There’s a ticking time bomb
Waiting to explode in China
And Communist policies are the cause
Welcome to China Uncensored, I’m Chris Chappell.
Is China Communist?
Well, it’s run by the Chinese Communist Party,
which has almost total control over the economy and society.
And like any Communist Party, China has been talking a lot lately about sharing the wealth.
At a major meeting of the Communist Party last year,
Chinese leader Xi Jinping talked a lot about what he called common prosperity.
“The Party Central Committee with Comrade Xi Jinping…[will]
gradually realize the goal of common prosperity.”
“The Party has promoted the development of…common prosperity.”
And “With unswerving resolve, we will pursue common prosperity for all.”
You know what that means? Common prosperity crackdowns!
That’s how you make a Communist utopia! Take money from successful people
and say you’re going to share the wealth.
Because, “Beijing has yet to offer specifics on many of the services
China’s governments will provide, but economists expect the bill to be formidable.”
So how do you pay for all this common prosperity? Simple. Make everyone pay together.
“Across China…schoolteachers have been asked to work extra hours.”
Of course, don’t expect to be paid for the extra hours. Or even your normal hours, really.
Civil servants are losing their perks and bonuses.
And, “Heavily-indebted local governments [are] expected to shoulder the bulk of the costs.”
Hey, what’s a little more debt for the glory of the Communist Party?
Because while the Communist Party’s central government talks about common prosperity,
it’s local governments that end up footing the bill.
“Governments at the provincial, municipal and county level financed more than 80%, 70% and 60%
of China’s fiscal expenditures on education, healthcare and housing projects, respectively,
with the remainder coming from the central government,
according to the latest official figures.”
The problem is local governments don’t get a whole lot of support from the central government.
I’m sure you’re shocked. Local governments can’t even levy their own income taxes.
And so, according to official data from China’s Ministry of Finance, “Local governments had
collectively amassed the equivalent of more than $4 trillion in debt as of the end of 2020.”
That’s right, trillion.
And get this,
according to the Wall Street Journal, “That sum is widely believed to be a gross underestimate,
with considerable debt buried in financing vehicles and camouflaged in other forms.”
In other words, China’s economy is being propped up by local government debt.
Local officials were always rewarded or punished for how well their local economies
are doing. That led to wide scale borrowing to fund massive infrastructure projects.
And remember when I said earlier that local governments don’t get a lot of tax revenue?
The main way they’ve been making money is through real estate.
But then, you know, Evergrande? China’s real
estate market is in the middle of a very slow-motion collapse.
And the Communist Party is trying to prevent that by cracking down
on property developers and local government debt.
But that means some local governments could run out of cash.
So how is the central government going to deal with that impending crisis?
The same way the Chinese Communist Party handles everything—blame local officials.
In December, China’s Vice Finance Minister“reiterated
that there wouldn’t be any bailouts for governments that couldn’t repay [debts]”.
Because at the end of the day, only the Chinese Communist Party is too big to fail.
And now it’s time for me to answer a question from a fan of China Uncensored who supports the
show on the crowdfunding website Patreon or the exclusive social media platform Locals.
Acmariner99 asks on Patreon, “Do you think China's "zero covid" strategy will encourage
businesses to resettle somewhere not in China?
Genocide, systematic censorship, and involuntary organ donation doesn't motivate businesses to
make more ethical decisions, but cutting into their bottom line might(?) What do you think?”
Well, you’re definitely right, it seems like many companies
won’t do the right thing unless it actually affects their bottom line.
Goldman Sachs is warning China might stay shut for all of 2022 thanks to its zero Covid policy.
Others are saying China is uninvestable.
And remember recently when Mad Money’s Jim Cramer
said it's impossible to recommend Chinese stocks in a hostile communist regime.
It’s true that some companies are pulling out of China, or looking to expand to other countries.
Supply chain problems are even reviving US manufacturing.
But we don’t really have good data yet on how many companies are leaving China.
They’re not necessarily going to announce it while they’re still in China.
So it may take a while for us to see the full effect of China’s zero covid strategy.
Thanks for your question and your support Acmariner99.
And thank you for watching. You too can get your questions answered on the show
by signing up for the China Uncensored 50 Cent Army over at patreon.com/chinauncensored.
Once again I’m Chris Chappell, see you next time.