It’s Over: China’s Economy Is Finally Collapsing

Let's discuss China and the impact to the global economy, why Evergrande filed for Bankruptcy, how Country Garden could be next, and what this could mean for you watching - Enjoy! Add me on Instagram: GPStephan

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THE CHINA ECONOMIC CRISIS:

-High Youth Unemployment:

Higher education expanded faster than market demand - meaning, there are more college graduates than there are jobs to pay them - and, as a result, a high portion of Chinese Youth are unemployed. As it stands right now, “the jobless rate of 16-to-24-year-olds rose to 21.3%,” which has been steadily rising, each and every year since the survey was started in 2018.

China says that it’s a big “misunderstanding" - instead, they explain that the surveys used to collect the data just “need to be further improved and optimized." I'll let you be the judge of that.

-Real Estate Bubble:

China was building 5 TIMES as many homes as America and Europe (COMBINED) and, supply was still so limited that several cities used a lottery to allocate them, some with odds as low as 1-in-60. However, with demand slowing down, property developers had a harder time raising money to stay afloat. They couldn’t afford to finish their “pre-constructed” units, and even though this started with the property giant, Evergrande, ”Within four weeks, more than 320 projects in about 100 cities were facing protests, roiling markets and forcing authorities to corral banks and developers to defuse the unrest.”

-Currency Deflation:

When prices come down, it’s a sign of less demand - and, when your money becomes more valuable the longer you hold on to it, the less likely you are to spend it, which causes prices to fall even further, and starts the cycle all over again, until - eventually - companies scale back, produce less, and the economy falls. It's also said that “Chinese consumers are spending less, in part because a slump in housing prices has affected their savings, much of which are tied up in property. Jobs tied to housing that were once abundant are disappearing. And the uncertainty of how far the crisis might spread is leaving companies and small businesses afraid to spend.”

-A Shadow Banking Crisis:

One of China’s largest shadow banks is under a microscope after they missed their payments to 3 publicly traded companies. As for the official statement, a potential informant has said that “we can’t make any public announcement now…The main reason is that we are still actively checking our underlying assets, and we are trying our best to recover the assets for you. Now if we disclose the underlying assets for a certain product, it might cause a dramatic shrinking of the assets. We can’t do this because this is being irresponsible.”

The good news is that, thankfully, it appears as though the United States has very little exposure to the Chinese financial crisis. One analysis explains that, in the big picture, it’s estimated that the US controls about $215 billion dollars of direct investment in China, along with $300 billion dollars worth of portfolio investments, consisting of their stocks and bonds.

For comparison, the United States stock market is worth $46 Trillion dollars. The entire value of our housing market is worth another $43 trillion dollars. On top of that, it’s also said that China’s contribution to US trade is less than 1% of our GDP - so, it’s also unlikely to have a dramatic effect on our consumer demand.

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