Sorry for the wall of text but it can't be helped. Get your favorite beverage and enjoy the read.
Today I have several factoids about China.
The 20th Congress of the Chinese Party Congress is currently taking place in Beijing. There is some serious behind the scenes maneuvering going on as Xi Jinping is trying to get an unprecedented third five year term as CCP Chairman. Likely related to that there are a number of happenings in China that point to some SERIOUS problems that neither Xi nor his rivals, such as previous chairman Jiang Zemin, want published.
1. Real Estate - Real Estate makes up about 29% of China's GDP. The Chinese housing market is about twice that of the US by value. But a lot of that real estate is empty. An estimated 65 million homes, 20% of the total supply, in China are unoccupied. Not only is this high by international standards, it means there are enough empty houses in China to house the entire population of France.
Chinese people hold 70-80% of their assets in real estate. Unlike the US and other countries, in China you take out a mortgage and begin making payments before your house/ apartment is built. There is a large problem with unfinished buildings which the builders have stopped work on because they have run out of money. The Chinese refer to these as "rotten tail" buildings.
As a result, protests and mortgage payment stoppages are spreading throughout China. There are some VERY large companies teetering on the edge of bankruptcy. The largest of these is Evergrand with $300B in debt.
Related to this is the rise of overt anti-government political protests. While we would consider these protests mild, the reaction by authorities is over the top even by Chinese standards. Most protests are related to Covid restrictions/testing and real estate.
2. Weather - Last year it was floods everywhere. This year it is drought. The water level at the Three Gorges Dam is down so low they have had to reduce water to the turbines. The TGD normally generates 22,500 MW of power. The water flow is down so far that it is only generating 6,075 MW. This is leading to severe problems for those who rely of power from the dam. This is also an issue for many hydro power projects throughout the country.
Roughly 400 million people live downstream from the TGD on the Yangtze river. The drought is so bad the largest freshwater lake in China, Poyang Lake, has lost about three quarters of its volume. Ship and barge traffic on the Yangtze and Yellow rivers has been severely curtailed and in some areas stopped. This is putting additional strain on an otherwise shaky economy.
3. Covid - The worst of the US Covid restrictions pale in comparison to the milder Chinese Covid restrictions. These restrictions are causing significant civil unrest but Xi and the CCP have no other options. Their vaccine doesn't work and has all the side effects that ours does. On top of that there is little to no herd immunity in their population. If they open up they could easily be looking at 40-80 million deaths within six months.
People have to be able to show a negative Covid test within the past 48 hours on their phone to travel, shop, bank, and do other things. This is absolutely crippling their manufacturing sector. There is a stampede of foreign companies relocating their operations.
4. Economy - A series of economic reports related to inflation, GDP, etc. that were due to be published yesterday and today were NOT published. This means bad news. If it were good it would have been published.
On top of the Covid restrictions, the US chip embargo is also killing Chinese manufacturing. One of the very few things the Biden regime has gotten right is the continuation of the Trump restrictions on chips to China. It's not that that foreign companies are forbidden to sell chips to the Chinese. They have a choice to make. If they sell to China they and anyone who uses their chips may not sell their products in the US.
High-end chips are completely cut off to the Chinese. These are chips used in AI applications, internet servers/switches, missiles, aircraft, drones, and very high end cell phones. The supply of mid-level chips has slowed to the point that the Chinese are buying products containing these chips just to repurpose the chips for something they weren't designed for. About the only chips they can get are the low end internet-of-things chips. Think smart refrigerators.
The Chinese can't operate the machines to make the high-end chips. They can't get the machines to make either the high or mid-level chips and they can't make the machines to make the low-end chips.
Part of the talk about the CCP invading Taiwan was to get the means to make these high-end chips. It was recently announced that there are plans to evacuate the techs and destroy the machines should the CCP invade. This changes the risk/reward equation for the CCP drastically and it wasn't looking good for them in the first place.
OK, that's enough. Hope y'all thought the read was worth it.
WWG1WGA
Garde la Foi, mes amis! Nous nous sommes les sauveurs de la République! Maintenant et Toujours!
(Keep the Faith, my friends! We are the saviors of the Republic! Now and Forever!)
LonePalm, le Républicain du verre cassé (The Broken Glass Republican)