Difference between revisions of "Essay: It's time to be very bearish about China's long-term economy"

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*[https://archive.md/iDe7x#selection-1545.0-1545.99 China’s rise is reversing], ''Financial Times'', November 20, 2021 (The past two years have seen the largest drop in the China’s share of global GDP since the [[Mao]] era)
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*[https://archive.md/iDe7x#selection-1545.0-1545.99 China’s rise is reversing], ''Financial Times'', November 20, 2023 (The past two years have seen the largest drop in the China’s share of global GDP since the [[Mao]] era)
  
 
*[https://www.foreignaffairs.com/asia/who-killed-chinese-economy Who Killed the Chinese Economy?], Foreign Affairs, November 14, 2023, [https://www.youtube.com/watch?v=6Z1TxK9JyWI Video for article]
 
*[https://www.foreignaffairs.com/asia/who-killed-chinese-economy Who Killed the Chinese Economy?], Foreign Affairs, November 14, 2023, [https://www.youtube.com/watch?v=6Z1TxK9JyWI Video for article]

Revision as of 14:13, March 28, 2024

It's time to be very bearish about China's long-term economic prospects.

*Japan's Recession Was Bad. China's Will Be So Much Worse.

*China's tepid economic recovery represents a policy 'narrative shift', says China Beige Book CEO

For more information, please see: Skepticism about China remaining a global power

China faces a number of serious intractable problems. A number of leading geopolitical/economic analysts are pessimistic about China's remaining a global power and that China has peaked economically and/or will decline economically (See: Skepticism about China remaining a global power).

The company China Beige Book International describes its company thusly:

“ Reliable data on China’s economy are notoriously difficult to come by. Official Chinese government figures exist, but lack transparency and credibility, while the few private indicators that exist are far too limited in size and scope for strategic planning.

We founded China Beige Book International in 2010 to help institutional investors and corporate CEOs navigate China’s notoriously black box economy. Today we operate the largest private in-country data-collection network ever developed to track the Chinese marketplace, gathering real-time economic data from thousands of firms across all of China’s regions, sectors, and 34 discrete industries.

Our flagship platform provides independent data and in-depth analysis on every key component of China’s diverse economy—from growth dynamics to labor market and inflation trends to the world’s only tracker of the credit environment and shadow banking.[1]

”

Due to China's ongoing real estate crisis, there have been many sensationalist doom and gloom forecasts about China's future economic prospects. On the other hand, China's Beige Book International has been very judicious and measured in its economic forecasts. The company previously argued that China's economy hasn't peaked, but it no longer argues this.

In October 2023, Leland Miller, who is the CEO of China Beige Book International, now argues that we are in a new paradigm about China's future economy due to structural problems and "Right now we are in a period where everything is looking pretty bad."[2]

Japan experienced economic malaise from the 1990s to 2010s (see: Japan's lost decades - 1990s to 2010s).

On October 19, 2023, Reuters reported:

“ China’s real estate market is in decline. Debt deflation hangs in the air. The country’s workforce is shrinking and GDP growth is trending downwards. No wonder the International Monetary Fund at its recent shindig in Marrakech warned of slowing economic growth in the People’s Republic, raising the prospect of “Japanisation” – the prolonged economic and financial malaise that afflicted its once high-flying neighbour after an asset bubble imploded three decades ago. The trouble is that China’s economic imbalances are far worse than Japan’s in 1990. And that’s before considering the ruinous economic consequences of President Xi Jinping’s autocratic rule.[3] ”

And while Japan's long prolonged financial malaise was bad, China's will likely be much worse (See: Japan's Recession Was Bad. China's Will Be So Much Worse).

China is no longer set to eclipse the US as the world’s biggest economy soon, and it may never consistently pull ahead to claim the top spot as the nation’s confidence slump becomes more entrenched.

That’s according to Bloomberg Economics, which now forecasts it will take until the mid-2040s for China’s gross domestic product to exceed that of the US — and even then, it will happen by “only a small margin” before “falling back behind.”

Before the pandemic, they expected China to take and hold pole position as early as the start of next decade.[4]

See: Skepticism about China remaining a global power


China's major economic crisis are signs of major deflationary pressures

According to Investopedia, "Deflation is not normally bad for an economy, except when it occurs in reaction to previous over-inflation."[5] Unfortunately for China, it has economic bubbles that are bursting in relation to its real estate and stock markets which is causing much economic hardship to many Chinese. Both of these markets had values that were highly inflated relative to their actual economic value. The Empower website notes that deflation "can lead consumers to spend less now, in part because they expect prices to continue to fall; it can push businesses to lower wages or lay off employees to maintain profit levels; and it makes existing debt more expensive for many borrowers.[6]

Presently, communist China is facing multiple crisis with the three major crisis below being signs of growing deflationary pressures on their economy:

Chinese real estate crisis (2020–present)

Map of China

See also: Chinese real estate crisis (2020–present)

On February 6, 2023, Yahoo Finance said concerning the Chinese real estate crisis (2020–present):

“ China's overreliance on real estate has sent its economy tumbling toward 2008-era financial conditions, Kyle Bass told CNBC on Tuesday.

