China Growth in Question

The FT article “China Covid outbreak linked to Delta variant weighs on economy” (Hale, White, Shepherd) makes some grim reading, with several other articles having a similar take, citing Goldman Sachs. I was gripped by a sense of déjà vu. In my first lecture in January 2020 I cited the uncertainties for the trade/macro outlook given events in Wuhan. From FT:

Goldman Sachs downgraded its expectations for real gross domestic product growth over the third quarter to 2.3 per cent quarter on quarter, compared with 5.8 per cent previously.

These two graphs provide some insight into the basis for these revisions. The first shows how much the economy has been locked down, according to differing measures.

Source: GS, “Effective Lockdown Index: August 10 Update.” Notes: data from Goldman Sachs Global Investment Research, University of Oxford (covidtracker.bsg.ox.ac.uk), Google LLC “Google COVID-19 Community Mobility Reports”.

The second picture shows the Goldman Sachs estimate the drag on the Chinese economy (as well as others).

Source: GS, “Effective Lockdown Index: August 10 Update.”

The worrying statement is contained in an AP article:

“The right question for everyone to be asking, including financial market participants, is when lockdowns will come to other economies,” said Carl B. Weinberg of High Frequency Economics in a report. “This is central bankers’ worst nightmare coming true.”

This is a worry insofar as some of the East Asian economies do not have very high vaccination rates.

Source: FT, accessed 8/10/2021.

For Jeff Frankel’s prescient assessment back in February 2020, see here. When i was still worrying about supply chain effects, I wrote this post in mid-February.

35 thoughts on “China Growth in Question”

  1. ltr

    http://www.xinhuanet.com/english/2021-08/10/c_1310119035.htm

    August 10, 2021

    Over 1.79 bln doses of COVID-19 vaccines administered in China

    BEIJING — Over 1.79 billion doses of COVID-19 vaccines had been administered in China by Monday, the National Health Commission said Tuesday.

    [ Chinese coronavirus vaccine yearly production capacity is more than 5 billion doses. Along with over 1.795 billion doses of Chinese vaccines administered domestically, another 750 million doses have been distributed internationally. A number of countries are now producing Chinese vaccines from delivered raw materials. ]

  2. ltr

    https://news.cgtn.com/news/2021-08-10/Chinese-mainland-reports-143-new-confirmed-COVID-19-cases-12BCARohmDu/index.html

    August 10, 2021

    Chinese mainland reports 143 new COVID-19 cases

    The Chinese mainland recorded 143 new confirmed COVID-19 cases on Monday, with 108 being local transmissions and 35 from overseas, the latest data from the National Health Commission showed on Tuesday.

    In addition, 38 new asymptomatic cases were recorded, while 501 asymptomatic patients remain under medical observation.

    This brings the number of confirmed COVID-19 cases on the Chinese mainland to 93,969, with the death toll unchanged at 4,636.

    Chinese mainland new locally transmitted cases

    https://news.cgtn.com/news/2021-08-10/Chinese-mainland-reports-143-new-confirmed-COVID-19-cases-12BCARohmDu/img/d568f5f1a4fc496898cce734fe2a6d76/d568f5f1a4fc496898cce734fe2a6d76.jpeg

    Chinese mainland new imported cases

    https://news.cgtn.com/news/2021-08-10/Chinese-mainland-reports-143-new-confirmed-COVID-19-cases-12BCARohmDu/img/811afe3eb9bc4fea9a69b0461478ed75/811afe3eb9bc4fea9a69b0461478ed75.jpeg

    Chinese mainland new asymptomatic cases

    https://news.cgtn.com/news/2021-08-10/Chinese-mainland-reports-143-new-confirmed-COVID-19-cases-12BCARohmDu/img/153f2d95b0024089b97743539c2dab34/153f2d95b0024089b97743539c2dab34.jpeg

    2. ltr

      As for the coronavirus experience, the Chinese began to administer vaccines domestically in June 2020 or 14 months ago. Through these 14 months, there have been 2 coronavirus-related deaths in China and neither death was of a vaccinated person. Between June 2020 and August 2021, there have been remarkably few coronavirus cases, symptomatic or asymptomatic, detected in China. Evidently the 1.79 billion doses of Chinese vaccines administered domestically have proven remarkably effective through August 10, 2021.

      As for the Chinese coronavirus incidence data and vaccine administration data, the daily records begin in January 2020 and have continued through August 10, 2021. I have often posted the daily data and will continue.

