China's economy is screwed

S

serendipity

Verified User
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China’s anticipated economic recovery in 2023 has fallen short, raising concerns on Wall Street. Despite expectations of a boom following the end of Beijing’s zero-COVID policy, China’s recovery from the pandemic has been lackluster. Industrial production and trade, both imports and exports, have disappointed. High levels of debt, particularly in the property development sector, weigh heavily on the economy. Trading partners express concerns over human rights abuses and government intervention. The private sector, expected to drive the recovery, is cautious.

China’s failure to achieve a robust economic rebound indicates the demise of the old China. The burst of the property market bubble is draining resources from households, banks, and local governments. Protectionist policies adopted by countries once supporting free trade further impact China’s growth prospects.

Beijing does not seem inclined to reverse this downward trend, as President Xi Jinping has prepared the nation for lower growth, aligning with his preferred economic structure. Financial institutions like JPMorgan question investing in China, and investors like Stanley Druckenmiller express skepticism about China’s future economic power.

The anticipated exuberant recovery has given way to the final stages of the Chinese economic miracle. Weakness across sectors, including contraction in manufacturing activity and underperformance in industrial production and the property market, indicate a “head fake” rather than sustained growth. The major drivers of China’s economy, such as property and exports, are expected to remain dormant, and the transition to a consumption-based model is hindered by the persistent reliance on exports.

China’s struggles stem from deeper structural issues, including high levels of debt driven by ill-advised investments in infrastructure and property development. Beijing acknowledges the debt issue and curtails the supply of cheap credit, but this deleveraging process poses significant risks. Pervasive property-related debt burdens homeowners, developers, banks, and local governments, impacting society with deflationary pressures and slow growth.

In a world characterized by protectionism, China’s economic model encounters challenges. As the shift away from China as a global manufacturing hub and supply chain center takes place, other countries may experience inflationary pressures and need to seek alternative sources of growth. Geopolitical tensions and cautious investment further restrict China’s ability to rely on trade as a means to stimulate its economy.

https://www.oodaloop.com/globalrisk...-screwed-than-anyone-thought-insider-article/
 
serendipity said:
deflationary pressures and slow growth.

In a world characterized by protectionism, China’s economic model encounters challenges. As the shift away from China as a global manufacturing hub and supply chain center takes place, other countries may experience inflationary pressures and need to seek alternative sources of growth. Geopolitical tensions and cautious investment further restrict China’s ability to rely on trade as a means to stimulate its economy.
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Sure.
 
China got Russia....please attempt to think for two minutes at a time for a change.

It's good for you.
 
I was listening to a member of the Han say that the story is being misreported in the West, that actually the bankruptcy of this company does not mean that China is imploding, what it means is that the Party has decided how they are going to resolve the issues with this sector of the economy, and is moving forwards.
 
Hawkeye10 said:
I was listening to a member of the Han say that the story is being misreported in the West, that actually the bankruptcy of this company does not mean that China is imploding, what it means is that the Party has decided how they are going to resolve the issues with this sector of the economy, and is moving forwards.
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Hmm, I'm impressed that the Han, who are somewhat like the Borg, deigned to say anything. Sadly it's too late there will be an almighty crash it's been a long time coming.

China has a unique, state-driven model of capitalism that clueless economists have hailed as the “new model for economic success.”

Bubbles get so extreme — and China’s bubble is the most extreme of all — that once they start to unwind, you get an avalanche of deleveraging and defaults.

I expect major problems in China likely by the summer or fall.

I have been warning for years that the greatest - and final - bubble to burst, in this century of bubbles, would be China. Now that cracks in the great red dragon's economy are widening, it's time to prepare for the worst.

China has a unique, state-driven model of capitalism that clueless economists have hailed as the "new model for economic success."

But I say China's model (and economy) will fail drastically, proving once and for all that government-planned economies do not work as well as free market capitalism balanced by democracy.

China has massively overbuilt everything: industrial capacity, housing, offices, malls, infrastructure, you name it.

