JohnRawls wrote:Yes that is exactly the case. Too much was build for too few people in the wrong places.
Beyond white elephants designed to promote national unity in Tibet and Xinjiang, can you name a specific project you have issue with?
JohnRawls wrote: I don't think that there is any sane economist inside or outside China that will dispute this nowadays.
A preemptory true sane economist.
JohnRawls wrote:In China you need local GOVERNMENT approval for bankrupcy. In most Western countries you start a legal proceeding and then the court judges how the assets will be distributed and the debts paid. That is a massive difference.
My brother, what is the court if not a government institution?
Which 'local government institution' in China handles bankruptcy for the majority of enterprises? (hint, it rhymes with fort - 2007 Enterprise Bankruptcy Law)
If we want to complain about bankruptcy in China, I'd start with the fact that outside of two or three cities personal bankruptcy is not a thing and family debt is.
JohnRawls wrote:What is the plan in moving forward? Any solution to this right now will blow up GDP and decrease it. Right now the GDP numbers sort of look okay because the enterprises are still digging holes and filling them in at a smaller scale. If they are gone then something needs to replace them. What is the plan? Deflating the Yuan? That is rather uncreative and will destroy nominal gdp and consumption ability of the population while giving manufacturers an edge. But that still leads China to the same problem it is facing now without an answer.
Clamping down on foreign capital loopholes, coupled with slow onboarding of enforcement of existing tax regimes. I have personal experience with this, through my business registered in Weifang and my personal income tax from working full time in China.
Basically, over the past four years (starting in 2019), China has been offering generous tax reimbursement packages to get people to register their income through the Tax Agency. This has created a large dataset to draw from, to corroborate the number of firms and workers in a country and diminish the gray market. In conjunction with this, there have been much more stringent reporting requirements made of companies that are required to be done each year - even we have to have an accountant on hand to handle the audit these days. China is a position that the other PIGS were not - because it has so much centralized control over 'big data' in the country, it is very easy to track/trace when a firm receives payment, when they pay out their workers, what their workers spend the payment on, etc, and thus very easy to corroborate whether taxes are being filed correctly.
ATM, China is using a stick to get people on board. I paid 22% income tax as a base for 2023, but with rebates, ended up paying around 12%. One interesting anecdote is that when I applied for my rebate, my employer, who had not actually been paying taxes, got called up by the PSB and there was a whole small thing where I had to withdraw my rebate request and wait for them to catch up on the paper. Now they'll probably be flagged for intensive review for a couple years, but this is how China is basically getting its books in order.
Once this process is done, it will have a viable revenue stream to replace the money lost by development taxes. The problem then becomes one of what investment vehicles can China offer to its citizens outside real estate, as folks don't particularly trust the stock market and capital controls prevent investment abroad. They're obviously expecting that without an alternative of real estate investment, they'll essentially have no choice but to jumpstart domestic investment in its financial sector, and markets - which they likely will. People won't just stop investing, in the long term.