  3. ltr

    https://news.cgtn.com/news/2021-08-09/Economics-has-another-diversity-problem-12AK5L4Sn84/index.html

    August 9, 2021

    Economics has another diversity problem
    By Dani Rodrik

    Early in his career, the economist Joseph E. Stiglitz had an extended stay in Kenya, where he was struck by various oddities in how the local economy operated. Sharecropping was one such anomaly. If farmers were required to surrender half of their harvest to landlords, Stiglitz wondered, wouldn’t that greatly tax incentives and thus reduce efficiency? Why did such a system persist?

    Stiglitz’s quest to resolve this paradox led him to develop his seminal theories on asymmetric information, for which he would later be awarded the Nobel Memorial Prize in Economic Sciences. “The time I spent in Kenya,” he reminisced, “was pivotal in the development of my ideas on the economics of information.”

    Similarly, the economist Albert O. Hirschman was in Nigeria when he observed behavior that he found puzzling. The rail company, long a public monopoly, had begun to face competition from private truckers. But instead of responding to this pressure by addressing its many glaring inefficiencies, the company simply deteriorated even more. The loss of consumers, Hirschman reasoned, had denied the state firm valuable feedback. This observation about rail transport in Nigeria was the seed that grew into his phenomenally influential book “Exit, Voice, and Loyalty.” (Hirschman also fully deserved a Nobel Prize, but never got one.)

    These stories attest to the value of being able to see the world in all its variety. The social sciences are enriched when received wisdom is confronted with “anomalous” behavior or outcomes in unfamiliar environments, and when the diversity of local circumstances is fully considered.

    This observation should be uncontroversial. Yet one would not know it from the way that the economics discipline is organized. The leading economics journals are populated predominantly by authors based in a handful of rich countries. The gatekeepers of the profession are similarly drawn from academic and research institutions in those same countries. The absence of voices based in the rest of the world is not merely an inequity; it impoverishes the discipline.

    When I recently took over as president of the International Economic Association, I looked for data on the geographical diversity of contributors to economics publications, but I found comprehensive and systematic evidence to be surprisingly scarce. Fortunately, data collected recently by Magda Fontana and Paolo Racca of the University of Turin and Fabio Montobbio of Università Cattolica del Sacro Cuore in Milan provide some striking initial findings.

    As I suspected, their data show an extreme geographic concentration of authorship in leading economic journals. Nearly 90 percent of authors in the top eight journals are based in the United States and Western Europe. Moreover, the situation seems similar with these publications’ editorial board membership.

    Given that these rich countries account for only around one third of global GDP, the extreme concentration cannot be explained wholly by inadequate resources or less investment in education and training in the rest of the world – though those factors surely must play some role.

    Indeed, some countries that have made huge economic strides in recent years nonetheless continue to be severely under-represented in top journals. East Asia produces nearly one-third of global economic output, yet economists based in the region contribute less than five percent of the articles in major journals. Similarly, the shares of publications from South Asia and sub-Saharan Africa are minute and significantly lower than these regions’ already small weight in the world economy….

    1. Barkley Rosser

      ltr,

      Hmmm. Interesting. Guess neither Dani nor Magda read mmy 2009 book with Colander and Holt. For starters, this is much more a story about US domination as the earlier post by Menzie showed. Yes, Western Europe ahead of East Asia and sub-Saharan Africa on representation in top journals, but US top schools way ahead of European top ones also.

      Funny that Dani did not notice an oddity: the people who noticed these unusual things in Kenya and Nigeria were not local economists; they were American ones, Stiglitz and Hirschman. I warn that if one goes out of one’s way to get somebody from say sub-Saharan Africa, it is highly likely that is someone trained in the US and not necessarily all that knowledgeable about the their local economies, which is presumably what Dani would like.

      Again, a lot of this has to do with ideology and methodology, and there is a greater diversity among US schools than among ones almost anywhere else.

      I will note one curious item suppoting them at another level, the matter of Nobel Prizes. While a couple of South Asians have received ones, nobody from East Asia has. I find this especially striking regarind Japan, from where I have until very recently always had somebody on my boards of editors. Japan has had a lot of very innovative and high-powere economists, but none have gotten the prize. The obvious exsample just discussed here is Masahisa Fujita, who was the first to apply the Dixit-Stiglitz model to urban-regional economics ahead of Krugman, but he did not share that prize, even though he was way ahead of Krugman on almost all fronts. But his English is poor and he is very mathematical, and his breakthrough papers appeared in lower level field journals (Regional Science and Urban Economics) while Krugman’s appeared in the JPE and he made sure the media heard all about it with his self-puffing spin.

