Comment by reissbaker | Hacker News Reader

Comment by reissbaker | Hacker News Reader

Parent Full thread

> In the West you can only go so far, back there, especially if you have specialized technical knowledge, you have a chance to make an impact at scale that would never be possible in the West . . . . I am not sure what the U.S. can really do about this without adopting essentially the same repression as in China. I.E. control the flow of personal. [sic]

The U.S. economy is nearly 2x larger than China's, and if you're counting the entire "West" (I'm guessing you mean Europe + US?), it's about 4x larger. And that's just looking at GDP; if you consider GDP per capita, the difference is even starker: the U.S. is nearly 7x higher. In terms of immigration, the U.S. has roughly 750x more inbound immigration than China [1], and the EU has similar numbers [2].

I don't think the numbers back up what you're saying here — they contradict it pretty soundly. In fact, the U.S. currently is (IMO stupidly) trying to prevent people from coming at all because it has such a huge volume of inbound immigration.

1: https://en.wikipedia.org/wiki/Immigration_to_China

2: https://en.wikipedia.org/wiki/Immigration_to_Europe

It seems that GDP should only tell part of the story with respect to specialist incomes. A senior engineer in the US will have their salary and contribution diminished by regulatory requirements and business inefficiencies, and will lose a lot of their potential compensation to health insurance, investor compensation, and other rent-seeking. In China, someone with a skill the Party has designated as critical to national goals may have a lot of the bureaucracy and bullshit cleared for them, or may be offered zero-interest loans to develop their business. Or perhaps not... I have no experience here, but GDP is a terrible metric for how much opportunity is available to skilled engineers.

Furthermore, compensation for technically skilled individuals is significantly lower in the rest of the world than in the US: visa barriers are definitely holding US tech salaries up. Although China has even stronger restrictions on foreigners, for those who can get into China but not the US it may be a good deal.

>The U.S. economy is nearly 2x larger than China's

No, it's not. This is a flaw of using nominal GDP which doesn't take into account currency differentials, and therefore costs of production.

China's GDP(PPP) is already bigger

https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)

GDP(PPP) is useful for observing changes within domestic markets but not global economic power. As per the page you linked: "GDP comparisons using PPP are arguably more useful than those using nominal GDP when assessing a nation's domestic market . . . It is however limited when measuring financial flows between countries." When we are discussing a Taiwanese semiconductor manufacturer stopping shipments to Huawei due to US-led pressure, GDP(PPP) isn't particularly relevant. TSMC doesn't care how much the cost of production in the US is; it produces chips in Taiwan, not America. But it does care about the total dollar value of American economic support, which nominal GDP measures, and GDP(PPP) does not.

And for the result of GDP(PPP) on individuals within domestic markets — which was another of the OP's claims, that individuals are likely to obtain more impact and success in China than in the West — you want GDP(PPP) per capita, not overall GDP(PPP). And the numbers still don't back up that claim: China is closer to Iraq than it is to even a fairly economically-challenged Western country like Greece, and nowhere near the US. [1]

Hong Kong — when measured separately from the rest of China — is actually very close to US-level GDP(PPP) per capita. But... I think HK's futures in that respect have declined significantly due to the PRC. In fact, Hong Kong used to be slightly higher than the US, and HK has declined on that metric over time while the US has risen.

1: https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)...

PPP gives a great measure of total addressable market size in local currency.

US nominal GDP is higher only because US dollar is 7x a Chinese yuan.

But there absolutely are more humans in China, with enough yuan to buy more chips than the US. Only that they'll get paid in a lesser currency.

> with enough yuan to buy more chips than the US

Er, no. By definition a country with higher nominal GDP can afford to import more chips than a country with lower nominal GDP. That's exactly what nominal GDP calculates. This is probably why you're being downvoted into oblivion. It's also why TSMC isn't exporting its chips to Huawei anymore.

