China's Japanification
Don't start gloating just yet ...
China is in dire straights and the arrival of the Trump administration may very well tip them into disorder. Specific issues that appears frequently on China Update include:
Demographic implosion, fertility was 1.0 last year, in contrast to the less anemic than every other industrialized country fertility of 1.6 the U.S. enjoys, and impossibly far from the 2.1 replacement level. Their pension scheme was created when 7% of the population was over sixty and the average age was twenty one. They are facing having fully half of the population reach retirement age alive.
The most conservative sources say there are about fifty million homes uncompleted and another thirty million bought for investment that are not selling, which amounts to 8% of stock, as opposed to the 3% to 5% the U.S. had leading to our subprime crisis of 2008.
Chinese bond yields are lower than those of Japan(!), which has never happened before, and the video contains one easily understood chart showing this. All other indicators say the same thing - Japanification, a synonym for deflation. Central banks can do many things to counter inflation, the demon deflation can not be exorcized, it always runs its course.
The government supports an investment lead economy, rather than export lead or market lead, and has no means for stimulating internal consumption. If you’re struggling with the three forms of leading, the U.S. had an investment lead strategy from about 1932 - 1940 - the Works Progress Administration, the Civilian Conservation Corps, and so forth.
69% of foreign companies with operations in China have packed up and left(!) Those who are right there clearly understand what is happening.
OK, great, China is one little poke away from falling right over! MAGA!
Except that the doubling of U.S. investment in factories last year is merely a good start for what we’ll need if China becomes dysfunctional, and those calculations depend on us maintaining good relations with Mexico, Central, and South America. Which we obviously will not.
Every action has an equal and opposite reaction . Pushing China out of bounds will likely leave us in similar condition, as we’re doing this in an egotistical, impulsive, populist fashion, rather than as a mindful strategy.