Interesting analysis on China's economic health.
Fraser Howie is an independent analyst who provided his insight as to just how bad things are for China. This analysis came BEFORE Trump issued his IEEPA declaration for companies to stop doing business in and with China. The effects of that declaration will make China's economic problems in this analysis much worse.
Howie says that there is a “whole host of hidden debt” in China. Howie estimates that China’s total debt is over 300% of their GDP. Howie referenced the Institute of International Finance for these numbers.
“China is very much past the tipping point where the debt simply no longer can be ignored. The cost of servicing the debt ... simply distracts from almost everything else. China ... (had) this huge stimulus and turn on the credit taps and they drove all this global demand,” Howie said. “But there clearly was going to be a cost ... and now they are suffering (from) it.”
When China's efforts to burn cash over the US tariffs is added to this, the unemployment numbers that keep increasing there, and the shift from importing minerals to importing more food, anyone with common sense has got to realize that things are much worse than China is letting on. The trade war with the US has increased China's debt at a time when they were looking for ways to boost their economy.
“The Chinese economy is clearly slowing, there are a lot of headwinds, there’re companies leaving China. China’s becoming a much harder investment case for a number of reasons."
Again, this analysis was BEFORE Trump took a larger tariff/barrier position on Friday. I don't know how many cards there are to be played in Trump's deck, but I do know that the US economy is stronger than China's, and I do know that the tariffs are hurting China more than they're affecting the US.
Author Steven Mosher has a similar view of China and their economic problems. Author of "Bully of Asia: Why China’s Dream is the New Threat to World Order," Mosher believes that tariffs on Chinese exports puts the killshot on a very weak economy that is a loss leader in every other category. China's only profitability comes from their exports, according to Mosher.
Mosher likens the leadership of the central planning of China to that of the oligarchs in Russia who amassed great wealth in the aftermath of the Soviet Union collapse. However, the PRoC didn't collapse, and their oligarchs are very wealthy.
Because of all of the corruption inside China, exports are the only sector that makes any money.
“The tariffs have hurt the export sector of economy tremendously in China, and remember, that’s the only sector of the economy that actually makes money, the rest of the economy loses money. The state-owned enterprises [are] these huge dinosaurs run by huge non-productive bureaucracies consisting of Communist Party officials who have no idea how a market economy works and are just there to take bribes, make deals, and pocket the profits.”
What money that China makes from exports is what funds all of the other losing propositions in their economy.
Chinese-Americans have seen themselves achieve great success. Mosher says, they "have one of the highest average incomes of any group in the US." The Chinese in Hong Kong have had great achievements in turning an island of 2 fishing villages and population of 2,000 into one of the most modern cities in the world with a population over 7 million. Singapore and Taiwan are other glowing examples of the contribution of Chinese. But the Chinese don't have any similar record of achievement inside China.
“Certainly, I have great respect for the Chinese people, who are among the hardest working, most enterprising, and most intelligent people the world has ever seen. It’s a great tragedy that they’re languishing under one of the most tyrannical surveillance states the world has ever seen.”
If Mosher's and Howie's analyses of China's economy is correct, it's very bad for China.