China's debt bomb looks ready to explode

inthelongrun

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Quote from: stompix on September 14, 2022, 12:17:54 PM

Quote from: inthelongrun on August 26, 2022, 06:46:28 AM

Exactly. The Chinese were smart enough that is why they are now the second largest economy in the world and are probably the second world power after the US.

The main reason why they have the second GDP in the world is that there are a billion of them Grin

If China would have only 100 million it would be the size of Mexico, just a bit above the Netherlands.

This thing about having the largest or second or third GDP but just because of the population is misleading, China has the second GDP in the world but it has the 55th or 61th nominal GDP per capita, just like India is 5th or 6th overall depending on sources but below 150 per capita.
Of course, there is a good partt as it's easier to double the revenue of a guy who earns 100$ than the one who is making 100k, but at the same time, with China facing a population decline that might be already happening this year the growth will be completely erased.

Not saying that they haven't grown far faster than other counties which were in the same situation back in the 80 or 2000, but numbers are sometimes misleading.

The Chinese One Child Policy has been stopped a few years ago. In the last 3 decades, Chinese population growth was so low and the One Child Policy will have a long-lasting effect in the next decades to come. Soon China will have a huge aging population and there will be a population decline and maybe it started already. The Chinese government utilized its huge population for cheap labor to drive its economy. But now, China is shifting from labor dependent to becoming an investing nation. China will have a declining population but its economy will continue to grow. This means that the population is not the main factor anymore. Its GDP per capita will continue to rise.

stompix

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Quote from: inthelongrun on August 26, 2022, 06:46:28 AM

Exactly. The Chinese were smart enough that is why they are now the second largest economy in the world and are probably the second world power after the US.

The main reason why they have the second GDP in the world is that there are a billion of them Grin

If China would have only 100 million it would be the size of Mexico, just a bit above the Netherlands.

This thing about having the largest or second or third GDP but just because of the population is misleading, China has the second GDP in the world but it has the 55th or 61th nominal GDP per capita, just like India is 5th or 6th overall depending on sources but below 150 per capita.
Of course, there is a good partt as it's easier to double the revenue of a guy who earns 100$ than the one who is making 100k, but at the same time, with China facing a population decline that might be already happening this year the growth will be completely erased.

Not saying that they haven't grown far faster than other counties which were in the same situation back in the 80 or 2000, but numbers are sometimes misleading.

pooya87

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Quote from: lucates on September 13, 2022, 03:30:42 PM

So will it impact China's growth? The international financial implications of Evergrande going under may be limited since most of its debt is domestic. Still, there will be second round effects. If it's the free flow of credit that has helped to sustain China's rapid growth, especially after the international financial crisis of 2008. Tighter credit norms must affect the peace of Chinese economic activity and therefore of the larger global economy. This could mark the end of the long run of "miracle" growth that has made China.

When you talk about Chinese economic growth or their economy in general you have to keep in mind that the system there is not the same democratic capitalist nonsense. It's different which is why some economy experts claim that China already had the growth they wanted to for now and they are shifting their attention to improving people's lives by closing the gap between different classes.

If you look at the past 40 years you can see that in China they eliminated absolute poverty (from 85% down to 0%) meanwhile it all those democracies with capitalism the gap is increasing fast as the poverty spreads, number of homeless families increase, quality of life deteriorates, ...

lucates

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So will it impact China's growth? The international financial implications of Evergrande going under may be limited since most of its debt is domestic. Still, there will be second round effects. If it's the free flow of credit that has helped to sustain China's rapid growth, especially after the international financial crisis of 2008. Tighter credit norms must affect the peace of Chinese economic activity and therefore of the larger global economy. This could mark the end of the long run of "miracle" growth that has made China.

Uang_kartal

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At first glance I think that the population is 3 times more than developing countries. This makes China need supplies and bailouts for the country's needs. I assume that Chinese officials are commensurate with their contributions. I hope violence is not the solution. I believe China can overcome this debt together, both in dealing with situations such as Covid and non-covid. Of course, whatever the conditions, the debt will still be paid. no matter how many times or years in the future

naira

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There are 4 factors that we need to pay attention to as a whole in China's economy at this time.

