But the Chinese Communist Party has a plan
It may fix things for now, but ultimately make the problem much worse
Welcome to China Uncensored, I’m Chris Chappell.
But before we begin, in case you haven’t heard, we now have China Uncensored merchandise!
If you’d like to buy a t-shirt like this, or some of our other great t-shirts and mugs,
check out chinauncensored.tv/merchandise,
get some cool stuff, and support the show! And best of all, none of it is made in China!
Good news! We may see a lot more giant statues popping up around China!
There’s a reason you sometimes see bizarre giant statues like these in Chinese cities.
It’s a great way to artificially boost the local economy.
And the Chinese economy is in need of some boosting.
China’s economy is getting walloped by crises in energy, shipping, and real estate.
The real estate crisis has to do with the slow motion collapse of
one of China’s biggest real estate companies—Evergrande.
“The Hong Kong listed giant has become one of the most indebted companies in the world
with more than $300 billion worth of liabilities and it’s struggling to
pay it back sparking fears of a default that could send tremors through China's economy.”
Property construction makes up about a quarter of the entire
Chinese economy. The Chinese Communist Party cannot afford to let that go.
It needs to boost the country’s GDP, no matter how artificially.
Fortunately, China’s economy is state-planned. And yes, the Communist Party has a plan to deal
with this crisis—have local governments take on more debt in the form of special bonds!
In other words, they’re planning to kick the can down the road,
so local government debt will be the next big bubble to burst.
I’ll show you how after the break.
Welcome back.
Last week, China’s State Council met to come up with a plan to deal
with the nationwide economic slowdown.
The solution? Saddle local governments with a mountain of debt!
The State Council called for “ongoing construction of projects”.
Please tell me that means more giant gold statues of Mao.
After all, nothing says Communism like a giant gold statue.
But with the economy going down the toilet, how do you pay for these construction projects?
The State Council says with “special bonds”.
Special bonds are government debt for specific construction projects, where the debt gets paid
off from future taxes or proceeds from that project. For example, debt to build a bridge,
paid for by future tolls. Or debt to build a giant Mao statue, paid for by future admission tickets.
And as you can see, local governments have been ramping up special bond sales.
And next year it’ll be even more.
This year, Local Governments budgeted about $570 billion dollars for special bonds.
Next year that number goes up to $630 billion dollars.
Surely this will end well.
This essentially how the Communist Party has dealt with its previous debt bubbles—funnelling
the debt into a new form of debt.
But that’s just the beginning. Major Chinese cities are making it easier
for property developers to get loans. More after the break.
Welcome back.
So Evergrande, a major Chinese real estate developer, may default on some of its loans.
So it's probably a good idea to make it easier for Chinese real estate developers to get loans.
That’s what the city of Chengdu is doing.
Chengdu is the capital of Sichuan province. It has 21 million people.
It’s going to “accelerate approvals for home sales and property loans
as well as ease restrictions on using proceeds from pre-sales”.
Basically, to make it easier for other developers to do what Evergrande did.
Because what China’s real estate market needs right now is more debt and fewer regulations.
Many Chinese cities are also easing rules on land bidding.
You see, local governments don’t get a lot of support from the central government.
And they can’t levy their own income taxes.
So they have to do some pretty crazy things to raise money sometimes.
And land sales are a major source of income for them.
This in turn helps Chinese real estate developers, who can build stuff on the land and then sell it.
Well isn’t a state run economy just a neat little package!
And now it’s time for me to answer a question from a member of the China Uncensored 50-Cent Army,
a viewer who supports our channel on the crowdfunding websites Patreon and Locals.
W. Leclerc asks on Patreon, “On the subject of Taiwan,
what do you think are the winning conditions for a Chinese invasion of Taiwan ? And do
you think the CCP believe they can achieve these conditions ?”
Well, I think the biggest thing that would make a Chinese invasion of Taiwan possible
is if for some reason, other countries—particularly the US,
doesn’t come to Taiwan’s aid. Don’t get me wrong, even on their own,
Taiwan would make any Chinese invasion force pay a bloody price, but without international support,
the CCP could blockade Taiwan. That’s something Taiwan is already warning about.
Would the US abandon Taiwan? I doubt it. It’s so important to US national
security interests and regional stability in the Indo-Pacific,
and it would be so contrary to all the recent support the US has been giving Taiwan. And with
any luck, that support is enough deterrence to prevent an invasion from ever happening.
Thanks for your question and your support, W. Leclerc.
And thank you to everyone who supports China Uncensored on Patreon or Locals.
It’s not easy to expose the Chinese Communist Party and we could not do it without your support.
So help support the show by contributing on Patreon
or Locals.
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Once again I’m Chris Chappell, see you next time.