China’s economy is about to implode. We will all feel the aftershocks

Telegraph UK Via Yahoo ^ | 30 January 2024 • 3:13pm | Matthew Henderson

[Red Badger]

Evergrande, the embattled Chinese real estate giant with debts of $300 billion, has just been ordered to liquidate by a court in Hong Kong. What effect will this have, both within China and across the global economy?

This latest twist is no surprise. Evergrande has long been dead in the water. The point to grasp is that Evergrande’s latest setback will not trigger a financial crisis in China; it is rather the result of the financial crisis which has been deepening for at least four years.

For far too long, up to 30 per cent of the Chinese economy had depended on a grossly inflated domestic property bubble. By 2020, when the government finally took urgent measures to limit this debt, its corrosive effects had distorted and disabled both the formal banking sector and also the much less accountable and manageable Shadow Banking system. Both are now in serious disarray as a result.

Ramifications of this unregulated borrowing and lending crisis have spread across the economy at large. The collapse of the property and construction bubble has weakened domestic economic confidence, deepening the unemployment crisis and posing major challenges to local government budgets. These domestic concerns have led to the current implosion of the Chinese stock market. In turn this has compelled foreign investors to take a more realistic position on China risk than believing the golden goose fables still being peddled by Beijing. Meanwhile, with some notable exceptions such as EVs, contraction of markets abroad for Chinese products has highlighted how much China remains export-dependent in a cooling global economy.

All of this calls into question capacity of the Chinese leadership to halt and reverse the decline of the wider economy. Western commentators have been saying for years that China still has significant potential to revitalise its stagnant economy.

[dead]

Good article, but they always write about an economic collapse of China as if it will be a global disaster. I think it's more nuanced than that - there will be short term pain, but the world will be rid of the biggest Communist hell hole ever built.

If China collapses, will they lay off Joe Biden?

[marktwain]

Building dozens of ghost cities, where no one lives, and trillions of dollars are spent doing the equivalent of digging holes and filling them in, has significant economic consequences.

[1Old Pro]

Public resentment and disaffection with the CCP is on the rise.

That's not sufficient for any significant change. Public satisfaction with Biden is clear in multiple polls. Yet Biden still has a chance at re-election - go figure. And in China, things like elections have even more corruption than our elections.

[bgill]

Governments will jump on the tried and true method of recovery by starting a war. Never mind the consequences.

[MichaelRDanger]

Hence China’s desire to invade Taiwan and seize Taiwan Semiconductor Manufacturing Company which produces the majority of the world’s high end computer chips. Failure to achieve a rapid victory could lead to an economic collapse amid civil disorder.

[dfwgator]

China already has the moles embedded in those Taiwanese companies to get any secrets they need.

[Red Badger]

If China invades Taiwan, all those machines will be destroyed..................

[SunkenCiv]

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[FLT-bird]

I doubt the Chicoms will let it suddenly implode. Their strategy seems to be to try to muddle through without admitting how much of the big 4 Chinese banks’ debts are toxic. The result is problems popping up here and there and eventually systemic problems for the whole economy. But an overnight collapse? That’s very unlikely.

[L,TOWM]

My view of China as a dangerous adversary is tempered by their beginning the growth and construction cycle in 2010. Their misdirected investments are now coming home to roost, but at the time, our economies needed their investment. At the least, they saved the construction industry around the world 15 years ago.

With that said, they are a dangerous adversary.

[marktwain]

I doubt the Chicoms will let it suddenly implode.

The question is: Can they stop it?

Another question is: Can they stop it while maintaining the extreme control they now have, and have invested much time, wealth, and cultural capital into?