First: The housing market is in a state of collapse (strike to pay for the property due to the developers not completing the projects offered to investors, especially the Chinese people). The strike to pay for Chinese property forced banks to raise their hands because it had an impact on liquidity.
Second: China's water source problem is that the largest river is experiencing drought. One of them is the Yangtze River, the impact is clear that the agricultural sector in China, especially in areas that are difficult to reach, has become completely blocked.
Third: The level of spending in China has decreased drastically, due to mental pressure and lack of confidence in the finances of the people there which have resulted in lower import activities.
Fourth: China's import activities are decreasing every time.
source: https://theconversation.com/china-property-crisis-why-the-housing-market-is-collapsing-and-the-risks-to-the-wider-economy-189082

inthelongrun

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Quote from: NotATether on August 20, 2022, 10:36:33 AM

Quote

Large banks in China are in trouble as well. They have lent tens of billions to poor countries as part of China's ambitious Belt and Road Initiative. A significant portion of their credit portfolio is likely to become nonperforming as their borrowers are unable to service the debt due to the global economic downturn.

I don't think protests in front of banks imply worse economic conditions are impending for China.

I'm more of the opinion that money lent under the B&R program is extra money which China can afford to give away, so it's not like they are lending recklessly.

Exactly. The Chinese were smart enough that is why they are now the second largest economy in the world and are probably the second world power after the US. Chinese loans to poor and developing countries are risky but the interests are also higher compared to standard government loans. And apart from that, the Chinese included conditions like that 99-year control in a big port in Sri Lanka. Terms that are probably not allowed to be viewed and shared by the general public. 99 years, that is a lot of time. Even the Chinese government can just pay their host banks so they can utilize it for their navies and other operations in the Indian Ocean.

NotATether

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Quote

Large banks in China are in trouble as well. They have lent tens of billions to poor countries as part of China's ambitious Belt and Road Initiative. A significant portion of their credit portfolio is likely to become nonperforming as their borrowers are unable to service the debt due to the global economic downturn.

I don't think protests in front of banks imply worse economic conditions are impending for China.

I'm more of the opinion that money lent under the B&R program is extra money which China can afford to give away, so it's not like they are lending recklessly.

pooya87

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It's a hole they dug for themselves many years ago, I believe started with Reagan, and they are not going to be able to get out of it now. It is not just the infrastructure and engineers. It is all the laws and regulations that prevent production from being profitable like high taxes and high salaries. On top of that their products have to be able to be able to compete with other products.
For example can majority in US afford to pay 10 grand for a shitty iPhone? lol This is why they never leave China, Taiwan, etc.

zasad@

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In China, inverters have invested trillions of dollars, and it took the country several decades to build infrastructure and grow engineers. How can this be done in 2-3 years? Move Chinese workers to the US? Or build these factories in India, Africa or Mexico?

pooya87

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Quote from: zasad@ on August 18, 2022, 08:10:36 AM

The situation with Taiwan is even more ridiculous for the US. Chips are made in Taiwan for the US military industry, and they are located near China and Russia.

US has been trying to decrease that dependence though. I forgot the details but it was something like a trillion dollar plan to eliminate the dependence entirely in 3 years. 2 years already passed. I suppose at this point US is not so worried about Chips in Taiwan.

As for production, google "Reshoring". They are advertising the hell out of it these days in US. I can't comment on how successful it is since it mostly means coming from China to Mexico (instead of back to US) and there isn't enough cases to make a difference.

Quote from: Gyfts on August 18, 2022, 01:57:04 PM

I'm critical of the U.S. debt, only for the reason that USD acts as the current currency reserve at the moment -- but the debt is sustainable if the U.S. economy grows. It's a dangerous game to play, but I'd be more concerned about the fact the U.S. is in a recession and birth rates seem to be declining which means there isn't enough economic output to support the debt. Inflation compounds the issue to the extent that it accelerates other countries dumping USD from their currency reserves as its purchasing power decreases too quickly over time.

