China's deflation is striking, getting worse, walking in Japan's footsteps. The parallels (demographics, banking, bazookaing, etc.) are eerie
I am beginning to suspect that DS, fighter jets, etc., are intended as a cloak for the dire deflation China is experiencing.
A concise realistic analysis that I think is compelling:
youtube.com
As you once knew but now perhaps in your new iteration reject, top down managed economies don't work.
The bond market is right. It is about to hit the fan in China. No amount of statistical fudging, ineffective bazookaing, etc., can prevent or correct.
How can an export machine continue to work when deflation hits, investment fails, banks hit the skids, etc.?
Harsh medicine must be taken. As a first step, huge write-offs of bad loans (mostly to SOEs) must be made. Loans on bad properties both in mainland and in HK must be recognized, property sold at deep discounts to salvage whatever crumbs remain before even the crumbs disappear.
I'm sure you know all about HK commercial real estate. Down 40% since peak in 2018. That's right 40%. Never mind the status of mainland real estate but in a word, worse than HK's, which is bad enough.
spglobal.com
Only when the harsh medicine is taken can the Chinese economy recover.
But the CCP is stupid, Xi is ideologically hide-bound, and cannot do what needs to be done, presumably because admitting weakness and bad policy will create social unrest and weaken his iron hand on power.
And, once again, top down macro management does not work. Never has, never will. Market forces need to be allowed to express themselves. Xi might as well be trying to harness a hurricane with a rope. And he just doesn't understand - "people like lower prices don't they?"
China is headed for a substantial economic crisis that no amount of statistical fudging or propaganda can hide.
All your happy talk about China is just unrealistic. There is no recognition of what the bond market is yelling at all investors concerning Chinese prospects.
Oh, and tariffs are on the way. |
