Listening carefully here, keeping context, reading between the lines, nobody wants to openly call China on their ridiculous housing market problem, which would result in a “loss of face”.
I hear so many concepts that Peter Zeihan covers, but they’re implicit.
Massive housing overbuild.
Demographics problems requiring investment in people.
Need to boost pension system - because housing/savings connection.
Central government taking investment duties away from municipalities.
Concerns China will try to export (read: DUMP) its way out of this mess.
The housing overbuild has happened in part because municipalities don’t collect property tax, they make their money by selling government land to developers. That aspect of their government was one of the most striking things to me in all this.
The scope of the overbuild, for those just tuning in, is catastrophic. Remember our financial crisis in 2008, due to a 3% to 5% overstock in housing? The lowest estimate I’ve heard (Bloomberg) for China’s overbuild is a hundred million units, or 10% of their total stock. Zeihan chased up some numbers from an Institute in Shanghai that was once definitive, but which stopped publishing data(!) and it’s no surprise why - they think the overbuild is closer to a billion, literally two homes for every one that is actually needed.
70% of personal savings goes into real estate and those properties are going to be worth a dime or two on the dollar if they are in serviceable condition. Much of their inventory was thrown up as cheaply as possible and often left incomplete due to the manner in which development is financed. A great many people who thought they were preparing for old age are … doomed.
Conclusion:
We’ve seen Putin’s Damaged Stature due to the Crocus attack. His power was a tripod:
Restoring Russia to greatness.
Enriching Russians a bit.
Keeping Russians safe.
The first two died thanks to his Ukraine adventure and the intel failure on the Crocus attack has laid bare his inability to accomplish the third. There will be few signs of trouble in Russia … then one morning we’ll awaken to a post-Putin world. He’s put a LOT of effort into thwarting opponents, but when it gets bad enough some sort of coalition will form to remove him. It’ll be unlikely individuals in an unlikely alliance.
Xi has made China’s situation is much more dire. He’s literally gutted government at all levels to the point they can’t make decisions without him being directly involved. That might work for a microstate but for the world’s second largest country? No plausible collection of civil society functions could handle that housing problem, and they have none left to even try. They import 80% of the inputs for their agriculture in addition to the food they import. When they can’t pay, things go sideways for them in a manner ten times worse than The Great Leap Forward.
China isn’t going to knock over Taiwan, we already covered that in Global Chip Manufacturing Details. If they lunge that direction the world’s response to the provocation will set a fire that will burn until 20% of their population has starved.