose of housing is to provide a place for people to live, not to build a fortune for a few capitalists, especially ones who are not local and are therefore largely unaccountable for bad behavior.

redahs6• 8 years ago

Maybe housing costs are what's causing the slump (if there is one)?

Yes, that's how the business cycle has worked in western countries since the classical antiquity. The largest component of urban housing costs is the price for access to land, and payments for access to land are surplus payments beyond what is necessary for land to be supplied, because land is a fixed a natural resource with no labor cost of production.

An increase in land banking and the holding of real estate for investment purposes decreases the supply of land available, increases payments for access to it. This increases the market valuations for real estate value based on the increase in the capitalized value of future rent payments. This increases the opportunity cost of investing money in productive businesses which employ labor to produce goods and services relative to putting money into land. This decreases investment in production of non-land goods and services which have a labor cost of production, which decreases the demand for labor, which decreases wages.

Decreased wages then lead to decreased consumption which leads to decreased ability to pay rent, which then results in a drop in property valuations based upon capitalized rent payments. After a sustained period of rents increasing faster than wages, the property bubble usually pops and results in an economic depression.

One solution to avoid this problem is through taxing and redistributing surplus land rents through a land value tax, which countries such as Taiwan have implemented. China has people smart enough to clear this hurdle and find creative solutions to continue rapid growth, but since Xi has consolidated power and gone back to heavily promoting Marxism as the economic model for China's future, the current political situation makes it seem unlikely that they will actually do so.

baybal24• 8 years ago

FYI, netting $1400 a month in China is freaking a lot for somebody who is not an engineer or a communist.

An average fancy lunch costs CNY25 in the most expensive part of the town. Living a careless life on $700 per month can be done effortlessly.

To note, China is a freaking HIGH tax country. Earning $1400 post tax means her gross income must be around CNY25000 with freebies and perks, which makes her into top 5% of the workforce. She earns almost as much as engineers do.

contingencies3• 8 years ago

Your numbers are out of date.

In 2002 I recall eating a huge bowl of noodles in rural Yunnan for CNY1. Today an average "fancy lunch" costs at least CNY60 in a Tier 1 city. Hell, even one beer usually costs that. That's USD$10.

In Shenzhen, an average bowl of noodles is CNY20+. (The cheapest of the cheap, if you can find it and are willing to eat it, is about CNY8-16.) In the airports it's CNY60+ nationally. In high speed trains nationally a central kitchen produced low quality mass-meal in a thermoform container is CNY45, and perhaps purchased by 1/3 of travelers.

For more reference prices take a look at http://ele.me/ delivery service. The delivery fees alone are around CNY7 (USD$1+). This is not "fancy lunch in the most expensive part of town" but "the stuff the average white collar worker eats daily".

pjc50• 8 years ago

Sounds like they've completed the upgrade to Western status.

JKCalhoun• 8 years ago

Or Japanese.

thatfrenchguy2• 8 years ago

Less consumption -> Less CO2 emissions, so that’s awesome I guess ?

BadassFractal5• 8 years ago

Or skipping children altogether: https://www.independent.co.uk/environment/children-carbon-fo...

thatfrenchguy2• 8 years ago

The paper (https://www.biologicaldiversity.org/programs/population_and_... ) cited by the paper (http://iopscience.iop.org/article/10.1088/1748-9326/aa7541/m...) cited by the article says an interestingly different story:

lifetime emissions of CO2 that are saved by different actions (US)

Increase car’s fuel economy from 20 to 30 mpg 148 Reduce miles driven from 231 to 155 per week 147 Reduce number of children by one: Constant-emission scenario 9,441 Optimistic scenario 562 Pessimistic scenario 12,730

So basically fighting climate change, or having kids who consume less, has a much greater impact.

graeme• 8 years ago

That's just an individual. If consumption for an individual is down due to price, that's consistent with risin carbon demand.

(Global carbon use is up)

quadrangle9• 8 years ago

um, if people are being priced out, that could come from either supply or demand (or both or other factors).

But I think the core point is that if individuals drop out of a market, that relieves demand which can keep prices down and thus allow others to keep consuming!

In other words, if many of us do the environmental thing and drive less, that just enables wasteful irresponsible others to more cheaply use up all the same gasoline in the end.