The problem is that this type of economy is like cancer, it doesn't kill you right away but makes you suffer over time until it does after many years. US economy is built on debt and depends on debt and falls apart because of debt. It doesn't matter how much the economy grows, the debt will never be covered since it grows faster.
I suggest watching The Biggest Scam In The History Of Mankind: https://www.youtube.com/watch?v=iFDe5kUUyT0

DrBeer

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Quote from: zasad@ on August 18, 2022, 08:10:36 AM

Quote from: DrBeer on August 13, 2022, 04:07:31 PM

China's problem is that ... the Chinese economy is the most natural and largest bubble in the world economy, in world history! And the funny thing is that the Chinese economy is exactly the same as the crisis of 2009, when the real estate bubble burst! They did the same, only within the local market. And the result was not long in coming. But in the case of the Chinese economy, everything will be even worse - not a segment of the market, but the entire economy will collapse, because. In China, the domestic market is very "fragile" and everything is highly dependent on all internal processes. After the "explosion" of the real estate market, the construction-related market has already begun to crumble (from the production of concrete, building metal to manufacturers of electrical wiring, laminate and household kitchen appliances) ... And these are millions of workers who will soon be left without work, companies will stop paying taxes , and .. and further in a vicious circle. The only thing to say is that this will not happen this year for sure, China still has some inertia.

PS by the way - the United States officially began to withdraw production and technology from China, and transfer it to the United States, to solve 2 problems:
1. Solve internal problems, "burn" tons of money printed, give new jobs and boost the US economy. At the same time, provide their manufacturers with microelectronics (microchips, etc.)
2. Show China its place, and force it to be more accommodating.

Have you ever wondered why large factories from the USA and Europe moved to China?
Anyone who studies economics knows that the production of goods in China is more profitable than in the US and Europe.
Therefore, the US government will have to spend a lot of money to compensate for these losses and train its engineers.

The situation with Taiwan is even more ridiculous for the US. Chips are made in Taiwan for the US military industry, and they are located near China and Russia. It doesn't matter that Russia will locate military production in Cuba.

Partially agree. In terms of production costs, in the 80s it was profitable to build factories in China, pay low taxes, pay low wages, and make extra profits. It was.
Now the situation has changed.
1. China stopped being a very poor country, and the cost of production began to rise. There is an increase in the level of wages and taxes, and much more.
2. China began to behave "badly" - this is China's "pirate" approach to replicating "alien", non-compliance with copyright, ...
3. And most IMPORTANT - China has become not only a monopolist in some areas, but has also become potentially unsafe for those who "once pulled China into the 21st century from the stone"

Given these factors, and especially the third one, the reverse process has now begun - "the exodus of manufacturers from China." Well, plus, after all the covids and other global problems, for example, the United States needs to raise its industry, create new jobs, ...

Gyfts

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Quote from: pooya87 on August 17, 2022, 11:14:18 AM

...

I'm critical of the U.S. debt, only for the reason that USD acts as the current currency reserve at the moment -- but the debt is sustainable if the U.S. economy grows. It's a dangerous game to play, but I'd be more concerned about the fact the U.S. is in a recession and birth rates seem to be declining which means there isn't enough economic output to support the debt. Inflation compounds the issue to the extent that it accelerates other countries dumping USD from their currency reserves as its purchasing power decreases too quickly over time.

zasad@

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Quote from: DrBeer on August 13, 2022, 04:07:31 PM

China's problem is that ... the Chinese economy is the most natural and largest bubble in the world economy, in world history! And the funny thing is that the Chinese economy is exactly the same as the crisis of 2009, when the real estate bubble burst! They did the same, only within the local market. And the result was not long in coming. But in the case of the Chinese economy, everything will be even worse - not a segment of the market, but the entire economy will collapse, because. In China, the domestic market is very "fragile" and everything is highly dependent on all internal processes. After the "explosion" of the real estate market, the construction-related market has already begun to crumble (from the production of concrete, building metal to manufacturers of electrical wiring, laminate and household kitchen appliances) ... And these are millions of workers who will soon be left without work, companies will stop paying taxes , and .. and further in a vicious circle. The only thing to say is that this will not happen this year for sure, China still has some inertia.

PS by the way - the United States officially began to withdraw production and technology from China, and transfer it to the United States, to solve 2 problems:
1. Solve internal problems, "burn" tons of money printed, give new jobs and boost the US economy. At the same time, provide their manufacturers with microelectronics (microchips, etc.)
2. Show China its place, and force it to be more accommodating.

Have you ever wondered why large factories from the USA and Europe moved to China?
Anyone who studies economics knows that the production of goods in China is more profitable than in the US and Europe.
Therefore, the US government will have to spend a lot of money to compensate for these losses and train its engineers.

