Comments on James Laurenceson "Why fears over the Australia–China FTA are overblown", 31/07/2015
Thanks for the author to clear the air and to explain what the Australia-China Free Trade Agreement is about and particularly some of the issues that unions are trying to oppose.
There have been a lot of arguments, many of which are biased and based on the worst scenarios including Australia does not enforce on what they are specified in the agreement and should and will if the government or its relevant agencies carry out their duties normally.
Those arguments, including some on the Conversation website show hysteria and desperation, try to stir up nationalistic sentiments.
They ware completely unwarranted from the point of any rational analysis.
2015-07-30
Even a Nobel Prize laureate economist can be wrong with the Aussie housing market
Comments on ABC report by Peter Ryan "Housing bubble could burn investors, warns Nobel Prize-winning economist", 30/07/2015
A Nobel Prize laureate economist, Professor Vernon Smith, is reported saying that Sydney and Melbourne's real estate markets are showing every sign of being in a dangerous price bubble, and speculating investors could get burnt when a down turn occurs.
I quote some paragraphs from the Peter Ryan's report:
'"Sydney real estate is growing faster than your other cities and Melbourne has a similar experience," Professor Smith told the ABC.'
'"In so far that it's investors speculating and wanting to resell at a profit, some of them are going to be disappointed when things turn around," Professor Smith said.'
Although Professor Smith cautioned a little by stating losses and risk taking can be a normal part of the free economies:
'"But free economies involve losses. If you're not willing to take the losses you can't really brag about the gains.
'"Prices go up and to some extent that will include some speculation. But a good bit of this might just be normal functioning of the capitalist economy."'
As I have argued before that the Australian housing market cannot analysed in isolation from its unique features and a seemingly bubble can be sustained if the external factors do not go against it.
So, in a sense, a Nobel Prize laureate economist may not necessarily always get the fact right, particularly as far as the Australian housing market is concerned. The main reason for that lies the unique Australian housing market that differs from most other industrialised countries, particular the US. Applying a general theory to a quite different market is bound to miss the mark.
A Nobel Prize laureate economist, Professor Vernon Smith, is reported saying that Sydney and Melbourne's real estate markets are showing every sign of being in a dangerous price bubble, and speculating investors could get burnt when a down turn occurs.
I quote some paragraphs from the Peter Ryan's report:
'"Sydney real estate is growing faster than your other cities and Melbourne has a similar experience," Professor Smith told the ABC.'
'"In so far that it's investors speculating and wanting to resell at a profit, some of them are going to be disappointed when things turn around," Professor Smith said.'
Although Professor Smith cautioned a little by stating losses and risk taking can be a normal part of the free economies:
'"But free economies involve losses. If you're not willing to take the losses you can't really brag about the gains.
'"Prices go up and to some extent that will include some speculation. But a good bit of this might just be normal functioning of the capitalist economy."'
As I have argued before that the Australian housing market cannot analysed in isolation from its unique features and a seemingly bubble can be sustained if the external factors do not go against it.
So, in a sense, a Nobel Prize laureate economist may not necessarily always get the fact right, particularly as far as the Australian housing market is concerned. The main reason for that lies the unique Australian housing market that differs from most other industrialised countries, particular the US. Applying a general theory to a quite different market is bound to miss the mark.
How should Australia's GST compare with OECD average?
Comments on ABC Fact Check "Do Australians pay less GST than people in other OECD nations?" 30/07/2015
The comparison of GST with other OECD countries' GST or VAT, in this fact check, while apparently correct, masks the size effect of the different OECD countries and that makes a quite difference in its conclusion.
For example, the four countries which have a lower ratio of GST/VAT revenue to GDP include two of the OECD largest economies, namely the USA and Japan, as well as another G7 countries, that is Canada.
If the different sizes of the OECD economies is taken into account, then a different picture emerges and Australia does not fair too badly as the nominal comparison suggested. Australia could sit much closer to the average GST/VAT GDP ratio weighted by GDP.
So, this is an important point that the fact check should at least mention or better still discuss it.
From the second Chart in ABC Fact Check we can see that the ratio of GST/VAT to GDP is less than 5% for the US, and less than 6% for Japan, while it was stated by the ABC Fact Check that Australia's is 7/5%.
