China's Black Swan Event is Coming
Youth unemployment rates are so bad they will stop reporting them.
Friends,
The macro-economic data coming out of China points to a potential global economy 'El Niño' event. As you know, usually recessions sneak up on us and with a resilient U.S. consumer China’s dipping recession could have global shock waves.
Corporate debt is going to have a bad 18-months globally
In China, credit data for July released Friday showed a slump in demand from businesses and households to borrow money for the future. (as per CNBC)
On August 15th, 2023 in China, the PBOC trimmed the interest rate on 401 billion yuan ($55.25 billion) worth of one-year medium-term lending facility (MLF) loans from 2.65% to 2.50. This is more basis points than is normal, signaling the dire situation.
Developer Country Garden announced over the weekend it was suspending trading in at least 10 of its mainland-China traded yuan bonds. China’s inability to recover, it’s troubling real-estate and many other significant issues with its economy are occuring all at the same time.
“The weak July credit data suggest the downward spiral of the property sector continues, and worsening geopolitical tensions add to the uncertainty,” Lu Ting, chief China economist at Nomura, and a team said in a report Friday.
China’s lapse into deflation is peculiar and could lead to more uncertainty I believe. China is struggling with a “confidence crisis” as Beijing’s delay in policy action is being perceived as “inaction” to bolster a sputtering economy. The perception is China’s downward spiral from a socialist regime to a dictatorship could be bad for its economy and other investing in China.
China’s stock market is tumbling and a lot of investors are pulling out. Blood in the streets keeps my eyes open.
U.S. President Joe Biden signed an executive order on August 9th, 2023 that would block and regulate high-tech U.S.-based investments going toward China. It covers advanced computer chips, micro electronics, quantum information technologies and artificial intelligence.
China’s wolf warrior antics are coming home to roost in late 2023 and likely for 2024. But we should be on the lookout for deals. A Chinese recession could shake the global economy in 2024 it now appears likely.
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