Or because LED lights got so efficient, places (in China incidentally) can plaster them over most of the surface of a building for no reason other than showing off, thus using up all the efficiency gains.

To actually reduce overall consumption and pollution, we need widespread social changes that make such consumption and pollution seem shameful (and/or illegal) even though the market price isn't itself discouraging.

The only market solution would involve effectively internalizing the now-externalized costs of pollution.

samschooler• 8 years ago

This may be bad for the economy, but to me this sounds like a good thing? People are lowering their spending and carbon footprint. Now if this is because they legitimately can't afford it, that's different; but cutting consumption is generally good.

opportune3• 8 years ago

Cutting unnecessary consumption is good, but generally in market-oriented / capitalist economies you need consumption in some form to drive the economy. Cutting consumption can result in pretty big ripple effects as not only retailers and physical good extractors/manufacturers get hurt, but all the businesses servicing them get hurt too. Lowering consumption in the US, for example, would hurt Google and Microsoft a lot.

In addition to the imports, it sounds like a lot of the problem is due to rising rents and housing prices. I’m basically a broken clock on this, but a “strong” housing market is not necessarily good for the economy. Increasing home prices and rents can wipe out real growth the same way inflation can

BadassFractal5• 8 years ago

That's interesting. My econ understanding is pretty wimpy, so excuse the basic question here: is the broader theory here that "rising rents + increasing housing prices" = some sort of rent-seeking capitalism, whereas consumption of the not-real-estate kind is actually sustainable, desirable and beneficial long term?

seanmcdirmid• 8 years ago

Not having kids is a personally financially prudent decision but not so for society (it causes huge demographic problems if there aren’t enough kids).

mac01021• 8 years ago

Unless you can substitute automation for the kids that are supposed to enter the workforce. Or unless demand for labor decreases along with the decline of the workforce.

remir• 8 years ago

Going forward, it's clear that humanity, in order to have a desirable future, will have to consume and waste less resources and will also have to think about the number of people on the planet.

Being forced to consume less because you can't afford it in the moment is one thing. Being forced to consume less because there's less resource to use and transform, is a different thing.

opportune3• 8 years ago

Sounds like the Chinese can finally enjoy all the wonderful side effects of a mature economy

lxe• 8 years ago

I wonder, if true, how this trend will affect China's insane property market.

baybal24• 8 years ago

Everything can be. Biggest thing to carry out of that is all press coverage in the West of Chinese economy goes through a lot of "broken phones."

You have to do your own first hand research to get an idea of anything.

Example: the headline says "Shenzhen's property prices beat that of Manhattans" , but that only a half truth - average still climbs up, but median were going down for close to 3 years. Yes, the 400sqm mansion apartments did probably beat NYC long time ago, but who cares about them?

In overall, SZ market got push not due to demographics as popular narrative says, bur thanks to their (failed) universiade. A giant amount of property speculators, top tier ones at that, bought into the idea that universiade, just like the Olympics, will magically push property prices and Shenzhen will see its own share of Pangu plazas (the once most expensive apartment building in China). Well it just became the self fulfilling prophecy, but only for the top of the market.

Another thing few people know - Shenzhen spend more money on the universiade than most countries spent on the Olympics. To their disappointment, the event did not even sell half of all tickets, and went completely invisible to the outside world.

redahs6• 8 years ago

They could clear up rents rising faster than savings and consumption by copying Taiwan and implementing a land value tax as Sun Yat Sen and Henry George originally recommended. However Xi has consolidated power, begun promoting Marx more heavily, and claims Marxism is still totally correct for the future of China, so they probably won't. With a greater push for Marxism, if the economy begins to slow we should expect greater nationalization of Chinese industry. Hopefully investors realize that Taiwan is the more sustainable political-economic system in light of current conditions.

prolikewh0a• 8 years ago

While China may be a Communist Dictatorship, the economy is extremely capitalistic with no aspects of Marxism. Do the workers own the means of production? No, not Marxist. Privatization also is not Marxism.

erulabs2• 8 years ago

This idea of consumption being the indicator of health for an economy is troubling to me. Less consumption certainly appears troubling to shareholders, and as some have pointed it should be viewed as a positive thing re: environmentalism - less consumption means less resource utilization.

But from a purely economic standpoint - saving is not a bad thing. Murray Rothbard wrote the following (fairly obvious statement):

"To increase production, man must form capital. To create it, he must restrict his consumption and transfer his labor for that period to producing immediately-satisfying consumers’ goods."

