The underlying fact set was the point of the intro to and outro from January 31's "What If China Had A Reopening And Nobody Cared?":
China isn't reopening, it has reopened. This is it. And despite the record savings the population has accumulated over the last three years we are not seeing a wave of demand in the domestic economy. Using one of the most basic proxies for what is actually going on, the price of pork, the grand reopening, is, to say the least, muted. This is especially true considering the country just celebrated the largest, most festive holiday on the calendar.*****One data point does not make a trend but it does raise the possibility that the facile expectation of a boom in Chinese consumption is wrong.What if, and I'm just spitballing here, what if the giant ball of savings is being targeted by the rapidly aging population as a retirement cushion, i.e. future consumption, not current?
That would leave China's export economy to carry the weight.
And that is not looking very promising at the moment:....
And the headline story from Asia Times, February 11:
China’s ‘Bismarck’ moment is finally afootAmbitious social security and health care reforms aim to coax the masses into saving less and consuming more
In its latest assessment of China’s economy, the International Monetary Fund channeled Otto von Bismarck in ways global investors would be wise to consider.
No, the IMF didn’t mention the 19th century German chancellor. But the social safety net model Bismarck championed for Europe’s biggest economy was written between the lines in bold font.
Among the top reforms the IMF recommends is for Chinese President Xi Jinping to strengthen the social safety net to counter the ginormous pile of household savings that anxious citizens have amassed.
That, argues IMF economist Thomas Helbling, would spur China’s 1.4 billion people to increase consumption and, in turn, stabilize a shaky property market.
According to People’s Bank of China data, we’re talking a record 17.84 trillion yuan (US$2.6 trillion). Given the scale of China’s gray economy, perhaps the real figure is even larger than the annual gross domestic product of France, which is roughly $2.8 trillion.
“An ambitious but feasible set of reforms can improve these prospects, importantly in a way that is inclusive by raising the role of household consumption in demand,” Helbling says.
“Reforms such as gradually lifting the retirement age to increase labor supply, strengthening unemployment and health insurance benefits, and reforming state-owned enterprises to close their productivity gap with private firms would significantly boost growth in coming years.”
The good news is that Xi seems well ahead of the IMF here. Indications are that his incoming economic reform team is working up an ambitious Bismarckian social security and health care system to get the Chinese masses to part with their savings and consume....
....MUCH MORE
Weak domestic demand threatens China’s rebound
Wha, uh, hey. I'm just confirming my priors, give me one minute:....
