,/A>Posted on 04/17/2022 6:16:30 PM PDT by blam
The most recent macroeconomic figures show that the Chinese slowdown is much more severe than expected and not only attributable to the covid-19 lockdowns.
,/A>
The lockdowns have an enormous impact. 26 of 31 China mainland provinces have rising covid cases and the fear of a Shanghai-style lockdown is enormous. The information coming from Shanghai proves that these drastic lockdowns create an enormous damage to the population. Millions of citizens without food or medicine and rising suicides have shown that the infamous “zero covid” policy often disguises mass population control and repression.
It is easy to use the covid-19 lockdowns as the reason for the weakening of the Chinese economy but that would be a gross simplification. The problem is deeper.
China is going through a severe slowdown caused by the burst of the enormous real estate bubble and the crackdown on the private sector, which has led to a cut in investment growth.
According to Nomura Research, China faces the worst slowdown since the covid outbreak in 2020 and the world should be worried about a further slide, as the challenges persist. Official GDP figures may be massaged to deliver the government’s target, but all other macro figures point to a much weaker growth.
We must remember that there are two ways in which the Chinese government “boosts” real GDP: By publishing a low inflation and GDP deflator figure and by massively increasing credit and infrastructure spending. However, those two cannot disguise the importance of the weakening of the Chinese economy, because it is now structural.
The collapse of the real estate bubble is the biggest problem. A research paper by Kenneth Rogoff and Yuanchen Yang estimated that the real estate sector accounts for around 29% of China’s GDP. It is impossible for the Chinese government to offset the impact of such a massive part of the economy with other high-growth sectors. Furthermore, real estate’s impact on the job market is hard to substitute. Economist George Magnus warned that the impact of the real estate collapse would last for years.
To add to a difficult real estate problem, the government intervention on the private sector, called “crackdown”, makes it even more difficult to boost growth with other industries and businesses. The fear of constant political intervention is leading to a massive slowdown in foreign direct investment growth as well as fear of deploying capital and taking risks in the Chinese economy only to suffer grave penalties from the authorities when profits arrive.
The extent of the deterioration of the Chinese economy is evident in the recent leading indicators. The Caixin China General Manufacturing Purchasing Managers’ Index (PMI) slumped to 25-month low of 48.1 in March 2022, signalling contraction. The Caixin Services PMI plummeted to 42.0 in March from 50.2 in February, dropping below the level that separates growth from contraction. This reading indicates the sharpest activity decline since February 2020.
The political intervention on the technology sector, which is one of the leading job creators in China, has sparked fears of frozen headcounts and layoffs, according to various media reports. Additionally, the decision of the central bank of cutting reserve requirements for banks has not avoided a significant decline in credit growth, as reported by JP Morgan.
To all this we must add a currency, the yuan, which is used in less than 3% of global transactions, according to Reuters, due to the extreme capital controls and the exchange rate fixing imposed by the central bank. Confidence in the local currency is low due to the extreme intervention on the currency market, which is preventing China from having a truly international means of payment.
China’s high debt is also a problem. Total debt stands above 300% of GDP, according to the IIF. The ECB points out that China’s debt-to-GDP ratio for the entire private sector now stands at over 250% and the corporate component of this debt is the highest in the world. The ECB points also to the risk created because a “significant proportion of funding is supplied to the corporate sector by non-bank financial institutions” leading to higher risk-taking and a shadow banking system that leads to large inefficiencies and solvency challenges.
The aggressive and misguided lockdowns are affecting supply chains and activity, but the structural problems of rising intervention in the currency and industries as well as a heavily indebted economic model are likely to drag on real growth and jobs for a long time.
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Let us use this as a dangerous opportunity.
First of all if they No send goods we no send money. They can’t profit like this.
Secondly let’s seize the need to build up manufacturing in the US
Unfortunately, the Democrats and their radically leftist base do not want that and will continue to block manufacturing independence just like they block eneregy independence.
Our most dangerous enemies are here in the US.
> let’s seize the need to build up manufacturing in the US <
Unfortunately, that’s way more difficult than it was 80 years ago. Back then, you’d just buy a plot of land, build a factory, and put out a “Help Wanted” sign. You’re good to go.
Now there’d be an army of regulators at your doorstop the moment you bought that plot of land. It would take years to get your project off the ground. Trump understood this. So of course he had to be pushed aside.
Back when Obama was president, he said something along the lines of: Industry will not be coming back to the United States. Get used to it.
So yeah. Something evil is going on here.
One very significant detail... Most Chinese have at least a few years savings in the bank. It is not like the U.S. where someone misses a paycheck or two and they are late on their payments.