      Probably the most obvious Japanese economist to deservre it, and the most revered and publicly respected one in Japan, although I see almost no discussion of him being on any list to get it, is Hirofumi Uzawa. So I do think there is some bias against East Asian economists. Some nations have not produced anybody worthy of receiving it, e.g. PRC, but Japan definitely has, but no go so far. If this cannot get fixed, the journal representation matter will remain much further behind also.

      1. Barkley Rosser

        BTW, I have just checked, and unfortunately Hirofumi Uzawa is no longer among the living. I note that he was on the faculties of Stanford and U. of Chicago before returning to Japan to be at its top uni, the University of Tokyo. He did foundational work in growth theory and general equilibrium theory early on, with several Nobel-worthy results, but in his later years back in Japan he focused on the global warming issue and had a major influence on Japanese policy in connection with it. He deserved the prize, but now too late.

        1. Moses Herzog

          Seems like the poor guy had a hard time getting his opinions out into the open:
          To quote Professor Uzawa: “Mathematical economics is useless in its present state. We have only one model to describe economics, and it is an inhuman market principle that pursues economic efficiency while ignoring social conditions. With this kind of principle, we won’t be able to have deep insights into economics from a social science perspective, nor will we be able to use the scientific approach to develop a suitable analysis.”

          Professor Uzawa called this a “Crisis of Economics” and forced us to confront it. I will never forget the furious look on his face when he said, “At the request of the U.S. government, a number of economists were tasked with calculating the cost-benefit ratio necessary to kill Vietnamese.” Seeing these economists who so eagerly twisted the truth to pander to the government, Professor Uzawa must have sensed a crisis occurring in the field of economics.
          https://images.app.goo.gl/QHEqjJ7eVszVeZHg9 <<— Now Uzawa really is a "Book Reading Angel"

          1. Barkley Rosser

            Moses,

            Interesing link. Uzawa got a lot of public attention in Japan in his later years, with his stunning appearance and long white beard contribution to this, although his reputation as a both brilliant and deep thinker fundamentally lying behind it. He was someone who deservred much more attention from the global economics profession than he ultimately got, although he was always highly respected by people like the late Kenneth Arrow at the very top end.

          2. Barkley Rosser

            BTW, I note that the two that many think should have shared the Nobel with Krugman are Asian, one South Asian, Dixit, the other Japanese, Fujita.

            The most famous South Asian to get an econ Nobel is Amartya Sen, who goes back and forth between Harvard and Cambridge UK. He is currently the most cited economist of all time according to google scholar, even ahead of Karl Marx, so a good thing he go it. Like Uzawa he was also a student of the late Ken Arrow.

          3. Moses Herzog

            I wish to add or clarify something here. When I wrote this comment above, I had quotations around the part Uzawa wrote, and also copy/pasted the words of another man who was discussing the memory of Uzawa and his contributions, in the moment of making the 2nd paragraph of the comment I thought that by putting the comment in bold text, people would know that it was the words of another man’s and not my own. Obviously the writing is way too good to be something I wrote. Either way I was making a stupid assumption that putting it in bold would be enough for people to know it was not my words, but someone else’s. The 2nd paragraph is written by Hitoshi Matsushima, and can be found on the link I copied it from, here:
            https://www.u-tokyo.ac.jp/en/whyutokyo/indpt_giants_018.html

            I try pretty hard to give proper attributions, so if anyone was misled there, I apologize.

    4. ltr

      https://africasacountry.com/2019/10/the-poverty-of-poor-economics

      October 17, 2019

      The poverty of poor economics
      The winners of the Nobel Prize in Economics experiment on the poor, but their research doesn’t solve poverty.
      By Grieve Chelwa and Seán Muller

      Grieve Chelwa teaches economics at the University of Cape Town. Seán Muller teaches economics at the University of Johannesburg.

      [ The prized researchers are surely excellent, but differing national perspectives can be important to consider in valuing and honoring research. Then too, there is a country that has lifted many, many millions of people from poverty and severe poverty and I would welcome attention as to the ways conceived and adopted. Could such a country have had valuable economists? ]

  4. Moses Herzog

    Uncle Moses’ Stupid Question of the Day:
    Is the dot (and missing progression graph line) due to Beijing’s hoarding of public data?? Intentional missing data by Beijing, or unintentional because of not enough compiling/surveying of the “data pool”??