The article explicitly mentions the -goals- of those who are saving - to buy homes or raise children. Henry Hazlitt writes:

"But when money is invested it is used to buy capital goods–houses or office buildings or factories or ships or motor trucks or machines. Any one of these projects puts as much money into circulation and gives as much employment as the same amount of money spent directly on consumption. “Saving,” in short, in the modern world, is only another form of spending."

In other words - Why would it ever be bad that people are -expanding- the time horizon of their goals (favoring long term investments over short term ones - ie: houses instead of lattes)? If anything, this ought to be an indicator of a strengthening economy, even if it means "slumping" share prices in the meantime.

hendzen• 8 years ago

Where does the capital come from that flows in to savings?

- From wages, which are paid by enterprises that create the goods that are consumed

- From investment gains in enterprises that create the goods that are consumed

Its consumption all the way down.

quadrangle9• 8 years ago

Nonsense. Capital is ownership of raw materials and means of production, even if we use money to track that effectively. Capital comes from natural resources more than anything else. Consuming those resources destroys capital rather than generating it — except when the consumption is an investment that increases our access to more resources (i.e. using oil to run equipment to get more oil as well as examples that aren't the same resource).

If we live more consuming lifestyles, we drive up the demand for resources which could increase the motivation of people to get them and thus drive economic growth short-term, until/unless we use up the resources entirely. And that all still ignores externalized costs (pollution and other harms) that can come from the extra consumption.

adventured5• 8 years ago

Try consuming something before it's produced.

There is an order to things. It all begins with first producing/making something, no matter what segment of the economy you're talking about. Sure, you can start by borrowing (from someone else that has produced something), and eventually you still have to produce to pay for that front loaded consumption.

JamesBarney• 8 years ago

But the problem is if everyone is waiting for tomorrow to spend who is working today?

P.s. Houses are a consumer

mid• 8 years ago

Some people joke about eating meat instead of tofu, as American tariffs have made imported soybeans more expensive.

When the imports get more expensive because of tariffs it's by definition the tariffs imposed by importing country, i.e. China in this case.

quadrangle9• 8 years ago

You're so understated!! It's troubling to you. Wow.

I tend to celebrate such fair, intellectual posts! But in this case… consumption as economic indicator isn't just troubling, it's horrific.

Our economic measures are not just mediocre, but actually destructively backwards. They are measures that actively push us to catastrophes, unhappiness, destruction…

GDP etc. would triple instantly if we just paid our neighbors to do one another's housework.

contingencies3• 8 years ago

The two main problems with classic models of economics are: (1) the tragedy of the commons: the tendency of the environment, biology, sustainability, public space and other shared concerns to be ignored until monetized/privatized to the general detriment; and (2) the false 'equilibrium' analogy used to justify supply and demand with newtonian physics (and to a lesser extent, to wrap the whole thing in a shroud of self-serving ivory tower rationalism): needless to say there is no such equilibrium - market behavior at the macro level is actually driven by mass psychology.

[1] https://en.wikipedia.org/wiki/Tragedy_of_the_commons

[2] https://www.georgesoros.com/2012/06/02/remarks_at_the_festiv...

Edit: I agree with you. If you'd dropped the lead sentences you wouldn't have been downvoted. HN as a whole seems to react badly to hyperbole, but positively to unjustified, broad, faux-intellectual claims. Haha :)

briandear2• 8 years ago

Hazlitt is one of the most under-appreciated writers in Economics. His “Economics in One Lesson” is brilliantly simple.

redahs6• 8 years ago

"But when money is invested it is used to buy capital goods–houses or office buildings or factories or ships or motor trucks or machines. Any one of these projects puts as much money into circulation and gives as much employment as the same amount of money spent directly on consumption.

This is nice in theory but certainly false in practice.

In practice much of the price paid for capital-goods is not for capital at all, but for land and monopoly priviliges. In real estate, the land share of real estate value can be 60% of the total investment.

Payments for land and investment in land purchases are always surplus payments beyond what is necessary to bring land into use as a factor of production, because land is a fixed natural resource which does not have a labor cost of production.

When investment in land increases through land banking, this increases the opportunity cost of investing in businesses which employ labor to produce goods and services, which decreases the demand for labor and lowers wages.

