UK Economy is a Confidence Trick

[spyguy]

5 minutes ago, Little Frank said:

Complete drivel I'm afraid. 

Average UK wage (PPP) is roughly 2x Russia/Turkey, about 3x China (c. $10,000 a year in major cities) and about 5x India with Mexico, Brazil etc somewhere in between 

The idea that 'if you take away service sector jobs' everyone will somehow be far wealthier is such utter nonsense it's difficult to know where to start. Primitive economies start by digging stuff up out of the ground (think Africa), progress through agrarian economies, develop via investment into manufacturing economies (think China's development over the last couple of decades) and finally move into predominantly service economies where growth is slower but much higher. 

All this is before accounting for the catastrophic degradation to the environment which China et al are now having to grapple with due to grabbing global manufacturing. 

No sure about the Chinese wage.

Last I saw it was cheaper to do stuff in North of the UK than it was in he coastal zones - which are the only bits of China that count.

Wages have been rising at ~20%/year for quite a few years now.

[billybong]

China has made rapid progress in local purchasing power over recent decades and on average is now apparently only about 32% below the UK.  If the local Chinese supermarket is anything to go by they also have a very varied food selection - from the items imported to the UK from China and other countries around there.  Their low wages and relatively low housing costs etc help to make them very competitive.  

https://www.numbeo.com/cost-of-living/compare_countries_result.jsp?country1=United+Kingdom&country2=China

Edited March 28, 2017 by billybong

[Little Frank]

24 minutes ago, spyguy said:

No sure about the Chinese wage.

Last I saw it was cheaper to do stuff in North of the UK than it was in he coastal zones - which are the only bits of China that count.

Wages have been rising at ~20%/year for quite a few years now.

Aren't you? 

I am.

[spyguy]

43 minutes ago, billybong said:

China has made rapid progress in local purchasing power over recent decades and on average is now apparently only about 32% below the UK.  If the local Chinese supermarket is anything to go by they also have a very varied food selection - from the items imported to the UK from China and other countries around there.  Their low wages and relatively low housing costs etc help to make them very competitive.  

https://www.numbeo.com/cost-of-living/compare_countries_result.jsp?country1=United+Kingdom&country2=China

https://www.numbeo.com/cost-of-living/compare_cities.jsp?country1=United+Kingdom&country2=China&city1=Stoke-On-Trent&city2=Guangzhou

China's not very forthcoming with any stats.

The comparison between Guangzho + Stoke is probably much worse than the comparison.

Even then, its 20% cheaper to live in Stoke.

 

[Gribble]

"Primitive economies start by digging stuff up out of the ground (think Africa),"

Load of drivel I'm afraid. Think Australia

 

[billybong]

3 minutes ago, spyguy said:

https://www.numbeo.com/cost-of-living/compare_cities.jsp?country1=United+Kingdom&country2=China&city1=Stoke-On-Trent&city2=Guangzhou

China's not very forthcoming with any stats.

The comparison between Guangzho + Stoke is probably much worse than the comparison.

Even then, its 20% cheaper to live in Stoke.

 

According to that link Guangzho has just 10% lower local purchasing power than Stoke - they're catching up really fast.

[spyguy]

Just now, billybong said:

According to that link Guangzho has just 10% lower local purchasing power than Stoke - they're catching up really fast.

Say Im a Western manufacture.

Is the 10% price difference worth the problems with language, politics and distance?

Chinese quality is pretty hit + miss.

Not saying Stoke's is great but Ive the option to drive their and shout at someone.

When I first started seeing Chinese quote - 20 odd years ago - labour costs were negligible.

Ive seen quote now which are more expensive. And wages are rising pretty quick their.

 

 

[Simon Taylor]

37 minutes ago, Little Frank said:

Aren't you? 

I am.

Recent reports in the FT confirm that Chinese wages are not only higher than all the major South American countries other than Chile but are also at around 70% of the weaker EZ economies such as Greece and Portugal.

It's a tough message for any western politician to articulate,  but the US and Europe are going to get relatively poorer.  We need to get used to it and adapt.  Cheaper houses would be a start..