Also, there's a reason that the yuan is worth 7x less than the USD: it's because the PRC has intentionally devalued its own currency to keep manufacturing costs low and prop up local manufacturing instead of relying on imports, most recently in 2019 in an escalation of the U.S.-China trade war [1]. This helps bolster China's domestic manufacturing capabilities, but bites China in predictable ways when it wants to spend money abroad, e.g. importing chips from Taiwan.

1: https://www.investopedia.com/trading/chinese-devaluation-yua...

For a while, but nations with twin deficits (trade and fiscal) historically saw their currency lose value, which was a natural correcting mechanism to close inordinately large imbalances, which US has.. massively.

Of course what sustains this is $ as global reserve and for most of last few decades need for dollars to buy oil

These things are changing. China's size and demand for commodities pushes oil exporters and commodity exporters more and more to accepting yuan.

US loss of industry on the margins means $ has less use as reserve. Why stock pile dollars and treasuries if you anticipate large devaluation (deficits) in the future and are purchasing more goods from China?

What does US do as a result? Sanction and or invade oil exporters trading for other currencies. Iraq, Iran, Syria, Venezuela, Russia.

Nordstream 2 is a big one. Germany and Europe perfectly content to buy cheaper oil from Russia going forward. Much less need for $ though, as a result.

Thus, this overvalued $ (based on balance of trade fundamentals) won't perpetuate as it has previously.

It depends on the type of economic power. US is a bigger market, by virtue of bigger real GDP. Chinese can produce more by virtue of bigger PPP GDP.

I agree that for TSMC, market size is more important, but the blanket statement about global economic power is a little bit excessive. If we want to have COVID19 PPE, mass-produce medical equipment, or rapidly build military equipment, China can out-manufacture the US.

I know 2 of those three will be controversial (esp. military equipment), but I think they're true. The US military is probably superior to China's today, but the US had an inferior military at the start of WWII as well. However, the US was a manufacturing superpower and produced a superior military quite quickly. If China were to focus its manufacturing and engineering prowess on military technology, I think it would pass the US rather quickly at this point too. Yes, I'm aware of US technological superiority, and yes, I've seen estimates of how long it would take China to bridge the gap. No, I don't believe those estimates. I think there are a lot of mistaken assumptions in them, and it's to everyone's benefit (US' and China's) to believe the US is further ahead than it is.

> it would pass the US rather quickly at this point too

only if that military power is _used_. During WW2, the USA had to use that power of manufacture to win the war.

So unless you're suggesting that china is willing to go to a hot war with the US, and out manufacture military products to win it, this argument holds no water. and this isn't even taking into account nukes.

Not quite. Most wars are avoided since one side or the other backs down. If it's obvious you'll lose, you don't go to war. The US projects a lot of power worldwide because of its superior military. It's sufficiently superior that you have peace through superior firepower. If the US asks for something, and an aircraft carrier shows up off your coast, what do you do?

The only time you have wars is if either the military powers are nearly equal, or the demands are over-the-top unreasonable.

* China won't take over Taiwan while the US is defending Taiwan if the US can defeat China in open warfare.

* If things are close, it'll think twice about trying. That'd be an expensive bit of work.

* If China has clear military superiority, I think they'd topple Taiwan's government overnight. The US would back down.

The whole point of a big stick is that you don't have to use it. If I come up to you on the street, point a gun at you, and politely ask for your wallet, I'm much more likely to get your wallet than to need to use my gun.

Not familiar with PPP calculations around currency differentials, does it account for Chinese currency manipulation or that would not impact the PPP?

Source of currency manipulation claims: https://home.treasury.gov/news/press-releases/sm751

Yes its US Gov source, but there is a lot of data presented here which I frankly can not grasp: https://home.treasury.gov/system/files/206/2019-05-28-May-20...

Using PPP values instead of real values to compare countries is mathematically incorrect, by definition.

Reply on news.ycombinator.com