Policies which are designed to increase investment and savings over consumption typically decrease economic output and slow growth, because while increased consumption of labor produced goods and services increases the profits for investing in productive businesses supplying these services and the demand for labor, increased investment does not necessarily increase the demand for labor or the supply of labor produced goods and services at all.

It's possible for policies promoting increased investment and savings to promote nothing more than land banking and investors holding empty parking lots while waiting for a speculative increase in price.

erulabs2• 8 years ago

You’re not wrong - certainly land is one of the long term investments - but I have a hard time saying land purchases from other humans is more or less “productive” than latte-purchases - for varying definitions of productivity of course. I also fully agree waste to curription, monopolies, violence, etc etc are real things, but again I’m not sure how to measure that between land and coffee (just to keep the mental experiment going).

If all land was owned by one evil monopoly, and it was slowly being sold, even at insane prices - is that not productive in the sense that land in the future is more distributed than land in the past? Certainly it seems to me to be at least as worthy as short term entertainment and luxury - particularly ecologicaly - but purely economically too?

Anyhow - you’re not wrong at all - investment in land is certainly one of the things being favored instead of coffee - but this seems exclusively like a value judgment to me (who is to say what the price of land ought to be but the owners of the land?)

cryptonector• 8 years ago

Yes, sure, but! in order to save you also have to have people who will later be willing to provide goods and services in exchange for your savings, and that requires having children. No, I don't mean that everyone must have children, but that in a world where population pyramids are inverted, older people will have a hard time getting much value for their savings.

Taking this to an absurd extreme, the last human alive could have all the money in the world and it would do them no good at all -- all that money would have exactly zero value (well, the cash could be used as fuel or toilet paper, but that's it, and most money isn't and wouldn't be cash anyways).

Now, a society might be able to survive having an inverted population pyramid for a while, or even a very long time (generations) but e.g., dedicating more of its economy and people to elder care, by automating more of elder care, and so on. So it's exactly not all bad. Nor am I saying that fertility rates should be above replacement rates -- we all know that we can't have exponential population (or even economic) growth without end on Earth. But do note that an economy with a long-term inverted population pyramid tends to be inflationary: the elderly will have a lot of money (as usual), yes, but it will be chasing a smaller population of service providers.

Talk about Childhood's End.

Sustainability yes, self-destruction no.

In the long-term I do assume -perhaps wrongly!- that countries with negative population growth will eventually stabilize their fertility rates at replacement rate (probably with an overshoot on the upswing).

airstrike2• 8 years ago

You're just shifting profits from the Retail industry to the Real Estate industry, but ceteris paribus the amount of GDP remains unchanged.

I'm not an economist, but from what little I know, the Neoclassical / Solow-Swan model¹ ² defines output as a function of Labor, Capital and Productivity. Long story short, consumption doesn't drive economic growth.

__________

1. https://en.wikipedia.org/wiki/Solow%E2%80%93Swan_model

2. https://slideplayer.com/slide/4812968/

redahs6• 8 years ago

Consumption taxes have substantially decreased economic growth in Eurozone in practice. The Neo-classical models of economic growth are inferior to classical models of economic growth, as the exclude Land and natural resources as an independent factor of production.

The primary impetus of the development of neo-classical theories economics excluded was United States government land grants to railroad companies during the westward expansion of the 19th century. The railroad barons took over the economics departments of private universities which were previously controlled by the clergy, began firing professors which held to classical economic theories, as there was no tenure for professors at the time. They instead began funding professors such as John Bates Clarke, who repckaged Marxist economist theory that capital was 'jelly' and land and natural resources no longer exist.

"Neo-Classical Economics as a Strategem against Henry George" documents how land and natural resources were removed from classical economic theories during the development of neo-classical economics in order to promote the interests of wealthy land owners in the United States during the 18th century:

http://www.masongaffney.org/publications/K1Neo-classical_Str...

malloryerik• 8 years ago

These lines are unhelpful and dreadfully misleading in this case. If savings always meant good investment, there'd nary be debt crises yet the history of capitalism is a history of debt crises. Saving is also not the same as spending because the person or group using the money has changed, the location has changed, the purchases have changed.

As for good and bad investment, let's take an absurdist example for fun and clarification. A savings bank lends individuals' savings to two farmers for their yearly crops.