  5. Moses Herzog

    I’m almost afraid to let this cat out of the bag for fear “FT” will attempt to clamp down on it. But for those who can’t get past the “FT” paywall, if you have an FT Alphaville registration (It’s free), I have found you can sometimes sort of “sneak in” and read some “FT” articles. Roughly after 2–3 stories then the paywall will clobber you. But you can kind of get 1 or 2. So if you have registered on Alphaville, don’t give up on reading that entire article Menzie linked above.

      1. Moses Herzog

        Heh, yeah I’ll have to take a listen. Someone probably a fan of the band when they started the blog trying to tie into alpha/beta risk?? I’ve never liked the name but the blog is still good. The way Brits are I have this feeling it’s going to be a sappy pop song with synth keyboards or something.

    2. Baffling

      Ft and bloomberg are the two best financial news businesses out there today. I have access to the ft sight, which i really enjoy. Bloomberg paywall is a pain-wish i had access to them as well. One downside to ft is that brit news stories can be a bit long winded-although quite thorough.

  6. Moses Herzog

    I’ve probably told this story before, probably 5+ times on this blog. But I was over in China during the SARS (“bird flu” pick your term). All of the government officials (local, provincial, national) were sh*tting their pants they were going to lose their jobs if they didn’t handle things right. It was CYA time for all government officials. I had to have my temp taken by a colleague everyday. This is how mentally disabled they were~~you would have like a colleague/”buddy” assigned to you to phone you everyday to ask your temperature. I guess after roughly the eighth time I gave my colleague (A sharp guy from Inner Mongolia, and overall good person, but racist to Japanese) the same temp reading, he figured out something was up (I did it purposely as a social experiment, OK, I was lazy also). So long story short, some weeks go by, and the President of the University calls in all the foreign workers for a “special/required meeting” because he’s getting worried and some teachers had already departed (including a lovely and likable couple from New Zealand who naively asked me if they should tell the Dean or the Dept secretary they were leaving~~I told them don’t tell anyone and get the F out of Dodge. We head down to this meeting (which all the foreign teachers viewed as the joke it truly was). And you know it’s official “CYA” time because this Uni Pres would just as soon spit on us as look at us. And he gives us baloney on how they’re doing all they can do, prescribed behaviors for us translated subtitles: Don’t you white barbarians do anythiig that will get ME fired. What had they done?? The university had “done” 3 things 1) giving a yellow bar of sulphur soap (yes, sulphur soap) to all the students to “carry with them”. Looked very similar to this:
    https://www.alibaba.com/product-detail/ks312-Shanghai-Sulfur-Soap-high-Efficient_60747398135.html?spm=a2700.pc_countrysearch.main07.148.27bc2f2dKnR7HM

    You can imagine how your average college student, even in early 2003 China, responds to carrying around a bar of soap everywhere they go. (Unfortunately I am not sure if the sulphur soap came “with certificates” or “a red stamp”) Joke….. Anyway…..

    The university’s 2nd step was to give all students a basketball. Just ask Leana Wen and Fauci—they’ll tell you themselves, nothing stops lung infections quicker than off-brand basketballs. The 3rd step was to minimize students leaving the campus. NO ONE stopped students from leaving the dorm, and there were roughly 3 holes on the outside campus gate with no guards, where students would leave/enter of their own free will, all day long, like a conga dance line. So after all these great measures. Our Uni President, standing tall and resolute over the conference room table asks the white barbarian foreign teachers if they have any suggestions to help avoid the spread of SARS on campus. I look over at one of my closer friends, a Canadian man of Bangladesh ethnicity, we’ll call him “Madu” (not his real name) and I’m smiling, and Madu is smiling because he knows what I am thinking because I have bemoaned this situation to Madu about 10,000 times in our private conversations only including our closest of Chinese friends. He says “You want me to tell them??” Because he knows I’m dying to tell them, but won’t. I say, “You can, but they’re not going to do a damn thing you tell them, and all you’re going to do is piss them off”. So he raises his hand and says “paraphrasing” “My friend Moses, and I, we thought it would be a good idea to have soap dispensers with actual soap on the wall in all of the campus restrooms”. About 5 seconds pregnant pause and the Uni Pres slams his hand on the conference table, and in Chinese basically emits “Done!!!!” I left the university, and over a year goes by and I talk to one of my old colleagues “Did they ever put soap in the bathrooms??” Answer: “No”.