[Futuroid]

26 minutes ago, Little Frank said:

Aren't you? 

I am.

Don't worry, spyguy is a man of many anecdotes and few facts.

[spyguy]

1 minute ago, Simon Taylor said:

Recent reports in the FT confirm that Chinese wages are not only higher than all the major South American countries other than Chile but are also at around 70% of the weaker EZ economies such as Greece and Portugal.

It's a tough message for any western politician to articulate,  but the US and Europe are going to get relatively poorer.  We need to get used to it and adapt.  Cheaper houses would be a start..

But Chinese productivity is sh1t. It really is.

[spyguy]

Just now, Futuroid said:

Don't worry, spyguy is a man of many anecdotes and few facts.

Its an interweb forum. By nature, all response are going to be anecdotal.

Macro economics, despite the spin, is a bunch of wild guesses.

I can respond with my experience - which is production costs and QA on UK midlands v. Chinese coastal zones.

Take it or leave it.

[billybong]

22 hours ago, spyguy said:

Say Im a Western manufacture.

Is the 10% price difference worth the problems with language, politics and distance?

Chinese quality is pretty hit + miss.

Not saying Stoke's is great but Ive the option to drive their and shout at someone.

When I first started seeing Chinese quote - 20 odd years ago - labour costs were negligible.

Ive seen quote now which are more expensive. And wages are rising pretty quick their.

 

 

I can understand that - as I've posted earlier about Poland I think it's worth pointing out how close the purchasing power is just for its own sake as I don't think a lot of people realise it (I'm not referring to HPCers).  

I think UK politicians also use an old perception to pretend that the UK is better off compared to other countries (on a "you lucky people" basis) than it really is in relative terms.

Edited March 29, 2017 by billybong

[zugzwang]

15 minutes ago, Gribble said:

"Primitive economies start by digging stuff up out of the ground (think Africa),"

Load of drivel I'm afraid. Think Australia

 

A gigantic ponzi scheme... just like China!

[North London Rent Girl]

On 25/03/2017 at 5:40 PM, stormymonday_2011 said:

At the risk of reiterating the same point over an over again the big killer for the UK is the rentier economic mindset of politicians and the media who confuse property speculation and inflation with investment and growth. The sheer amount of effort expended and money being eaten up to maintain asset prices in this country is simply obscene. Despite the obvious social and economic damage it is causing people seem unable to abandon the idea that it is anything but a good thing. Property is the one area where the British are completely and utterly mental. It really is the national religion.

Good point well made, don't worry about saying it too much, it bears repetition - bears, geddit? Ahahahaha.

[North London Rent Girl]

On 26/03/2017 at 1:37 PM, slawek said:

English and legal system are nothing special. 

Can't agree with you about that, although I think the legal system is in danger...

On 26/03/2017 at 1:55 PM, slawek said:

I am finding the UK a shabby place when I am returning from Europe. 

There is a visible attitude to sweat the assets. I guess what is the point of building something new when you can just sit and see you property value going up. 

but do agree about this. The better quality of life in Germany and France is tangible, people there, as far as I can see, seem to work to live, not the other way around. The cities are cleaner, transport much better, you have a sense that they're not spivvy cultures - not get as much as you can for doing as little as you can cultures like here. Speculation, quick profits, that's what we like here. We don't seem to be able to do many things properly.

Small example - was gutted to hear this morning that SW Trains franchise is going to be sold to First Great Western and a Chinese firm. I don't know why they're not leaving it with Stagecoach, who have been doing a good job for years on the line I use. Great Western will turn the trains into sardine cans as they have on the Paddington-Westcountry line and charge an unconscionable fortune for tickets. This can't be a performance-based contract award, someone has got a bung somewhere. Also, I would think it gives FGW a monopoly, doesn't it, on mainline services to devon and cornwall? And, again, the minority partner is a chinese firm. How is it bad for us to own things publicly ourselves but good for us for other nations to own UK infrastructure? I'm not necessarily against the latter but really don't understand why the former is bad. Manky, fast-buck economy, short-term thinking, no interest in quality, lip-service paid to service/value for money. Here's a union talking sense about this deal:

"Once again the Government have refused to consider the public sector option for a major rail franchise and instead it's a foreign state operator, in this case the Chinese state, which is set to make a killing at the British taxpayers expense.