The comparison of GST with other OECD countries' GST or VAT, in this fact check, while apparently correct, masks the size effect of the different OECD countries and that makes a quite difference in its conclusion.
For example, the four countries which have a lower ratio of GST/VAT revenue to GDP include two of the OECD largest economies, namely the USA and Japan, as well as another G7 countries, that is Canada.
If the different sizes of the OECD economies is taken into account, then a different picture emerges and Australia does not fair too badly as the nominal comparison suggested. Australia could sit much closer to the average GST/VAT GDP ratio weighted by GDP.
So, this is an important point that the fact check should at least mention or better still discuss it.
From the second Chart in ABC Fact Check we can see that the ratio of GST/VAT to GDP is less than 5% for the US, and less than 6% for Japan, while it was stated by the ABC Fact Check that Australia's is 7/5%.
How much is China's per capita income?
Comments on Zhengjun Zhang and Sarah Du "China needs to turn its capital ideas into SOE reform", 30/07/2015
Are the facts in the following paragraph all correct?
"China has several quite unique characteristics. It has a large population (close to 1.4 billion); it is a middle income country with US$3200 per capita disposable income in 2014; and it is a transition economy that is still developing its market mechanisms and institutional systems. With these characteristics, China needs to keep a large toolbox to deal with potential challenges on its development path."
I just had a look at the China section of the CIA's World Facebook that states the Chinese economy was $10.36 trillion in 2014. With the population less than 1.4 billion, that would imply a bit over $7,000, more than double of the $3,200 used by the authors in this post.
How can the difference be so large? One of the two must be seriously incorrect.
My impression of memory is that China's per capita income was more likely greater than US$5,000 in 2014.
PS: Sorry, I didn't realise the authors were talking about disposable income as opposed to per capita income when I questioned its use. My apology.
But, why did they use disposable income in such context? Isn't it strange? Isn't per capita income better and more in line with most discussions? It certainly caused confusion to me, at least, because many people may naturally think it was per capita income as an indicator of the income level there.
PPS: In the wake of the previous post titled "Is China a market economy?" by Gary Clyde Hufbauer and Cathleen Cimino-Isaacs, China should probably consider the potential of its SOEs and particularly its governance and public disclosure of relevant information to make the Chinese a market economy, if the argument that it is not a market economy has merits.
Only domestic consideration is not enough and any international implications must be taken into account. Otherwise, China may encounter more problems in trade and investment, including anti dumping against its SOEs exports as well as overseas investment by SOEs.
Having said that, I am personally not sure the argument that China is not a market economy is meritorious.
Are the facts in the following paragraph all correct?
"China has several quite unique characteristics. It has a large population (close to 1.4 billion); it is a middle income country with US$3200 per capita disposable income in 2014; and it is a transition economy that is still developing its market mechanisms and institutional systems. With these characteristics, China needs to keep a large toolbox to deal with potential challenges on its development path."
I just had a look at the China section of the CIA's World Facebook that states the Chinese economy was $10.36 trillion in 2014. With the population less than 1.4 billion, that would imply a bit over $7,000, more than double of the $3,200 used by the authors in this post.
How can the difference be so large? One of the two must be seriously incorrect.
My impression of memory is that China's per capita income was more likely greater than US$5,000 in 2014.
PS: Sorry, I didn't realise the authors were talking about disposable income as opposed to per capita income when I questioned its use. My apology.
But, why did they use disposable income in such context? Isn't it strange? Isn't per capita income better and more in line with most discussions? It certainly caused confusion to me, at least, because many people may naturally think it was per capita income as an indicator of the income level there.
PPS: In the wake of the previous post titled "Is China a market economy?" by Gary Clyde Hufbauer and Cathleen Cimino-Isaacs, China should probably consider the potential of its SOEs and particularly its governance and public disclosure of relevant information to make the Chinese a market economy, if the argument that it is not a market economy has merits.
Only domestic consideration is not enough and any international implications must be taken into account. Otherwise, China may encounter more problems in trade and investment, including anti dumping against its SOEs exports as well as overseas investment by SOEs.
