The Consequences of China’s Slowdown

China’s Economy Is Slowing Which Could Have Big Consequences for the World.

Financial sector,” sent shockwaves through  the business community with an article saying   that the historic mission of private enterprise  had achieved all of its goals in china and that   communist ideology would be coming back in full  force – the era of private enterprise was over.   the article was so widely shared and

Caused such  consternation that the communist party spoke out   to calm the nerves of the business community –  there was nothing for people to worry about.   president xi’s administration launched a  series of campaigns targeting different   the business and cultural landscape in china.   the government targeted the

Fintech industry,  private tuition and entertainment as well   culture, gaming and effeminate fashion trends.   animated character winnie the pooh – i dunno,   the severity of the action taken by beijing  against private companies surprised people   both in china and abroad, and while these attacks  on private enterprise

Were harming the economy,   the real damage was yet to come. the three red  line policy in august 2020 essentially sucked   all of the air out of the room for chinas property  developers. this was a big deal as china’s   property sector is estimated to make up almost  a third of the country’s total economic output.  

Fantasia holdings and modern land china have  since defaulted on their debt, and the property   market has ground to a halt over the last few  months. the problem is bigger than that though,   raised about a third of their total revenues   from selling land leases to property developers.  that revenue source evaporated in autumn

2021.   problem of excessive leverage and real estate   malinvestment in china, and this had been building  for fifteen to twenty years. my friend hugh hendry   empty housing units in china right now and   93 million new homes under construction. actual  housing demand is estimated to be 7 million new   units per year. that

Is a lot of excess inventory  building up. something did have to be done about   the excesses in the real estate sector, but you  have to question if the brakes had to be slammed   on that hard, and if it makes sense to hammer  other sectors of the economy at the same time?   the government actions erased billions of dollars 

Of value for both domestic and foreign investors.   some of the country’s largest employers,   local governments, and corporate contributors to  economic growth. the crackdowns left investors and   chinese businesspeople wondering if it made any  sense to invest in china at all going forward?   so why did this have to happen

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Right now? well,  chinese officials insist that all is going to   plan. in april 2021, the party’s politburo said  china’s strong rebound from the pandemic had   presented a “window of opportunity” to tackle  critical structural challenges in the country.   track to exceed the government’s full-year   they

Argue that this crackdown is a necessary   that could blow up if not addressed immediately  and that these steps are needed to eradicate   there is something to be said for some of these   is right now amongst the worst in the world.   to purchase an apartment. that compares   to thirteen years in london and eight in

New york  cities that are not famed for their affordability.   is for living in and not speculation. and he   china’s trade surplus reached its  it was 26 per cent higher than the  cent higher. china’s manufacturing industry  benefited from a shift around the world   from people spending money on services to buying 

Tangible goods over the course of the pandemic.   in early 2020 at the start of the pandemic,   but chinese exports of goods quickly took off once  domestic cases of the virus fell and lockdowns   it doesn’t make sense to kick the can down the   in china, and it possibly makes sense to   but it is not clear that a lot of

Planning went  into implementing the three red lines policy.   were entirely unprepared for the repercussions.   is likely to be further emphasized over time.   of the approximately 600m chinese “have-nots”,  while dual circulation entails a shift toward   goods from abroad – an attempt to achieve   in an online speech

To the world economic forum’s   annual meeting, president xi struck a pro-growth  tone in his defense of the common prosperity   desire is not egalitarianism. we will first   make the pie bigger and then divide it properly  through reasonable institutional arrangements.   will get a fair share from development,  

People in a more substantial and equitable way.”   have done much to grow the pie as he described,  and i struggle to imagine how any of them would.   so, china is still growing, but it is growing  less than before. by most international standards,   in the fourth quarter of last year was a   great performance. but while it

Was above most  analysts’ predictions, it was the slowest pace   of expansion for 18 months — a slide from 6.5  per cent growth during the same period in 2020.   economic consequences of his common prosperity  campaign are beginning to spiral out of control.   number 1. the crackdowns on businesses like in  the tech sector and

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Education sector. number two,   the collapse of the property market. and number  three, china’s “zero covid” strategy which goes   far beyond social distancing and wearing masks.  it involves people being confined to their homes,   closed roads, suspended transportation services  and it has left citizens short of food and

Other   canada… china appears to be taking this action   economic growth for international prestige. china’s slowdown is, to a certain extent,   affecting these three key areas as they appear  to reflect a strongly-held official conviction.   are facing a number of additional headwinds.   relating to human rights abuses.

