Investors were promised there would be big bucks
After China reopened after Zero Covid,
But the situation is way worse than you could possibly imagine.
Welcome to China Uncensored, I’m Chris Chappell.
Something is rotten in the state of China.
Okay, I realize I have to be a little more specific.
I’m talking about China’s rotten economy. And their reopening boom is a charade.
Now, for years, we’ve been told China was the place to invest.
Blackrock said investors should triple their assets in China.
Which makes sense. If you’re gonna gamble on horse racing, you’d want to bet on the horse
that seems the quickest. Even if that horse is responsible for massive human rights violations
and a pandemic that shut down the global horseracing economy. How could you, Seabiscuit?
Even those who didn’t want to invest in China were probably invested in China.
After all, many American pension funds invest in China.
The same goes for most emerging market funds.
But then, Zero Covid happened. China went into years of lockdowns. The economy basically stopped.
Of course, this didn’t stop Blackrock. This article is from the middle of Zero Covid.
Because there was this idea that sooner or later China had to reopen. And when it did, boy,
the economy would take off like a rocket ship.
This is like telling people to invest in parachute pants,
because surely, it’s gonna make a massive comeback any day now!
Morgan Stanley had great tips on where to invest when China pulled back from Zero Covid.
Goldman Sachs said China’s reopening is going to boost the entire global economy.
The Telegraph said China may be investors' best bet in 2023.
And they were right! After reopening, China’s economy did take off like a rocketship. Only
it was more like those first rocket ships with monkeys strapped inside
that exploded after takeoff. Because the numbers are in,
and things aren’t looking so hot. I’ll tell you more after the break.
Welcome back.
It’s been several months since China reopened after Zero Covid. So has it
been the great economic boom that many predicted?
Well, I’m definitely hearing a boom sound…from it imploding.
Some economists were predicting China’s GDP would
grow by well above 5%. That’s even more optimistic than China’s official numbers.
And those official numbers themselves are man-made and unreliable.
But that GDP growth isn’t materializing.
Chinese consumers did not come flocking back,
going on a massive spending spree, as was expected.
Based on historical corporate revenue trends, for China’s GDP to be growing at 5%,
revenue would need to be growing faster than 8%. Instead, it’s growing at 1.5%.
20 of China’s 28 main economic sectors are growing slower than the official GDP goals.
They’re growing even slower than a giant Himalayan lily. What? You think I make
nothing but video game references? This one’s for all my botany heads out there.
One of the problems is that China's youth unemployment is sky high.
One in five can’t find a job.
Imports are also down by 8% in April.
Credit and loans are plunging, and some economists
are beginning to worry the recovery they predicted may not be coming.
And I’m beginning to worry that it’s way too easy to become an economist.
Them telling you to invest in China is like a doctor telling a senior citizen
with osteoporosis to ride more unicycles. No way they’re gonna crash and burn, right?
So why did so many investors and economists get it wrong?
The problem is China’s economy is fundamentally broken.
Systemic problems that have been building for years are finally coming to fruition.
China’s Communist state-run economy has been entirely dependent on government
stimulus and debt. Most of that money and debt went into the real estate sector,
which accounts for about 30% of China’s GDP.
Local governments in China can’t levy taxes, so they make money through real estate.
But last year, total official revenue from land sales dropped
by over 23 percent, a loss of about $288 billion.
In Monopoly terms, this is when you flip the board over and call your mother a cheater.
Local governments have been running off ever increasing debt for a long
time. And the situation is coming to a head. Check
out my recent episode China’s Debt BLACK HOLE for more on that. The link is below.
What it comes down to is this:
China's Local Governments are running out of money. They can’t even pay workers on time.
This hurts both the industrial and commercial sector.
And with the fact that China is running out of a workforce, since people aren’t having kids…
…the idea that Wall Street was trying to sell us on a huge post-Covid recovery is insane.
That’d be like a doctor telling a senior citizen with osteoporosis that just fell off a unicycle
that they’ll make a huge recovery, just as soon as their fractured skull stops leaking.
Meanwhile, China’s debt ratio is 3 times its GDP.
For context, “as of mid-2022,
China’s relative debt burden stood 40 percent higher than America’s.”
As an American, that makes me feel a lot better about our debt crisis.
This feels like a 400 pound guy watching My 600-lb Life and thinking, “I’m doing just fine!”
And the US economy is a lot more robust than China’s.
Blackrock tells us “The abandonment of zero-COVID policy and broader shift to
more business-friendly tone has signaled the start of a new pro-growth era for China’s government.”
Except China just expanded its counter espionage law.
And the new rules are decidedly not business friendly.
“Foreign executives say the expanded scope and powers of the legislation
threaten to turn everyday interactions into national-security offenses”
And China just sentenced an elderly US citizen to life in
prison on spying charges, no further details given.
Eh, seems reasonable. I mean, if China says an old person decided to take up
international espionage as a post-retirement hobby, I see no reason to question that…
other than to ask, “How can I also become Agent Double-Oh-Seventy.
That’s just the tip of the iceberg, too. The Chinese Communist Party has been detaining
foreign executives and conducting surprise raids and inspections on foreign businesses.
Is it just me, or is it obvious what we need to do?
We need to quadruple our investments in China! If we can just pump more money into China’s vast
network of debt, we can keep it propped up and make lots of money in the process! Or we
could just invest in parachute pants. Seriously, it’s gonna make a massive comeback any day now!
And this show would not exist without support from viewers like you. YouTube frequently
demonetizes, suppresses, and secretly unsubscribes people from this channel.
Join what I call the China Uncensored 50 Cent Army by contributing to the show on Patreon. You’ll get
a bunch of cool perks, including the ability to ask me questions I’ll answer on the show.
Today’s question comes from Mah-Dry-Bread, “Hey guys! So I know you guys like to stream
games on YouTube over on Gamers Unbeaten. Do you plan to ever try streaming on Twitch,
or are you more interested in sticking to YouTube?”
Great question. So if you don’t know, I’ve started a new gaming channel called Gamers
Unbeaten. The reason I did that was because YouTube makes it very difficult to talk about
political things without getting demonetized, age-restricted, or censored. So my hope is that
I can sneak in political commentary under YouTube’s radar by doing it in video games.
So if you haven’t yet, check out Gamers Unbeaten. I’ll put a link in the pinned
comment below. The latest episode is on The Legend of Zelda Tears of the Kingdom.
But I have not ever thought about Twitch. I really don’t know all that much about it.
So let me open that up to everyone. Would you like to watch us on Twitch? And if so,
do you have any tips for making the most out of Twitch? Let me know in the comments below.
So thank you for the suggestion Mah-Dry-Bread, and thank you as always for the support.
Once again, I’m Chris Chappell. See you next time.