Agreed. But this overcapacity that China has indulged in has got to be self defeating. The comment of how many Chinese panel manufacturers will go out of business will be the result. Who gets hurt in this controlled economy?
Any responsible country needs to protect its own economy from this recklessness.
Every day there is exactly the right amount of oranges sold in London.
London doesn’t grow a single orange, but if you want one you can buy one.
On a market scale there is neither a dearth nor wastage, - all this with no coordination between suppliers, no regulations and no black market.
Free market system, price fluctuation, supply matches demand exactly – gotta love it.
Yes but China isn’t a free market.
Despite the over capacity manufacturers don’t cut back.
They continue to invest so the money is coming from somewhere…
When I made the comment that you quote, I was talking about the USA and their increasing boycotts. They dress it up as the good old fight against evil forces, but it’s just protectionism by the US of US industries.
Don’t confuse the market with the supply, the orange tree will bear fruit regardless.
Left to its own devices price fluctuation in a free market ensures demand = supply.
Interference in the process creates inefficiencies and black markets.
Yes (again)
But China doesn’t follow the rules. Their policy is to use manufacturing as a weapon to improve their international power, hence the antagonism vented by not only the US.
There are no rules to the free market system only inevitable consequences.
An oversupply causes the price to drop, if the resultant selling price is less than the production price it cannot be sustained indefinitely.
The manufacturer goes out of business.
Another side effect is that if the foreign product is taxed too high, there is motivation to smuggle the product into the country anyway and demand is sustained.
King Canute can order the tide, but the tide is going to find a hole in that dyke.
This is true. In free market systems the manufacturer risks going out of business.
In China the state will prop up that business if there is an ulterior goal.
To be honest, this kind of argument strikes me as a “just so” story. A bit too neat. Like South Park gnomes, make solar panels… ???.. world domination!
Not that it is untrue, of course, but even in SA the state supports motor- and textile manufacturing because there is an “ulterior goal”, that goal being keeping jobs and getting re-elected.
What I find comforting, is that even if this does turn out to be true (China ends up controlling the world through this), the mechanism will be a LOT more delayed than the one we have with OPEC. I mean, if OPEC decides they want to control things a bit and cut production, you feel it a lot faster.
To add to your excellent post, the Chinese Gov is already having some financial woes, a BIG worry for some other big “financial” institutions, based on the little I understand of that.
You can only “employ” whomever for so long on whatever “scheme” you have devised before money starts talking harder.
And for the Chinese Gov to have millions upon millions of unemployed, will be very VERY bad for “business”.
Hence them (the Gov) propping up whatever needs propping up.
Once saw a article of the amount of buildings built standing empty, dilapidated today. Was a boom at the time.
Perhaps as a second comment on the same line of thought, and perhaps this belongs in the “Politics in RE thread”, but I do find it funny when Americans object to this dependence on China, when they sit on a lot of the raw materials themselves, and could easily take back that independence if they wanted to.
Take Lithium for example. The US sits on 750 000 tons of the stuff. But it is so much easier to import it from elsewhere while shaking a fist at that entity for gaining too much power in the process…
Not that I even really buy that argument either. Let’s say China does decide to throw around its weight a bit. What prevents you from mining your own stuff, or importing it from somewhere else? It is not like oil where you will run out long before you can sink your own oil wells, assuming you even have oil. The timelines are a lot longer, the materials a lot more available, and the control therefore a lot weaker.