Louis-Vincent Gave: Understanding China’s Economy, and U.S. Competition — #50
Dec 14, 2023
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Louis-Vincent Gave, financial expert and founder of Gavekal, discusses China's economic growth, its focus on education, and the global implications of its economic and political policies. Topics include China's real estate market, the impact of China's economic growth, comparing the size of the Chinese and U.S. economies, China's trade surplus and U.S. debt, and the possibility of a U.S. debt crisis.
China's manufacturing and industrial sector is 60% larger than the US despite being a third smaller in nominal terms.
China's real estate consolidation has improved affordability and not led to an economic implosion.
China's focus on education has resulted in the production of more engineers and STEM graduates, leading to growth in high-tech industries.
Deep dives
Size of the Chinese Economy
Despite being a third smaller than the US economy in nominal terms, China's manufacturing and industrial sector is 60% larger than the US.
Impact of Real Estate Consolidation
China's real estate consolidation has affected growth, but the economy has not imploded. The government has actively wanted to take down real estate and affordability has improved.
Rise in STEM Graduates
China is producing more engineers and STEM graduates than the US, leading to growth in high-tech industries like electric vehicles and nuclear power plants.
Chinese Service Sector
While China's service sector is 20% the size of the US, it is not as well developed and lacks industries like finance, healthcare, and education that contribute significantly to the US service sector.
China's Education System and Economic Accounting
China's education system has seen a significant increase in the percentage of high school graduates who go on to college, reaching a level similar to the US. This challenges the perception that China lacks educational services compared to the US. However, the economic accounting makes it appear that the education sector in China is much smaller than in the US due to lower college tuition fees. As China's incomes continue to grow, more money will be spent on tourism, entertainment, education, and healthcare, despite being a small minority currently, as the wealthier individuals prefer private options over public services.
China's Challenge of Job Creation
China is facing the challenge of job creation as it graduates millions of students each year who aspire to white-collar knowledge worker jobs. However, there is a shortage of such jobs in the market, leading to high youth unemployment. The Chinese government historically addressed job creation by transforming farmers into laborers for infrastructure projects. But creating jobs in the service industry requires a different approach, as the government cannot simply dictate the creation of private enterprises. As China transitions from a farm-based economy to a more service-oriented one, it needs to create favorable conditions for entrepreneurship and private sector growth to absorb the growing number of graduates seeking employment.
Louis-Vincent Gave of Gavekal discusses China's economic growth, its focus on education, and the global implications of its economic and political policies.
(00:00) - Early life - Gave as French infantry officer
(14:42) - Founding Gavekal
(23:50) - Understanding China economic growth
(32:57) - China real estate market
(42:48) - The impact of China’s economic growth
(48:19) - Comparing the size of the Chinese and U.S. economies
(01:07:09) - China’s trade surplus and U.S. debt
(01:18:11) - Will there be a U.S. debt crisis?
Music used with permission from Blade Runner Blues Livestream improvisation by State Azure.
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Steve Hsu is Professor of Theoretical Physics and of Computational Mathematics, Science, and Engineering at Michigan State University. Previously, he was Senior Vice President for Research and Innovation at MSU and Director of the Institute of Theoretical Science at the University of Oregon. Hsu is a startup founder (Superfocus.ai, SafeWeb, Genomic Prediction, Othram) and advisor to venture capital and other investment firms. He was educated at Caltech and Berkeley, was a Harvard Junior Fellow, and has held faculty positions at Yale, the University of Oregon, and MSU. Follow him on X @hsu_steve.
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