Chinese production / World Production
and
Chinese Net Exports / World production.
I just think it is going to be hard to come up with figures that show that Chinese net exports of just about anything amount to much more than normal idled production capacity of 10-20% that are standard in most manufacturing sectors and are probably even bigger today and for the near future due to the recession. But that's that falsifiable data that would change my mind on it.
I just think it is going to be hard to come up with figures that show that Chinese net exports of just about anything amount to much more than normal idled production capacity of 10-20% that are standard in most manufacturing sectors and are probably even bigger today and for the near future due to the recession.
I doubt there are many manufacturing sectors outside of China with overall idle capacity anywhere near the 10-20% mark, just waiting for eventual orders. Maybe in relatively simple assembly like textile or shoes: less expensive equipment and lower skilled workers.
For anything that requires heavy and expensive machinery (steel, automobile, electronics assembly...) idle plants just do not exist: they are dismantled and their employees laid off.
Should you want to rebuild that, you'd need Capex (a lot of it in some cases) and workforce training. All of this takes more time and money than seen from Wall Street brokerages...
In some sectors, and electronics assembly is arguably one of those, Chinese net export is definitely above any idle capacity you could come up with elsewhere: just about everybody in that field has moved manufacturing to mainland China, starting with the Taiwanese. Europeans think a hundred miles is a long way. Americans think a hundred years is a long time.
In the US, where we would expect asset markets to be the most liquid for idled capacity, the capacity utilization rate is currently only 74%, and 71% in manufacturing. The average from 1972-2009 was 80.1%, so actually I was too generous. Capacity under-utilization worldwide is likely to be at least 20-40%, more than enough slack to pick up the hole in manufacturing that China might leave behind if it closed itself off to trade was was isolated from the world by conflict with the US. (Interesting, isn't it? Chronically unemployed capital is actually a much bigger figure than unemployed labor.)
Chronically unemployed capital is actually a much bigger figure than unemployed labor.
Labor, on the other hand, is almost exclusively unemployed involuntarily. Did the very wealthy not have a strangle-hold on government policy this would be a very good argument, in times like these, for either taxing their idle wealth. This is one of the situations about which Keynes wrote where actions entirely rational for an individual when taken simultaneously by almost all those in the position to act, collectively prove disastrous. As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