    Do you think, OK, yeah, some years later, I thought China would have problems with Covid?? How would you measure that out based on the above?? The national policy response at the time was “This started in Hong Kong, not our fault”. Sound like a mature response to a possible pandemic to you?? What would you expect 18 years later based on the above??

  7. macroduck

    Repeating myself here: Slower Chinese growth will widen the U.S. trade gap and do particular damage to commodity producers.

    USD/CNY is behaving more or less like the trade-weighted dollar index, neither trending much this year. Interesting to see how long such stability can persist, given divergent economic outlooks. Between the U.S. infrastructure bill and the budget, fiscal policy will make recession in the U.S. unlikely. ROW not so lucky, with China a big factor.

    1. Moses Herzog

      I keep waiting for gasoline prices to drop again. I’m confident they will but you know they will drag their feet on those price drops. I wonder if Xi JInping had gone to Biden with his hat in his hand and offered to buy a few more soybeans and pay a fair dollar amount on better vaccines if he could have gottena vaccine with higher effectiveness. Too late now. I feel sorry for some of the citizens but not for Xi. Winnie the Pooh showing poor leadership skills…… AGAIN
      https://images.app.goo.gl/FRL1TYFVWZCZHixb7

      https://images.app.goo.gl/nVuKbNjBpXof1VZ18

      https://images.app.goo.gl/biGHmxDBRZTNjASz8

  8. Moses Herzog

    @ Menzie
    Did you read the news about Huawei today Menzie??~~or I guess it was already news two days ago?? Dropping 5G for P50. I don’t catch Bloomberg or CNBC all the time, but that news didn’t seem to make as bigguh “splash” in the water as one might have expected. It seems like pretty damned big news to me.

  9. Moses Herzog

    Huawei has lost 15% of the global market share of smartphones in a single year. For whatever it’s worth Xiaomi, another Chinese maker of smartphones market share has grown roughly 3% over that same period. Another Chinese smartphone producer named “OPPO” has also grown its market share over the same time span.

  10. ltr

    http://www.xinhuanet.com/english/2021-08/10/c_1310119623.htm

    August 10, 2021

    China’s foreign trade growth rate hits 10-year high

    BEIJING — The volume of China’s foreign trade, exports and imports all hit record highs in the first seven months of 2021, while their year-on-year growth rates set 10-year highs compared with the same period in previous years, the Ministry of Commerce (MOC) said Tuesday.

    The country’s total imports and exports expanded 24.5 percent year on year to 21.34 trillion yuan (about 3.3 trillion U.S. dollars) from January to July. Exports rose 24.5 percent from a year ago, while imports jumped 24.4 percent in the first seven months, data from the General Administration of Customs showed.

    In July, imports and exports rose 11.5 percent year on year to 3.27 trillion yuan, with the volume becoming the second highest in history only after that in June, the MOC said.

    China’s exports to developed markets such as the United States, the European Union and Japan rose 22.6 percent in the first seven months. Its trade with emerging markets continued to grow, with exports to the Association of Southeast Asian Nations, Latin America, Africa and other emerging markets rising 26.5 percent year on year, boosting the overall exports growth by 13 percentage points, the MOC said.

    Various market entities have been dynamic in foreign trade, the MOC said….

    1. Moses Herzog

      Branching out into direct quotations of Government Ministries…….

      I was going to make a comment about tubes leading out from one of Xi’s bodily orifices and directly into ltr’s mouth, but, as you all know, I would never be that crude.

    2. macroduck

      Upward-trending series trend upward. Stop the presses!

      Do your masters send you a list of articles to shove into comments, or do you choose this drivel yourself?

    1. Ulenspiegel

      ” I always try to be thoughtful and helpful, and I am always polite.”

      That are two lies in one short sentence.

      1) You are not helpful, you spam this board with low quality propaganda; usually void of any original thought or entertainment value.

      2) Not to address valid questions in a scientific discussion is considered rude. You confuse form with content, nice form without content is useless in science.

      The only interesting questions are: Are you paid for your contributions? Or is this your expression of duty for your fatherland? “Charity” work?
      (and in case you have a thick skin: Do you understand the concept of an useful idiot and do you understand how this concept may be relevant for the issue at hand?)

  12. ltr

    “Crude” insults * are terribly frightening. No one should be subject to such images.

    * Pornographic images

  13. ltr

    The use of “crude” images * to frighten a writer is beyond distressing.

    * Pornographic images

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