2015-07-29
China is a market economy
Comments on Gary Clyde Hufbauer and Cathleen Cimino-Isaacs "Is China a market economy?" 29/07/2015
While it was understandable that at the time when China joint the WTO, it was not unreasonable to regard some parts of the Chinese economy were not market economy, it is no longer reasonable to use that as a trade barrier or as a tool for anti dumping purpose. Fifteen years have past since then and China has changed a lot. Yes, there are some sectors where there may be monopolies, duopolies or oligopolies still operate, but they are not too different from some western and industrialised countries. For example, some utility industries in Australia operate as monopolies or oligopolies.
The following paragraph from the author is telling that it is not a legal issue as opposed to a policy one. It is a form of imperialism in action:
"Whether the United States takes a hard-line mix-and-match approach, rather than grant China market economy status across the board, could well turn on policy considerations rather than legal parsing. Among these considerations will be the general atmosphere of commercial relations with China in 2015 and 2016, including the evolution of the renminbi exchange rate (devaluation would inspire a hard-line approach) and the outcome of the US–China Bilateral Investment Treaty negotiations (success would have the opposite effect)."
The authors' recommendations are not particularly unreasonable in that any firms whether they are state owned or not, should publish any information as an ordinary firm would. However, there is a danger that those recommendations could be abused and used for more than what are recommended for.
Further the accusations of China manipulates its currency does not have merits at all. One cannot use trade surplus or deficit with a country alone as a test of whether a currency is fair valued or not. China can have surplus with some countries and deficits with some other countries as well as about balanced trade with the rest. The US have run trade deficits with many countries for very long time and those countries include free exchange countries. If surplus or deficit is the sole measure, then why the free exchange rate countries have not had their currencies moved in the direction to balance their trade with the US?
PS: I have had a look at the Eastasiaforum website and could not find my comments there even by 9.23 am, 30 July 2015. Maybe the use of the phrase imperialism caused the editors some headaches. I only meant economic imperialism, in the sense similar to past imperialists which, when they were losing their former powers, tried to create difficulties for either new comers of new power or left some difficulties to their former colonies. In Chinese, the phrase "垂死挣扎“ adequately describes such behaviours.
While it was understandable that at the time when China joint the WTO, it was not unreasonable to regard some parts of the Chinese economy were not market economy, it is no longer reasonable to use that as a trade barrier or as a tool for anti dumping purpose. Fifteen years have past since then and China has changed a lot. Yes, there are some sectors where there may be monopolies, duopolies or oligopolies still operate, but they are not too different from some western and industrialised countries. For example, some utility industries in Australia operate as monopolies or oligopolies.
The following paragraph from the author is telling that it is not a legal issue as opposed to a policy one. It is a form of imperialism in action:
"Whether the United States takes a hard-line mix-and-match approach, rather than grant China market economy status across the board, could well turn on policy considerations rather than legal parsing. Among these considerations will be the general atmosphere of commercial relations with China in 2015 and 2016, including the evolution of the renminbi exchange rate (devaluation would inspire a hard-line approach) and the outcome of the US–China Bilateral Investment Treaty negotiations (success would have the opposite effect)."
The authors' recommendations are not particularly unreasonable in that any firms whether they are state owned or not, should publish any information as an ordinary firm would. However, there is a danger that those recommendations could be abused and used for more than what are recommended for.
Further the accusations of China manipulates its currency does not have merits at all. One cannot use trade surplus or deficit with a country alone as a test of whether a currency is fair valued or not. China can have surplus with some countries and deficits with some other countries as well as about balanced trade with the rest. The US have run trade deficits with many countries for very long time and those countries include free exchange countries. If surplus or deficit is the sole measure, then why the free exchange rate countries have not had their currencies moved in the direction to balance their trade with the US?
PS: I have had a look at the Eastasiaforum website and could not find my comments there even by 9.23 am, 30 July 2015. Maybe the use of the phrase imperialism caused the editors some headaches. I only meant economic imperialism, in the sense similar to past imperialists which, when they were losing their former powers, tried to create difficulties for either new comers of new power or left some difficulties to their former colonies. In Chinese, the phrase "垂死挣扎“ adequately describes such behaviours.
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