The situation with Taiwan is even more ridiculous for the US. Chips are made in Taiwan for the US military industry, and they are located near China and Russia. It doesn't matter that Russia will locate military production in Cuba.

pooya87

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Quote from: kensaii on August 17, 2022, 01:23:11 PM

The US isn't that vulnerable to the high debt-to-GDP ratio since the petrol dollar and dollar as the main currency for world trade, main in foreign reserves of many countries.

But the situation with Petrodollar is not the same as before. Many countries are dumping it. For example over the past couple of years two of the biggest energy exporters (Iran and Russia) have been using other currencies. One of the biggest oil importers (China) has been using CNY to pay, India is also starting to use Ruble, etc. to import energy. Another big oil exporter (Saudi Arabia) is also selling some of its oil in other currencies such as CNY.
In other words USD used to be global currency, it now mainly exists in Europe while it is slowly being abandoned in other regions.

I agree about the points you raised about China.

Multiple Chinese enterprises are leaving US economy. PetroChina ($130 billion), Sinopec ($70 billion), Aluminum Corp of China ($10 billion), ... are all leaving US stock market (NYSE). Wink

Drawesome

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Winter is coming for Germany. EU is not going to spend a winter with no Energy. I believe they may force an end to the Ucrania war.

kensaii

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The US isn't that vulnerable to the high debt-to-GDP ratio since the petrol dollar and dollar as the main currency for world trade, main in foreign reserves of many countries. Same with Japan cause they are the world's biggest creditor, and fund their money to oversea under ADB's loans to developing countries. US and Japan will be fine.
China? Not so much since they have had the real-estate bubble problem for years but never address it. The covid pandemic last year affect the whole world and this somehow take a toll on China's real-estate bubble. Forced their central government to tighten the bank's interest rate for the construction sector, housing, mortgage,... you name it. Oddly similar to the US's montage crisis in 2007-2008.

pooya87

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Quote from: edgycorner on August 15, 2022, 03:30:14 PM

Why would US help them tho?

The question is not why, it is "can they save China". It seems like both US and Chinese economies are falling apart. We already have recession in US with high inflation and not to mention that all sources report a huge national debt and a high debt-to-GDP ratio. They both need bailout and with increasing energy prices it won't happen any time soon.
Here is a scary counter: https://www.usdebtclock.org/world-debt-clock.html

edgycorner

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Quote from: TheNineClub on August 13, 2022, 10:19:22 AM

Is it possible? Yes. But that dosen't mean that much because most of the issues can be offset by givernment meassures. It's not the first time a big player like that had economic issues (great depression wink wink), and in some cases they got through it even stronger.

But this situation is unprecedented. More than 30% of China's GDP directly depends on real estate market and that's a lot. These events will set china back by a decade and it's certain to happen(Probably by mid-September)

Quote from: Drawesome on August 13, 2022, 05:20:23 PM

I believe they have to make a lot of redistribution so the balance tally, but they have a huge income and they are not going to let their system to fail easily.

You can't write money into existence without even worse consequences(inflation).

Why would US help them tho? A failing Chinese economy will be golden for US here, they will get the goods for cheap and favourable terms in future deals.
If anything, US will try to accelerate their fall else it will be US in the meat grinder

stompix

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Quote from: pooya87 on August 15, 2022, 02:53:18 AM

Is the author confusing Japan with China?!
All the sources I look up on the internet are reporting a 250-260% debt-to-GDP ratio for Japan, and about 60% for China and 130-150% for United States!

As always, your sources are good for nothing, exactly the third result in google:
Directly from South China Morning Post (owned by the CCP)
https://www.scmp.com/economy/china-economy/article/3135883/china-debt-has-it-changed-2021-and-how-big-it-now

Quote from: Hydrogen on August 12, 2022, 05:28:53 PM

It is possible that china's economy is imploding at the moment. The united states $50 billion dollars in ukraine funds, might have gone to china. To stabilize their economy and prevent global collapse. This could be one reason behind the united states currently throwing "additional funding" at ukraine. And funding additional near $1 trillion dollar packages.

I don't know what you're smoking but quit it! Lend-lease doesn't work like that, and the US has no reason to pay China's debt, if they wanted that they could settle this between them as both countries own part of each's debt.

Topic: China's debt bomb looks ready to explode (Read 324 times)