It's overbuilt twice as much, and for twice as long, as any other government-driven emerging economy ever has. In fact, the last government-driven overinvestment spree occurred in Southeast Asia, and it resulted in a financial crisis between late 1997 and late 2002. And China has made that situation look puny by comparison.

There is no way this can end any way other than very, very badly. The question is: when will an economic collapse come? The answer is, sadly: sooner than you'd like.

Here are the seven signs the end is near…

Sign #1: Recently, a large Chinese property developer decided, for the first time, to discount condos by 40% when sales stalled.

The thing is, this is a shocking step to take in China. It's just not done.

The affluent Chinese line up to buy overbuilt, empty condos at insanely overpriced levels. They don't rent them out because there is no rental culture in the country. Ninety percent of homes are owned. They simply buy the property and let it stand empty… so when a developer cuts prices and thus devalues their investment, they get bitterly angry.

But this discounting trend is likely to spread rapidly now as more developers are forced to discount prices just to raise cash and avoid bankruptcy.

Sign #2: The richest man in China, with $31.9 billion, is Li Ka-shing. He and his son, Richard, have sold $3 billion of prime commercial properties in the last nine months. That tells me the smart money is leaving before the bubble bursts!

Sign #3: A Bain & Company/Chinese bank survey of affluent households showed that 60% of the rich are considering moving overseas because they don't trust government or the bubble, pollution levels are getting intolerable, and they want to get their kids an English-speaking education.

Sign #4: A number of major developers have gone bankrupt. These developers are highly leveraged and pose the greatest threat to the banking system, which has grown more through shadow banking and sub-prime lending in the last few years than anything sustainable. The worst new statistic, as developers pull back, is that housing starts in floor space dropped 37% in the first four months of 2013.

Sign #5: Bad loans are rising fast in China. The country's private debt is now higher than that of the U.S. or Europe, as you can see in the chart below. At 190% and rising, it's higher than emerging countries in Asia in 1998, when private debt peaked at 160% before a five-year currency and financial crisis.

But note that this chart doesn't include financial sector or government debt. When you add those numbers into the pot, my estimates of the country's total debt is around 277% of GDP. That's much higher than other emerging countries like Brazil, which is at 152%, India at 130%, and Russia at 78%.

Emerging countries don't have nearly the private debt of developed nations because their incomes are low and their citizens and businesses are less creditworthy. So for China to have a total debt of around 277% is unprecedented for an emerging country.

Sign #6: A major agricultural co-op closed its doors and investors couldn't withdraw their deposits.

Sign #7: A major Chinese solar company defaulted on its bonds - the first to occur in China.

Thus far, the government has quietly bailed out or covered over the defaults and cracks. But they're now hinting that they're going to let more defaults happen to "slowly let the air out of the balloon."

The Chinese government simply doesn't have a clue. Actually, no government does. They always think they can deflate bubbles slowly to ensure a soft landing.

Soft landings never occur in major bubbles.

Bubbles don't correct. They burst.

They get so extreme - and China's bubble is the most extreme of all - that once they start to unwind, you get an avalanche of deleveraging and defaults that build on each other.

Bubbles become black holes.

I expect major problems in China likely by the summer or fall.

When China blows, there won't be an effective stimulus policy from the U.S., Europe, or Japan, to counter such a shock. It will make the U.S. sub-prime crisis look like a Sunday afternoon picnic.

https://seekingalpha.com/article/22...974308550:dsa-1485125208378^^666684245927^^^g
 
serendipity said:
Hmm, I'm impressed that the Han, who are somewhat like the Borg, deigned to say anything. Sadly it's too late there will be an almighty crash it's been a long time coming.

China has a unique, state-driven model of capitalism that clueless economists have hailed as the “new model for economic success.”

Bubbles get so extreme — and China’s bubble is the most extreme of all — that once they start to unwind, you get an avalanche of deleveraging and defaults.

I expect major problems in China likely by the summer or fall.

I have been warning for years that the greatest - and final - bubble to burst, in this century of bubbles, would be China. Now that cracks in the great red dragon's economy are widening, it's time to prepare for the worst.

