<
https://www.businessinsider.com/china-debt-economy-implode-stock-market-wall-street-xi-jinping-2023-6>
"Entering 2023, the relentless drumbeat of Wall Street consensus was pounding
out one consistent rhythm: China is back. After years of lockdowns and
suppressed output, economists and investors cheered the end of Beijing's
zero-COVID policy and the economic boom that was sure to follow. The
colossus-in-waiting that is the Chinese consumer was about to roam freely,
analysts said. This was great news for the whole world — everyone would benefit
from the globe's second-largest economy getting healthy.
But six months into the year, Wall Street's dreams for the country are turning
into a nightmare.
Far from an economic explosion, China's recovery from COVID has been weak.
Industrial production has disappointed. Trade — both imports and exports — has
slowed markedly. There is debt everywhere, especially in property development,
which makes up 30% of the economy. Trading partners are upset for a litany of
reasons, from human-rights abuses to concerns about the government's increasing
role in the country's commerce. The private sector — which was expected to
drive most of China's bounceback — is running scared.
The fizzled reopening isn't just a short-term disappointment, it's a sign that
the old China is gone. The mechanisms that drove the "Chinese miracle," a
triple-decade transformation that made the country an international force, have
broken down. The bubble in China's property market finally popped. And because
of real estate's central role in the economy, the painful process of absorbing
those losses will continue to suck money away from Chinese households, banks,
and China's massive web of local governments. China's working-age population is
getting old, and there are fewer young people to replace them than at any time
in the country's modern history. Exports remain key to the economy, but
countries that once championed free trade have turned from globalism to
protectionism.
As opposed to slumps in the past, it also does not appear that Beijing is going
to step in and reverse this downward trend. Chinese President Xi Jinping has
instead been preparing his people for an era of lower growth, making it clear
that's what the economy can achieve in its current state, and it's also the
structure he likes.
And while Wall Street is trying to put on a good face, banks like JPMorgan are
starting to write notes to clients asking if it's even worth investing there.
This is one of those questions where if you have to ask, that in and of itself
is a problem."
Via Dewayne Hendricks and Dave Farber.
Cheers,
*** Xanni ***
--
mailto:xanni@xanadu.net Andrew Pam
http://xanadu.com.au/ Chief Scientist, Xanadu
https://glasswings.com.au/ Partner, Glass Wings
https://sericyb.com.au/ Manager, Serious Cybernetics
