The problem is that if financial operations give higher and more consistent profit than manufacturing, they will hollow the manufacturing out, and the only way to avoid it is to drastically cut down the area of the market. China is not doing it, so they are vulnerable, even if less vulnerable than USA.
That’s a problem in capitalist societies driven by private capital. Banking in China is pretty much entirely state owned. That’s precisely why China was able to wind down the whole real estate bubble which would’ve resulted in a massive crash in the US.
Banks in China still operate under market logic, and it the very market logic, which is poisonous here. State ownership just allows the state to act, if it recognizes the problem.
Market is just an allocator, it’s a useful tool for doing dynamic balancing, but the market operates within the framework of the state plan. Hence my example of how real estate was wound down in favor of industrial development. If the market made final decisions we would’ve seen very different outcomes.
The problem is that if financial operations give higher and more consistent profit than manufacturing, they will hollow the manufacturing out, and the only way to avoid it is to drastically cut down the area of the market. China is not doing it, so they are vulnerable, even if less vulnerable than USA.
That’s a problem in capitalist societies driven by private capital. Banking in China is pretty much entirely state owned. That’s precisely why China was able to wind down the whole real estate bubble which would’ve resulted in a massive crash in the US.
Banks in China still operate under market logic, and it the very market logic, which is poisonous here. State ownership just allows the state to act, if it recognizes the problem.
Market is just an allocator, it’s a useful tool for doing dynamic balancing, but the market operates within the framework of the state plan. Hence my example of how real estate was wound down in favor of industrial development. If the market made final decisions we would’ve seen very different outcomes.