China has a unique, state-driven model of capitalism that clueless economists have hailed as the "new model for economic success."

But I say China's model (and economy) will fail drastically, proving once and for all that government-planned economies do not work as well as free market capitalism balanced by democracy.

China has massively overbuilt everything: industrial capacity, housing, offices, malls, infrastructure, you name it.

It's overbuilt twice as much, and for twice as long, as any other government-driven emerging economy ever has. In fact, the last government-driven overinvestment spree occurred in Southeast Asia, and it resulted in a financial crisis between late 1997 and late 2002. And China has made that situation look puny by comparison.

There is no way this can end any way other than very, very badly. The question is: when will an economic collapse come? The answer is, sadly: sooner than you'd like.

Here are the seven signs the end is near…

Sign #1: Recently, a large Chinese property developer decided, for the first time, to discount condos by 40% when sales stalled.

The thing is, this is a shocking step to take in China. It's just not done.

The affluent Chinese line up to buy overbuilt, empty condos at insanely overpriced levels. They don't rent them out because there is no rental culture in the country. Ninety percent of homes are owned. They simply buy the property and let it stand empty… so when a developer cuts prices and thus devalues their investment, they get bitterly angry.

But this discounting trend is likely to spread rapidly now as more developers are forced to discount prices just to raise cash and avoid bankruptcy.

Sign #2: The richest man in China, with $31.9 billion, is Li Ka-shing. He and his son, Richard, have sold $3 billion of prime commercial properties in the last nine months. That tells me the smart money is leaving before the bubble bursts!

Sign #3: A Bain & Company/Chinese bank survey of affluent households showed that 60% of the rich are considering moving overseas because they don't trust government or the bubble, pollution levels are getting intolerable, and they want to get their kids an English-speaking education.

Sign #4: A number of major developers have gone bankrupt. These developers are highly leveraged and pose the greatest threat to the banking system, which has grown more through shadow banking and sub-prime lending in the last few years than anything sustainable. The worst new statistic, as developers pull back, is that housing starts in floor space dropped 37% in the first four months of 2013.

Sign #5: Bad loans are rising fast in China. The country's private debt is now higher than that of the U.S. or Europe, as you can see in the chart below. At 190% and rising, it's higher than emerging countries in Asia in 1998, when private debt peaked at 160% before a five-year currency and financial crisis.

But note that this chart doesn't include financial sector or government debt. When you add those numbers into the pot, my estimates of the country's total debt is around 277% of GDP. That's much higher than other emerging countries like Brazil, which is at 152%, India at 130%, and Russia at 78%.

Emerging countries don't have nearly the private debt of developed nations because their incomes are low and their citizens and businesses are less creditworthy. So for China to have a total debt of around 277% is unprecedented for an emerging country.

Sign #6: A major agricultural co-op closed its doors and investors couldn't withdraw their deposits.

Sign #7: A major Chinese solar company defaulted on its bonds - the first to occur in China.

Thus far, the government has quietly bailed out or covered over the defaults and cracks. But they're now hinting that they're going to let more defaults happen to "slowly let the air out of the balloon."

The Chinese government simply doesn't have a clue. Actually, no government does. They always think they can deflate bubbles slowly to ensure a soft landing.

Soft landings never occur in major bubbles.

Bubbles don't correct. They burst.

They get so extreme - and China's bubble is the most extreme of all - that once they start to unwind, you get an avalanche of deleveraging and defaults that build on each other.

Bubbles become black holes.

I expect major problems in China likely by the summer or fall.

When China blows, there won't be an effective stimulus policy from the U.S., Europe, or Japan, to counter such a shock. It will make the U.S. sub-prime crisis look like a Sunday afternoon picnic.

https://seekingalpha.com/article/22...974308550:dsa-1485125208378^^666684245927^^^g
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I am not going to read all that...you sure do lack courtesy....please do learn to distill your thoughts....BUT....

The Han are special.
 
Hawkeye10 said:
I am not going to read all that...you sure do lack courtesy....please do learn to distill your thoughts....BUT....