"The nonsense is that with the Government triggering Article 50 this week they would be free to ignore EU rail directives that slam a block on public ownership. It is frankly ludicrous that the Tories are continuing with the "any state but the British state" policy which has plundered our railways for ‎over two decades.

"RMT is deeply concerned at exactly what this announcement will mean for our members, these crucial rail services and the safety of the travelling public. We will be seeking an early meeting with the new owners to secure cast iron guarantees on the jobs and role of the guards, the future of the wider workforce and the safety and quality of passenger services."

– Mick Cash, General Secretary, RMT Union

 

[eric pebble]

On 3/25/2017 at 5:40 PM, stormymonday_2011 said:

Disagree.

I mix with a fair few East Europeans in the IT business in the UK and they are definitely not from the bottom of the food chain. People who move countries in search of work opportunities are rarely the poorest and least able.

At the risk of reiterating the same point over an over again the big killer for the UK is the rentier economic mindset of politicians and the media who confuse property speculation and inflation with investment and growth. The sheer amount of effort expended and money being eaten up to maintain asset prices in this country is simply obscene. Despite the obvious social and economic damage it is causing people seem unable to abandon the idea that it is anything but a good thing. Property is the one area where the British are completely and utterly mental. It really is the national religion.

 

Absolutely TOTALLY agree.   Bang on the nail.   Couldn't put it better myself.

[Little Frank]

18 hours ago, Gribble said:

"Primitive economies start by digging stuff up out of the ground (think Africa),"

Load of drivel I'm afraid. Think Australia

 

Quite. Massive hole in the ground dependent upon Chinese demand.

[Little Frank]

18 hours ago, spyguy said:

Its an interweb forum. By nature, all response are going to be anecdotal.

Macro economics, despite the spin, is a bunch of wild guesses.

I can respond with my experience - which is production costs and QA on UK midlands v. Chinese coastal zones.

Take it or leave it.

The best responses incorporate data (as mine did).

The worst are anecdotal (there's a sub-forum for anecdotals).

Thanks for the offer - I'll leave it.

[EssKay]

54 minutes ago, North London Rent Girl said:

The better quality of life in Germany and France is tangible, people there, as far as I can see, seem to work to live, not the other way around. The cities are cleaner, transport much better, you have a sense that they're not spivvy cultures - not get as much as you can for doing as little as you can cultures like here. Speculation, quick profits, that's what we like here. We don't seem to be able to do many things properly.

 

Spot on. The end result of an economy based almost entirely on rentierism.

 

I'm sure Brexit will magically fix that though...

[spyguy]

20 hours ago, Little Frank said:

Complete drivel I'm afraid. 

Average UK wage (PPP) is roughly 2x Russia/Turkey, about 3x China (c. $10,000 a year in major cities) and about 5x India with Mexico, Brazil etc somewhere in between 

The idea that 'if you take away service sector jobs' everyone will somehow be far wealthier is such utter nonsense it's difficult to know where to start. Primitive economies start by digging stuff up out of the ground (think Africa), progress through agrarian economies, develop via investment into manufacturing economies (think China's development over the last couple of decades) and finally move into predominantly service economies where growth is slower but much higher. 

All this is before accounting for the catastrophic degradation to the environment which China et al are now having to grapple with due to grabbing global manufacturing. 

You've no real facts, its just an anecdote with a couple of numbers.

You use averages for China; 90%+ of our trade with China is with the coastal regions.

The rest of country is rretty much subsistence farming. The ages of Mr Wu in the ar5e of wherever has no effect on UK/Chinese trade. The age of Mr Wu in Guangdong *does*

I've had sight of product quotes from China for almost 20 years.

In the mid to late 90s, it was an no brainer - even allowing for having to chuck away 1/3 of the delivery.

Now, the cost advantage is not there at all. Once you factor in delvoery - even with containers for free - and the poor qulaity, its not worth doing anything complex in China unless you put robots there.

Turkey and Russia are cheaper. But both are a long way from stable.

