More Evidence China Is Hitting The Skids

If you’re still working on the assumption that China is a financial and economic juggernaut destined to pass the U.S. in total output and eventually rule the world, it’s time to put those ideas aside. None of that is true.

To begin, China is entering the greatest demographic collapse in the history of the world, worse than the Black Death of the fourteenth century and the Spanish Flu of 1918. China’s current population is about 1.4 billion, but that number will decline to perhaps 800 million by the year 2090.

That’s a loss of 600 million people.

If an economy is nothing more than the number of people working in it and the average productivity of those workers, then that demographic collapse by itself is enough to bring China to its knees. Still, there’s more.

China’s rivers are poisoned, it’s pursuing genocide and ethnic cleansing in Tibet and Xinjiang, and the assertive Communism of Xi Jinping is destroying whatever small traces of capitalism might have emerged in the decades since Deng Xiaoping’s reorientation of the Chinese economy in 1979.

Apart from those big picture headwinds are a large number of more conventional but still potent detriments to growth. One of the biggest – the real estate debacle – is described in this article.

For decades, China has powered economic growth with investment in commercial and residential real estate. Chinese investors have very few investment options in foreign markets and alternative asset classes. They are mostly confined to gold, high-yield bank deposits (that are really unsecured loans to property developers), Chinese stocks (that are in their own bubble), and real estate.

Three of those four asset classes (all except gold) are in a state of collapse. Real estate developers have stolen down payments on housing and failed to finish the promised projects. The bank “wealth management products” were mostly diverted to real estate and are now defaulting for the same reasons – failed projects and fraud. The stock bubble is bursting also.

And this comes on top of China’s failed Zero Covid policy that is destroying growth in pursuit of an impossible goal of fighting COVID by locking down large cities on a seemingly random basis for extended periods of time.

There’s more to the story, but that should be enough to convince any investor that China is one market to keep away from. If you’re invested in China, it’s a good idea to get out before it’s too late.

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