China due to these policy-led slowdowns? well, in  december china’s state council accused the local   government in bazhou, of violating government  orders by going on a fee-collection spree   from small and medium-sized businesses to make  up for its declining land-sale and tax revenues   from the property slow down. the local

Government  ordered officials to collect $47m in new revenues,   fines on the local community. a factory owner   describes being forced by the local meteorological  office to buy an expensive lightning rod from a   inflated price. the central government,   policies that had forced the municipality   local party

And government officials in china are   complaining that they, not the central government  in beijing, have to foot the increasingly   expensive bill for evergrande’s collapse. as i  mentioned in a prior piece, they are being asked   to complete evergrande projects that buyers have  already paid for, but they do not appear to

Be   told the press that his firm is refusing to  do any work on evergrande projects for the   local government unless he is paid in advance  – he is already owed money for work he did for   evergrande. in other cities local officials are  trying to auction their evergrande problems away   there are news reports of

Chinese people who have  seen their home prices half, offering to give   away their partially paid off homes to anyone who  will take over the remaining mortgage payments.   their suppliers to accept commercial paper  – a form of iou – instead of cash payments.   they promise to pay this off by a future date. the  supplier is

Then able to use this commercial paper   to pay its suppliers, provided it endorses the  document by stamping a company chop or seal on   it. this commercial paper can easily be endorsed  ten times before it ends up with the final holder.   if a company like evergrande is unable to pay  upon maturity, the holder can sue every

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Company   freezing assets worth many times more than   in 2020 the total amount of commercial paper   issued by chinese companies came to 3.5 percent  of chinese gdp. evergrande alone accounted   for more than 60 per cent of commercial paper  issuance by the top-20 real estate developers.   so is the government doing

Anything to ease these  problems? well, so far, they are not doing much.   by 10 basis points and the five-year rate   which is used to price mortgages was reduced by  5 basis points, the first cut since april 2020.   the party’s year-end economic planning conference  reiterated that the government would continue to  

Continue its battles against “the disorderly   the various crackdowns on private-sector   what about the mostly state controlled chinese  banks? well, chinese banks rushed to meet their   state-required lending quotas last month by buying  up low-risk financial instruments rather than by   issuing loans. they bought

Banker’s acceptance  bills, which are technically classified as loans   and yield close to zero per cent. chinese banks’  have a cost of capital of around 2.5 per cent.   on low-yielding banker’s acceptance bills   rather than risking greater losses by issuing  their own loans at higher rates of interest.   many of

The problems being faced by president xi  were in place when he took office, but it could be   order for these problems to be unwound in an   orderly manner. before implementing the three red  lines policy that would force chinese developers   to deleverage, the government could have made  plans for funding local governments

That were   reliant on selling land leases to developers to  fund their operations. a lack of planning can   also be seen in the growing contagion that is  happening in chinese commercial paper markets.   it would appear that under these policies, chinese  property prices will be in structural decline,   tight finances for

The foreseeable future.   will also have to deal with growing regulations. for several years, china has contributed more   pandemic struck, it often accounted for close  to one-third of the world’s economic growth.   as its property sector collapsed, birth  these headwinds are unlikely  to dissipate any time soon.   this one

Next. see you again soon, bye.

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The Consequences of China's Slowdown By Patrick BoyleliveBroadcastDetails{isLiveNowfalsestartTimestamp2022-01-27T143009+0000endTimestamp2022-01-27T144720+0000}

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