Farmer A plants a 10,000 seeds of barley, and his neighbor Farmer B plants what are essentially small stones, 10,000 sterile seeds (perhaps he's been duped by someone or by his own misguided ideas into believing that they're fertile).

Both farmers will spend the same on labor, water, perhaps the same on the seeds, and so on, so the savings will be turned into spending as Hazlitt says, but their harvests will clearly be different. Farmer A will reap a growth in total value, while the planter of sterile seeds -- Farmer B -- has created no new value despite having spent the savings lent by the bank, which he now must repay. Because of his bad investment he can't repay the bank and must sell his farm.

If it turns out that many other farmers also planted these sterile seeds and can't repay their loans (other people's savings) the bank will default and great harm will be done to the community (who, if this is an idealized small and local economy, must also deal with a reduced supply of grains).

Instead of farmers planting sterile seeds, in China you have local governments planting sterile infrastructure projects and borrowing heavily to do so. The debt on these and other projects is mounting at an alarming rate. Why are these sterile seeds being planted? Because the easy infrastructure investments have already been made, and there is little other means to create 6% GDP growth without either increasing exports (ahem) or increasing demand, in other words increasing consumer spending so that savings could be invested in the creation of products and services to be sold to households rather than in sterile infrastructure projects.

The best explainer of this stuff that I know of is Michael Pettis, who teaches finance at Peking University. Here's a relevant article from his excellent blog: http://carnegieendowment.org/chinafinancialmarkets/72997

EDIT: By the way, increasing household income is the best justification I've heard for Xi Jinping's extreme and otherwise frightening power grab, because a shift like that (increasing household income) requires going against mighty interests: local governments and the wealthy.

RikNieu• 8 years ago

"To increase production, man must form capital. To create it, he must restrict his consumption and transfer his labor for that period to producing immediately-satisfying consumers’ goods."

Well, the problem with using that statement to downplay consumption is that it starts with the objective of wanting to increase production. But why would one want to increase production? Because demand(consumption) demands it.

zaro• 8 years ago

This idea of consumption being the indicator of health for an economy is troubling to me.

And rightly so. It's basically an indicator of how fast a society is turning resources in trash for profit. Probably it wasn't always like this, but nowadays I think that's the only metric it represents.

mattmanser• 8 years ago

I've been reading articles like this on HN for the last 10 years. I no longer know what to make of them.

Ideologically, I'm opposed to the Chinese government and always felt they deserved to fall, a little like the USSR. The idea of political incarceration sickens me to the soul. So the articles delighted me, a shameful delight in another's misfortune.

But these articles come out promising a herald of an imminent decline and they still climb.

Now I have a grudging respect for their emergence, and a less rosy view of the virtues of Democracy, after it did little but cause misery in much of Iraq, Afghanistan and Russia.

Perhaps this time China will finally succumb to its prophecised doom. More likely, I suspect, I will be reading on HN about another compelling portent of China's imminent decline in a year's time.

truedatone• 8 years ago

10 years ago....

debt to GDP https://www.bloomberg.com/news/articles/2018-02-08/sizing-up...

2008 - 150%

2018 - 350% (official figure) 450% (official figure plus shadow debt)

gdp growth https://tradingeconomics.com/china/gdp-growth-annual

2008 - 12%

2018 - 6%

children per women http://www.china-profile.com/data/fig_WPP2010_TFR_1.htm

2008 - 1.75

2018 - 1.5

China lost 4 trillion wealth to migration https://www.forbes.com/sites/insideasia/2017/02/22/china-cap...

Nothing goes up forever. Eventually they come crashing down to earth. Noone escapes economics fundamentals.

adventured5• 8 years ago

Oh it was Democracy that caused misery in Russia, not the hang-over and cultural destruction of 70 years of party dictatorship and failed experiments with various degrees of Communism? Not to mention mass genocide, starvation, poverty and oppression on a scale of which humanity has rarely seen.

Meanwhile Czech, Romania, Slovakia, Poland, Estonia, Latvia, Lithuania - all of which are Democratic, and all of which have had superior economic outcomes to Russia - haven't had that problem. Turns out when you forcibly hold a giant land mass together that shouldn't be together, there is a high cost.

Was Russia expected to snap instantly into a perfect Democratic model from that? How many elections did they hold that were Democratic before returning to a dictatorship? Not a very long experiment as it turns out.

