I'm pretty sure, once ignited, this will have a cascading effect that will reverberate all around the world, especially more pronounced in Asia. Could this be the catalyst for this year's recession??? China’s debt crisis continues to escalate In an economic landscape reminiscent of Japan’s descent into stagnation in the early 1990s, China is currently facing a similar trajectory, albeit under different circumstances. A former adviser to China’s central bank, Li Daokui, has brought to light the staggering scale of debt accumulated by local Chinese authorities, a figure much higher than previously estimated. This revelation sheds light on the underlying vulnerabilities of China’s economic model, which for years has been fueled by massive infrastructure spending and relentless borrowing. Unveiling the True Scale of Debt Li Daokui’s assessment paints a worrying picture of economic health. By 2020, local authorities had amassed an estimated 90 trillion yuan ($12.6 trillion) in debt, predominantly spent on infrastructure projects unlikely to yield sufficient revenues for debt servicing. This alarming figure, representing 88% of China’s GDP, poses a significant challenge for national authorities. Without a major shift in economic policy, China risks following Japan into a period of prolonged economic stagnation. The debt accumulated by China’s local governments is largely hidden behind complex financial arrangements, such as the financing of the vast rail transit loop in Chongqing. Li’s analysis reveals that a significant portion of this “capital” was, in reality, debt disguised under various financial instruments. This misrepresentation of financial health has masked the true extent of the debt crisis at the local level. Comparisons with Japan’s Lost Decade The parallels with Japan’s economic stagnation are striking. Like Japan in the 1990s, China’s growth rate is insufficient to manage its burgeoning debt, created during years of unbridled expansion and optimistic valuations. Tokyo’s response to its crisis – offering forbearance to companies and avoiding large-scale bankruptcies – is a path that Beijing may find difficult to emulate without significant policy changes. Moreover, China faces the additional challenge of navigating a shift in ideology. Solutions such as selling off state assets, akin to Japan’s approach under Prime Minister Junichiro Koizumi, clash with President Xi Jinping’s emphasis on the state’s role in the economy. This ideological barrier complicates the potential pathways for China to effectively address its debt crisis. The Implications of China’s Debt Dilemma China’s debt problem is more than just a financial issue; it is symptomatic of a deeper economic malaise. The misallocation of investment over the past decade into sectors such as property, infrastructure, and manufacturing has led to significant, yet unacknowledged, losses. These unrecognised losses, if not addressed, threaten to undermine China’s financial stability and economic growth. The key to resolving this crisis lies not just in managing liabilities but in acknowledging and addressing the losses on the asset side of balance sheets. This requires a comprehensive understanding of the real value of assets and a swift allocation of losses in the most economically efficient manner. Delaying this recognition, focusing solely on minimizing financial disruption, and continuing to fund non-productive investments could exacerbate the overall economic cost, as seen in Japan’s experience. In conclusion, China’s burgeoning debt crisis is a complex issue that requires a multifaceted solution. It calls for a strategic rethink of economic policies, an ideological shift towards more market-oriented reforms, and a clear recognition and allocation of losses. As the Asian giant navigates this challenging economic terrain, the decisions made by its policymakers will have far-reaching implications, not just for China but for the global economy. The path China chooses to tackle its debt crisis will be a defining factor in its economic future and its role on the world stage.
More crisis ----> more trading opportunities for the traders. So what to trade? China A50 futures HangSeng index futures HangSeng Tech futures ....
China is indeed imploding. Their real estate accounts for a big chunk of GDP and nobody is building anything anymore. All while western capital was and is still fleeing China because of the political situation. The 100 million USD question is wheter China will dump their US treasuries and Dollars onto the markets in a attempt to grab liquidity
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I bet no. Seems to me that would kill their currency. Maybe they'd do it as a precursor to invading Taiwan and/or Russia, since at that point it wouldn't matter. But assuming they want to be able to buy things like oil, those treasuries are a big backstop to their currency. A country like Kuwait only needs so much of the kinds of trade goods China produces.
The debt is a problem worldwide and clearly, it’s not sustainable. The small percentage of people who have most of the world’s wealth are not going to give it up easily, and the governments need to get money from somewhere and increasing taxes is not going to be popular at all with the masses. However what concerns me even more is that these days many countries have nuclear weapons and they hate each other (not the innocent citizens, but the bureaucratic morons at the power). In the past few centuries when world’s economically strongest nations were losing their world’s dominance (eg. Dutch, Spain, England), there were social unrests, and conflicts/wars. Now it is only a matter of time before US will lose its superpower status most likely to China, and they’re not exactly in love with each other, plus US owes lots of money to China. Then there is the delusional psychopathic Putin, and few other countries with very questionable governments, and when this is mixed with the massive debts it is a recipe for disaster. Let’s hope that some rationality and empathy will prevail, although unfortunately we as a society have pathetic way of electing our leaders regardless of what country we live in.
Don't bother. The government is going to interfere so much that you are not going to come away profitable. They will make sure you lose money even if it means they will have to borrow more to thwart you. The best way is to 1) Stay away and do NOT invest in China, 2) Watch China burn like Nero watching Rome burn (China has really brought this upon themselves on this one) and 3) Help the Chinese people through any donation or volunteering if you can. The Chinese people who are the real heroes behind China's outstanding economic growth shouldn't have to suffer just because some greedy, ambitious and callous local officials mismanaged the hard-earned revenues due to their stupidity and short-sightedness and the central government chooses to obsess over their ideology instead of caring about people's well-being.
members from eliteinvestor.com will be trembling in fear. members from elitetrader.com will be laughing all the way to the bank.
Consider yourself warned. Just like any government of an autocratic regime, the CCP does not appreciate being told they are wrong by you profiting from them. They know they are wrong but they are always right. If you point out their wrongs by choosing to profit from their wrongdoings, then you are in the wrong and they will do everything in their power to crush you. It's not their first time in interfering in the market or even shutting down the market to thwart the efforts of "evil foreign speculators" to take advantage of some "economic situations". The best is just to stay away.