Myth of China: Why the world is wrong
I am becoming (always have been) extremely skeptical and irritated with the continuos rambling that China will bail out the world. Oil demand falling? China will drive the demand. Tesla going bankrupt? The Chinese will buy Teslas/EVs by the thousands. Can't get Canadian oil to US market? Build a pipeline to the Pacific to fuel China. Growth has to come from somewhere, and the lazy assumption has been that it will be from the East. I cannot count how many commodity strategists get on CNBC and rant about how the amazing ability of China to implement EV usage (as if EVs are the perfectly clean and consequence free alternative to evil fossil fuel eating vehicles, and as if the average Chinese citizen can pony up US$130,000 for a Tesla ("ya but the Model 3 is gonna be US$30,000"... not a chance, STFU)) and resultantly pump their bear case for oil. The license plate lottery system in Shanghai/Beijing/other large centers gives a higher success rate for EVs, but only the elite (small % of Chinese consumer) can afford a car in any of these cities.. I digress.
After the GFC, China has essentially bailed out the Western World. The Chinese government 'stimulated' their economy with a ~US$600T package in 2008-09 and essentially carried the rest of the world with 10% yoy growth rates. Endless property and infrastructure building, bubbly consumer demand, etc. Why havent we seen this before? No economy in history has been so stupid as to completely blow up the bubble to the point of complete destruction. We haven't seen anything like a bubble of this size. Why does this matter to the next generation of young bankers? Because the whole financial world will be shaken.
The facts: 1) China is extremely financially fragile and does an incredible job of obfuscating statistics and general facts about its economy/society. Look no furthers than their presentation of economic numbers. Westerners have a hard time believing that such a large and important government could be straight up lying.. Well, wake up, because they are playing you like a fiddle.
2) This is all driven by the belief of the communists in Beijing that Western Society (and its basic values such as transparency, helping your fellow man, honesty and integrity) is weak, and that the system can be played. The Look no further than IP theft.. The establishment elite in the West have gotten away with this because they need someone to keep the game going. This has all been exposed from others like Kyle Bass, Bannon, etc. (nothing new). My concern has to due with the fact that people don't want to think deeply and admit their whole mental structure of endless Chinese demand is completely WRONG. This is not about the Chinese people, but their communist overlords. The sad fact is that the average Chinese man/woman has no power to stand up to the powers that be. They have no choice, and will likely be the ones who suffer the consequences of this mismanagement. When it boils down to it, anyone with wealth in China wants to get the F*** out. Why else does Beijing limit individual cash outflows to US$50,000/year?? No one aspires to move to and build a life in China, and this is core of any long term economic growth.
2 predicted outcomes; China has a full scale financial collapse and RMB deval within the next 3 years, (just like Japan before it; the stories are identical), and this triggers a world-wide downturn. Tailor your portfolios accordingly.
Now that I have possibly triggered you, tell me why I am wrong! Curious to know if others are having similar misgivings, or if you monkeys think very deeply about this topic in general.
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