"This is just like the US financial crisis on steroids," the Hayman Capital founder said. "They have three and a half times more banking leverage than we did going into the crisis. And they've only been at this banking thing for a couple of decades."

The years of double-digit growth China enjoyed prior to the pandemic were made possible by an unregulated real estate market, Bass noted, which leaned too heavily on debt to expand.

With defaults now plaguing the industry, this spells massive trouble for the country's broader economy. The real estate sector makes up around a quarter of the country's GDP and 70% of household wealth.

"The basic architecture of the Chinese economy is broken," Bass summarized.[8]

”

In December 2023, Nikkei Asia reported:

“ If the Chinese real estate bubble bursts and triggers a financial crisis, the nation's economic growth will be stuck at around 1%, jeopardizing its goal of doubling gross domestic product by 2035, the Japan Center for Economic Research says in a new report.

The report projects GDP growth for 18 Asia-Pacific countries and regions through 2035, with annual updates made to reflect the latest policies and economic conditions. The JCER released a summary of this year's report Monday.

China's economy has been dragged down by property market woes for more than two years. The government's plans to strengthen financial support for real estate companies could place an excessive burden on the financial system.

Mishandling the response could wreak havoc. Sluggish condominium sales and plunging prices could significantly push up defaults on bank loans, resulting in widespread financial woes at small and midsize banks.[9]

”

Articles and videos: Chinese real estate crisis (2020–present)

Videos:

Chinese stock market meltdown starting in 2021

Since 2021, China’s stock markets have lost about $7 trillion in value.[10]

See also: Chinese stock markets

Since 2021, China’s stock markets have lost about $7 trillion in value.[11]

Videos of Chinese stock market meltdown:

Youth unemployment in China

See also: Youth unemployment in China

China is experiencing high youth unemployment.[12]

On February 14, 2023, Yahoo Finance reported about youth unemployment in China:

“ China's youth unemployment rate is once again available to the world, after a six-month blackout period where no new figures were published. Joblessness looks to have dropped considerably since the data was last released in June.

But the new figure isn't exactly comparable to previous months — it now excludes full-time students from the calculation. On its face value, youth unemployment in December stood at 14.9%, whereas it touched 21.3% in the summer.

Back then, the high-flying number was a focal point for economists, highlighting emerging challenges resulting from China's slowing economy. As fresh graduates poured into the nation's workforce, they faced stagnating industries with a weaker demand for labor.

These realities may still hold true, even if the revised methodology provides a smaller number, Nicole Goldin, a nonresident senior fellow at the Atlantic Council, wrote.

"The lower result though, is still about three times the overall unemployment rate in China (5.1 percent) and reflects the quandary facing young people there. (For comparison, the OECD average is 10.5 percent.)," she wrote in a Friday post.

While headwinds to youth unemployment aren't exclusive to China, the country is mired in broader economic turmoil, from slowing consumption, a debt-burdened property sector, and a stock market in free-fall.[13]

”

On January 19, 2024, the Wall Street Journal reported:

“ Economists said a revised youth jobless rate for a single month likely wouldn’t sufficiently reassure the public about improved job-market conditions or erase longstanding doubts about the accuracy of the country’s official statistics.

“Adjusting how they calculate the figures at this moment may even exacerbate the public’s distrust in official data,” said Dan Wang, chief economist at Hang Seng Bank China. The release of the new figure comes as Chinese leaders have sought to rally the nation in recent weeks to view the economy more positively. Earlier this month, a senior Communist Party official urged the country’s propaganda chiefs to “promote the bright prospects of China’s economy,” echoing a message from a party conference that Chinese leader Xi Jinping presided over last month.

China’s National Bureau of Statistics said the calculation of the youth unemployment rate now excludes nearly 62 million students between 16 and 24 years old studying full-time on campuses. This, the bureau said, is in an effort to focus on those with “actual demand for jobs,” such as those who have finished education or those who are only studying part-time.