[Gigantic Purple Slug]

26 minutes ago, spyguy said:

You've no real facts, its just an anecdote with a couple of numbers.

You use averages for China; 90%+ of our trade with China is with the coastal regions.

The rest of country is rretty much subsistence farming. The ages of Mr Wu in the ar5e of wherever has no effect on UK/Chinese trade. The age of Mr Wu in Guangdong *does*

I've had sight of product quotes from China for almost 20 years.

In the mid to late 90s, it was an no brainer - even allowing for having to chuck away 1/3 of the delivery.

Now, the cost advantage is not there at all. Once you factor in delvoery - even with containers for free - and the poor qulaity, its not worth doing anything complex in China unless you put robots there.

Turkey and Russia are cheaper. But both are a long way from stable.

TBF IMO you are both right, just looking at it from different perspectives.

Little Frank and his claim may well be correct, but that sort of macro data doesn't help you when deciding when to offshore a particular job.

My (anecdotal) experience is the same as yours. You want a competent engineer in Shanghai, you will pay similar levels as you will in London. A fruit seller in Shanghai may be 1/5 the wages of a London one. The macro data is close to useless in helping you make an offshoring decision. You need to look deeper. 

 

[spyguy]

1 minute ago, Gigantic Purple Slug said:

TBF IMO you are both right, just looking at it from different perspectives.

Little Frank and his claim may well be correct, but that sort of macro data doesn't help you when deciding when to offshore a particular job.

My (anecdotal) experience is the same as yours. You want a competent engineer in Shanghai, you will pay similar levels as you will in London. A fruit seller in Shanghai may be 1/5 the wages of a London one. The macro data is close to useless in helping you make an offshoring decision. You need to look deeper. 

 

True. Lies, dammed lies, and statistics.

My problem is that productive Chinese have grown used to ~15-20% wage increases.

At the mo, Im seeing low-ball quotes where the labour cost is 10-20% less than the UK.

That cost advantage will be gone in 2 years. China is in a massive skilled labour wage bubble.

Then what?

They stop giving increase? Clamp down on costs?

Riots of the street - revolution again. Not a good basis for relocating production.

[zugzwang]

8 minutes ago, spyguy said:

True. Lies, dammed lies, and statistics.

My problem is that productive Chinese have grown used to ~15-20% wage increases.

At the mo, Im seeing low-ball quotes where the labour cost is 10-20% less than the UK.

That cost advantage will be gone in 2 years. China is in a massive skilled labour wage bubble.

Then what?

They stop giving increase? Clamp down on costs?

Riots of the street - revolution again. Not a good basis for relocating production.

Very generous IMHO. I don't believe The Great Turd will last another twelve months. Look at the numbers!

Quote

The total stock of household loans is up 25% since February 2016, while the stock of NFC loans is up only 8%. This has moved the household per capita debt-to-income ratio above 100%. The corporate sector is carrying upwards of $18 trillion in debt, and in a H1 2016 Reuters survey, 25% of companies didn't have sufficient profits to cover debt servicing obligations. The central authorities are guiding banks to continually roll over loans falling due.

Although the banking system is insulated from international financial markets, banks are holding very large amounts of debt, and the overall financial system has an NPL ratio above 22%. The real estate sector is the most exposed to rising rates, and Chinese developers were carrying $6.2 trillion in debt as recently as 2014. Developers are exposed to higher US interest rates, having raised debt through international capital markets in Hong Kong and Singapore. The property industry is a "leverage or lose" industry, and most developers need property prices to continue rising in order to remain in business.

https://seekingalpha.com/article/4058395-chinas-economy-q1-17

 

[slawek]

4 hours ago, North London Rent Girl said:

Can't agree with you about that, although I think the legal system is in danger...

 

French and German legal systems are also quite good.

I see two problems wit the UK system.

It is for rich, if you poor you have practically no chance to seek justice.

It is not completely independent, it bows to government and public opinion pressure, e.g. Marine A case, the guy intentionally killed wounded fighter, broke Geneva convention being fully aware what he was doing but got away with 7 years on bogus mental illness claim, all because there was public pressure to do this.       

[winkie]