“I’m having a hard time believing that about half a trillion of bad loans is going to sink an economy the size of ours in PPP term ($32 trillion).”
But it’s not just $500bn in Evergrande default. It’s another $1.8tn in shadow bank defaults, REIT failures, tanking ghost city revenues, and more.
It’s some $10tn in infrastructure expenditures that include high speed rail, airports, dams, canals, pipelines, and more. None of these things are generating projected revenues because most Chinese can’t afford to use them.
There is also an infrastructure crisis hitting China (and it will hit California!) as they discover that high speed rail is not just an initial capital outlay but also an ongoing expense. China’s massive HSR system now has to be maintained and it won’t be cheap.
Their fancy new roads, bridges, airports and more also require expensive maintainence and it won’t happen in a systematically corrupt society where party members will skim funds at every turn.
Bridges built ten years ago are falling down. One HSR line was so shoddily constructed it’s being torn down. Roads are crumbling.
No, China is is deep doo doo and they were able to stay ahead of it so long as the economy was doing good. But not any more.
Foxconn has already laid off 250,000 employees and the remaining 750,000 will be let go as operations move to India in a reduced form.
It gets worse because China’s woes are a reflection of economic problems worldwide.
My own view is the world is on the cusp of depression. All the indicators are there.
If you believe what you’re saying, then I have the perfect investment for you:
Sell short FXI (or any other China stock ETF), or buy a bunch of put options. You’ll make a killing when your predictions of china’s economy collapse come true!
What do you say?