The NBS didn’t provide complete details of its new methodology or how it compares with the old one. One key puzzle is that the NBS previously indicated it didn’t count most students anyway: Before it stopped publishing the old data, the agency said in June there were around 96 million people in the 16 to 24 age group in total, but only 33 million either in work or looking for a job, leaving some 63 million outside the labor force definition.[14]

”

China's "full-time children" phenomena

On February 17, 2024, the South China Morning Post reported that China’s young adults choose to be ‘full-time children’, paid by their parents to do chores amid record-high youth unemployment.[15][16] The Chinese phrase "full-time children" refers to young people who give up working and just live off their parents (See the video: China’s ‘full-time’ children).[17][18]

China's brain drain and loss of high income individuals

In 2023, The South China Morning Post's article China’s millionaires keep leaving, but now outflows may be ‘more damaging than usual’ states:

“ Advisory firm Henley & Partners estimates that mainland China will lose 13,500 high-net-worth individuals – those with investable wealth totalling more than US$1 million – followed by India’s 6,500. The UK, in third, will lose 3,200 such individuals, predicts the London-based investment migration consultancy.

In 2022, China lost 10,800 high-net-worth individuals, followed by Russia’s 8,500 and India’s 7,500, according to data in the “Henley Private Wealth Migration Report 2023” released on Tuesday...

The US’ start-up and employment visa programmes, including “national interest waivers” (NIWs) under the green-card application process, are also popular among Chinese tech, medical and academic professionals and researchers, especially those impacted by the downturn in China’s tech sector, Liu said. “They pay attention to opportunities for skilled immigration from Singapore and the United States,” Liu explained...[19]

”

China has likely peaked arguments

  • China’s rise is reversing, Financial Times, November 20, 2023 (The past two years have seen the largest drop in the China’s share of global GDP since the Mao era)

Videos:

It's time to be very bearish about the BRICS’ New Development Bank in Shanghai, China

See also: The 2023 BRICS Summit was a bunch of hoopla. We still don't live in a multipolar world.

According to Investopedia, BRICS refers to certain emerging market countries—Brazil, Russia, India, China, South Africa, and more—that seek to establish deeper ties between member nations and cooperate on economic expansion, including trade. The countries act as a counterbalance to traditional Western influence.[20]

The BRICS’ New Development Bank headquarters is in Shanghai, China.

BRICS’ New Development Bank headquarters in Shanghai, China.

China's skyscraper boom is officially over.[21]

China has likely peaked and economic trouble is heading its way. See: China has likely peaked arguments

2023 BRICS Summit was a bunch of hoopla. The BRICS are a farce.

Videos

Articles

See also

User:Conservative's essays

External links

References

  1. ↑ China Beige Book International - About page
  2. ↑ China's tepid economic recovery represents a policy 'narrative shift', says China Beige Book CEO
  3. ↑ China’s leaders speed towards Japanisation, Reuters, October 19, 2023
  4. ↑ China Slowdown Means It May Never Overtake US Economy, Forecast Shows, Bloomberg News, September 5, 2023
  5. ↑ Why Is Deflation Bad for the Economy?, Investopedia
  6. ↑ What is deflation?, Empower website
  7. ↑ What’s going on with China’s stock market?, MarketPlace.org
  8. ↑ China is facing the US financial crisis 'on steroids' as the real estate market collapses, famed hedge fund boss says, Yahoo Finance, February 6, 2023
  9. ↑ China real estate crash would threaten goal of doubling GDP: report, Nikkei Asia, 2023
  10. ↑ What’s going on with China’s stock market?, MarketPlace.org
  11. ↑ What’s going on with China’s stock market?, MarketPlace.org
  12. ↑ China rolled out a new measure of youth unemployment. It shows the nation's labor market is still a mess, think tank says
  13. ↑ China rolled out a new measure of youth unemployment. It shows the nation's labor market is still a mess, think tank says
  14. ↑ China Has a New Youth Jobless Rate. Some Economists Are Ignoring It., Wall Street Journal, January 19, 2024
  15. ↑ China’s young adults choose to be ‘full-time children’, paid by their parents to do chores amid record-high youth unemployment, South China Morning Post, February 17, 2024
  16. ↑ China’s ‘full-time’ children, video
  17. ↑ China’s young adults choose to be ‘full-time children’, paid by their parents to do chores amid record-high youth unemployment, South China Morning Post, February 17, 2024
  18. ↑ China’s ‘full-time’ children, video
  19. ↑ China’s millionaires keep leaving, but now outflows may be ‘more damaging than usual’, The South China Morning Post, 2023
  20. ↑ BRICS: Acronym for Brazil, Russia, India, China, and South Africa, Investopedia
  21. ↑ China's skyscraper boom is over
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