When did Iraq get Democracy? Was that before or after the vast civil war that killed hundreds of thousands of people and demolished its cities; or was it before or after ISIS ripped the country in half? Immediately after leaving a brutal dictatorship that had tortured the nation for decades? Another mass of land arbitrarily forced together by a great power, with horrible consequences.

Afghanistan got its Democracy with a helping of decades of religious civil war that decimated the country and continues to this day with everything persistently under attack by the Taliban. They're expected to accomplish what beautiful form of Democracy in that atmosphere of on-going civil war?

Using those three as examples of Democracy causing misery, is plainly absurd.

jacobolus6• 8 years ago

What caused misery in Russia was that after the collapse of the USSR, the way “democracy” and “capitalism” were implemented was by handing over the country’s natural resources, infrastructure, machinery, etc. to a few kleptocrats, with everyone else left to fend for themselves. As far as I can tell this was done with the support and encouragement of the USA and Europe (especially various wealthy Americans and Europeans who made a whole lot of extra money out of it).

It took a few years for the Russian mafia to consolidate power, but now the country looks to this outside observer like a mob-owned dictatorship with a weak economy, weak state institutions, little public accountability, no future orientation, poor career prospects for the well educated, etc. The main sources of power are (a) sizable natural resource reserves including gas, (b) nuclear weapons, (c) a shameless government which is willing and able to stir up a lot of shit in other countries.

When did Iraq get Democracy?

It’s hard to form any kind of “democracy” when a foreign military comes and destroys your local infrastructure, dismantles your local institutions, kills a substantial proportion of your population, sparks off a civil war, provides local paramilitary groups with loads of weapons, etc.

rahimnathwani• 8 years ago

The phenomena described are not new; this article could have been written 2, 3 or 5 years ago, when property values had already risen to levels that meant most couples have no hope of ever buying a basic apartment in the city where they work.

The title is a little strange: avocados have been a luxury item for as long as I've been in China. A single, medium-sized avocado usually costs between US$1.50 and $2.00. Avocado toast isn't a staple like it is in SF.

And, anecdotally, I've seen more cocktail bars and craft beer places open than I've seen close.

wrong_variable• 8 years ago

Meh,

Up until the 17th and early 18th Century most of global wealth was located in China and India. Its what made them prime target for the militarily strong Europeans.

I have been to Europe, Asia and the Middle East and people are almost the same.

So how can I explain the widely different living standards ?

The only answer that ever made sense to me was colonization.

You can see the equalization happening with Britain and US having third world style politics, corruption, etc due to having to learn to live in world without their hegemony.

As for democracy, do you think China could have survived democracy ? It would have ended up like Iran. Democracy only works if the country has strong institutions which China doesn't have, they still send their best and brightest to US universities.

unmole• 8 years ago

So, how come India survived democracy?

Animats• 8 years ago

This is really important, but too anecdotal.

The story was written before Alibaba's Q2 results were out, and says that if Alibaba is down, there's real trouble. Those results are out now, and Alibaba does not seem to have had a bad quarter.

adventured5• 8 years ago

Check out Alibaba's rapidly decelerating platform revenue growth (which is where they make all of their profit). Their top line was bolstered by throwing very large sums of money at one business deal after another. Their platform sales growth declined from 36% to 25% from just the prior quarter.

Their profitability almost entirely disappeared as well. They're spending large sums of money to buy cheap revenue, and burning up their margin in doing so, swapping high quality sales for low quality sales. That might be ok if they didn't have a $442b market cap to support (which was premised on them generating a large amount of profit from a high margin ad platform).

It remains to be seen whether growth at any cost is a smart approach, or whether it's going to result in driving into a jarring brick wall instead. Junk revenue has consequences.

est• 8 years ago

It seems that the only thing that downgrades is the quality of nyt reporting.

1/10 failing nyt downgraded itself to 朋友圈 level. I had much higher expectations of this reporting. Give me more stats covering more industries. Not some imaginative figure from 1st-tier whining about living in a big city is costy.

throwaway23434• 8 years ago

This way, Mr. Wang — who makes about $2,000 a month after taxes — saves $160 a month.

This is very surprising to me. This is the typical grad-student salary in the US (in CS), and in places outside of Bay Area, more than sufficient for a very decent QoL.

China’s Consumption Downgrade: Skip Avocados, Cocktails and Kids

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