The Han are special.
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You can ignore it as you wish but it will happen regardless. Many wealthy educated Chinese are leaving, sadly they are moving to places like Singapore, where my son and daughter in law live, and pushing the rents there sky high.
 
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serendipity said:
You can ignore it as you wish but it will happen regardless. Many wealthy educated Chinese are leaving, sadly they are moving to places like Singapore, where my son and daughter in law live, and pushing the rents there sky high.
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You need to turn up right more often for me to read all of that.

You have not earned that sort in investment.

Do Better.
 
Hawkeye10 said:
You need to turn up right more often for me to read all of that.

You have not earned that sort in investment.

Do Better.
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You should be a little more humble and a lot less hubristic, sadly that unlikely to happen.

Youth unemployment is so high Beijing has stopped publishing the figures. The last set showed 21 percent were out of work. The real figure is probably closer to 50 percent.

China will only avoid meltdown if Jinping comes up with another massive stimulus package, but Beijing can't keep doing that forever.
 
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serendipity said:
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China’s anticipated economic recovery in 2023 has fallen short, raising concerns on Wall Street. Despite expectations of a boom following the end of Beijing’s zero-COVID policy, China’s recovery from the pandemic has been lackluster. Industrial production and trade, both imports and exports, have disappointed. High levels of debt, particularly in the property development sector, weigh heavily on the economy. Trading partners express concerns over human rights abuses and government intervention. The private sector, expected to drive the recovery, is cautious.

China’s failure to achieve a robust economic rebound indicates the demise of the old China. The burst of the property market bubble is draining resources from households, banks, and local governments. Protectionist policies adopted by countries once supporting free trade further impact China’s growth prospects.

Beijing does not seem inclined to reverse this downward trend, as President Xi Jinping has prepared the nation for lower growth, aligning with his preferred economic structure. Financial institutions like JPMorgan question investing in China, and investors like Stanley Druckenmiller express skepticism about China’s future economic power.

The anticipated exuberant recovery has given way to the final stages of the Chinese economic miracle. Weakness across sectors, including contraction in manufacturing activity and underperformance in industrial production and the property market, indicate a “head fake” rather than sustained growth. The major drivers of China’s economy, such as property and exports, are expected to remain dormant, and the transition to a consumption-based model is hindered by the persistent reliance on exports.

China’s struggles stem from deeper structural issues, including high levels of debt driven by ill-advised investments in infrastructure and property development. Beijing acknowledges the debt issue and curtails the supply of cheap credit, but this deleveraging process poses significant risks. Pervasive property-related debt burdens homeowners, developers, banks, and local governments, impacting society with deflationary pressures and slow growth.

In a world characterized by protectionism, China’s economic model encounters challenges. As the shift away from China as a global manufacturing hub and supply chain center takes place, other countries may experience inflationary pressures and need to seek alternative sources of growth. Geopolitical tensions and cautious investment further restrict China’s ability to rely on trade as a means to stimulate its economy.

https://www.oodaloop.com/globalrisk...-screwed-than-anyone-thought-insider-article/
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What's most interesting is is this simply a downturn, which all countries face, or signs of more fundamental and much deeper challenges as they move forward? I'm not smart enough to answer that but there are definitely signs pointing towards the latter.
 
cawacko said:
What's most interesting is is this simply a downturn, which all countries face, or signs of more fundamental and much deeper challenges as they move forward? I'm not smart enough to answer that but there are definitely signs pointing towards the latter.
Click to expand...

China is pivoting from being a cheap global manufacturer to being the lone global superpower....there will be hiccups.
 
By far the most pressing issue is the current war between the West and the rest of the World.....China is moving to a total war footing....winning the war comes first..long term restructuring of their economy has to wait.
 
Hawkeye10 said:
By far the most pressing issue is the current war between the West and the rest of the World.....China is moving to a total war footing....winning the war comes first..long term restructuring of their economy has to wait.
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Is The Rest of the World in alliance with China? Or is it just Russland with whom China has declared neutrality in their war?
 
ironically, we claim to be about free markets, but China allows bubbles to burst.

They are not going to prop up mistakes of the past like we do
 
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