“To all this we must add a currency, the yuan, which is used in less than 3% of global transactions, according to Reuters, due to the extreme capital controls and the exchange rate fixing imposed by the central bank. Confidence in the local currency is low due to the extreme intervention on the currency market, which is preventing China from having a truly international means of payment. “
So tell me the fairy tale again how the yuan is going to replace the dollar. THAT WILL NOT HAPPEN.
China and Russia are switching to war economies.
China had once used its COVID-19 response as a proof of the strengths of Chinese Communist Party (CCP) rule, but now its latest struggles containing the pandemic is proving to be a "critical threat" to CCP rule, according to China expert Gordon Chang on Newsmax.
China is desperate to save the CCP as it locks down its people amid outbreaks, according to Chang.
"This is totalitarianism," Chang told Sunday's "Wake Up America," "pushing people as far as people will let them."
"Of course in a totalitarian society, it's much worse."
“ China’s high debt is also a problem. Total debt stands above 300% of GDP, according to the IIF. The ECB points out that China’s debt-to-GDP ratio for the entire private sector now stands at over 250% and the corporate component of this debt is the highest in the world.”
Not only do they have epic levels of debt, but an epic amount of that is bad debt, that will never be repaid (like their unoccupied ghost cities, rotting away).
It is a financial house of cards - or rather a world record tall skyscraper of cards.
Absolute. Undeniable. FACT.
Everything that's happened since the stolen election of 2020 is by design. Period.
And for those who haven't read Atlas Shrugged, now would be a good time.
I have a theory on this. (Puts on tinfoil hat, you guys can tell me if it’s warranted).
The CCP screws up and releases COVID. They see how it’s spreading, and what it’s going, and know that as densely populated as their cities are, that it’s going to be BAD. Bad enough to tank their economy. So, they ship a bunch of people around to other countries to make sure that THEIR economies tank just as badly. “We’ll all be in this together” they say. It works.
NOW, the real estate bubble has popped in China, it’s 29% of their economy, and they realize it’s going to get BAD for them. They can’t be that economically weak when the rest of the world is strong. Something might happen, or the party might look weak, and “lose face”. This simply can’t be. So, they do this faux lockdown to stop exporting products. It’ll tank THEIR economy, but it’s already screwed, so they don’t care. They need to tank everyone else’s economies as well, so that once again “We’ll all in this together”.
Am I crazy?
The Chinese economic numbers are even more fake than ours.
WAY more fake. And the level of fakery in ours is nauseating.
Your theory might be correct. At the very least it may explain one of several factors that are driving the Chinese self-destruction.
The CCP screws up and releases COVID. They see how it’s spreading, and what it’s going, and know that as densely populated as their cities are, that it’s going to be BAD. Bad enough to tank their economy. So, they ship a bunch of people around to other countries to make sure that THEIR economies tank just as badly. “We’ll all be in this together” they say. It works.
NOW, the real estate bubble has popped in China, it’s 29% of their economy, and they realize it’s going to get BAD for them. They can’t be that economically weak when the rest of the world is strong. Something might happen, or the party might look weak, and “lose face”. This simply can’t be. So, they do this faux lockdown to stop exporting products. It’ll tank THEIR economy, but it’s already screwed, so they don’t care. They need to tank everyone else’s economies as well, so that once again “We’ll all in this together”.
Am I crazy?
We're both looking at the same factors, but my take is that Xi is fighting for survival.
I think it's likely Xi is imposing the lockdown to divert attention from/explain the ongoing economic downfall in China. In China the virus is described as a US creation and not a fault of Xi. So the lockdown is part of the effort to keep the Chinese people blaming outside forces for their suffering.
If the economic woes and the C virus were seen as mostly Xi's failing, that would mean he likely no longer has the "mandate from Heaven" which entitles him to rule.
Recall the lemmings and their suicidal rush over a cliff? This is the world today where some humans seem almost gleeful as the major world economies they have been taught to hate go bust. As they celebrate, they pretend as though none of it will impact them in the slightest. Those that still possess survival skills, better sharpen them because It looks to me like lifestyles are about to head backward at a breakneck pace. What’s scary is that most people today come from privileged backgrounds and zero survival skills. How will they fare (survive even) in the coming worldwide depression?
Nice insightful post. Bravo.
China purposefully allowed Covid to spread. Which BTW was caused by a lab leak from Wuhan where they were doing gain of function research.
Of course they knew they had to spread the misery, which is why Trump is livid with XI, Trump knows this.
May not be 100% correct but I would guess Damn Close. I have felt this way for 18 months
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