China’s leaders are well aware that there’s too much infrastructure spending and too little spending by consumers, and they’re trying to “rebalance” the economy by easing interest rates and adding deposit insurance. The WSJ’s Ken Brown explains China’s financial system—with some help from claymation.


12/19/2013 10:22:20 PM2:11

Category: Credit, Video

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6 Responses to “China’s Banking System Explained in Claymation”

  1. David Merkel says:

    Thanks, Barry. This was worth watching and featuring. I knew most of this, but it was still well-done.

  2. bigsteve says:

    Just like Japan in the eighties was suppose to take over the world now China is played like that. But like the Japanese they have some big problems to overcome. The biggest is their population implosion caused by their one child policies. We could take a clue from their realization that consumers drive advance economies. The lack of buying power by consumers driven by lack of barter power of workers is holding back our economic recovery. Economics is like ecology. It function best when energy in the case of ecology and money in the case of economics flows freely through out the system. When one organism captures and holds a large amount of energy the whole system can collapse. Ditto for economies.

  3. DeDude says:

    Overall a very nice piece, but it has a huge mistake early on. From an economic point of view there is no reason to shift from spending on government investment in infrastructure to individual consumption. It makes little difference to GDP since government and consumer spending is not weighed any differently, nor are their multipliers inherently different. I know it is politically very difficult for people to swallow, but the economic effects of individual spending are no different from economic effects of collective spending, on similar “products”. There is actually a strong argument in favor of investing in high-speed rail systems rather than letting consumers waste money on things they could live just as fine without. Brainless consumption has a multiplier of 1, whereas smart investments by government on things that makes the country more efficient and competitive has a multiplier above 1.

    • kaleberg says:

      Why would anyone in the Chinese government be concerned about the GDP? They aren’t WSJ GDP fetishists. What they are worried about is political stability, and failure to provide rising living standards can lead to revolts, riots, civil unrest, productivity problems a la the USSR, and an increased internal military budget which has its own risks. Then again, China doesn’t have the headroom that the US does. We could increase living standards easily, even if the GDP falls, because so much of it is captured by a handful of billionaires and corporations.

      • DeDude says:

        Actually part of the problem is the Chinese mentality of “sacrifice now consume later”. They have savings in the bank (or real estate) and refuse to sacrifice that “insurance” for braindead consumption now. They need to be Americanized and learn to understand that life is about how much you can spend right now. They need to learn that this friend of theirs who is wasting all his income on stupid flashy consumption, is someone to admire and emulate, not a moron who you should pity.

  4. Livermore Shimervore says:

    @DeDude, that in a nutshell is why our comsumer driven GDP has done little to boost employment in the U.S. since the the early 1990′s at least. We boost GDP by consuming the productive fruits of Chinese labor but it does little to lift U.S. wages or household networth. For the Chineses, increasing their consumer spending in China is fine as long as it’s secondary to increasing productive capacity. So I’m perplexed at why the WSJ writer thinks it’s “too high”. While this may create a speculative bubble in China real estate, GDP is still concentrated in economic sectors that can actually lift wages and household networth. We however have not figured this out yet and continue to focus consumer spending on products that do little to improve our economy like buying the latest Apple or HTC gadget, or buying another set of made in China bed sheets. The govt squandered the oppourtunity to take advantage of low rates to work on infrastructure but even that is a secondary problem to the U.S. consumer’s inability to focus their spending on domestic labor vs. buying yet more imported goods whenever money comes around. Seems to me that the Chinese banking system does not reward consumption it rewards production. This is a problem?