China’s ENTIRE Economy Is About To Collapse | Double Dip CRASH.

China's economy losing further momentum

okay they are out and oh wow oh not good

all right China's slowing down of course

affectation affects the world our

country's going to hell this is supposed

to be the year that China's economy came

roaring back what we've had instead are

signs that this economy is struggling

holy smokes a China's deflationary crash

could spell not just recession and

depression for China but also

potentially recession for the world in

America Janet Yellen our treasury

secretary is calling this a big risk

Donald Trump is worried about the United

States dollar collapsing and

presidential candidates like Vivek

ramswami suggests that China is being

pushed closer to nuclear war with

America we have a lot to cover and in

this video I'm going to talk about

what's most at risk where the

opportunity it could be and what to

think about everything that's going on

congratulations man you have done so

much people love you people look up to

you Kevin path right there financial

analyst and YouTuber meet Kevin always

great to get your take first what's

going on well let's catch you up on that

because there is a lot going on to get

started consumer prices are down 30

basis points that is not that big of a

number right but what matters is the

sign it's a negative it is the first

negative read in two and a half years 28

months to be specific and that's a big

deal for China food deflation especially

pushed us towards deflation in the last

inflation report from China which you

should absolutely be taking with a grain

of salt because the numbers are probably

worse than they actually appear in the

Chinese documents but what's notable is

that pork purchases and pork prices were

down 26 percent that might not seem like

a big deal to those of us in America but

in China it's worth noting that China's

often the world's top pork producer and

pork is a big deal in the Chinese diet

so to see pork prices down 26 percent

implies something that might be more

than just temporary inflation of course

Chinese data suggests that hey well core

and services are still moving fine at

point eight percent so maybe it's too

early to tell that China has with

certainty fallen into deflation in fact

it's leading some Publications to go as

far as calling the deflation that's

happening in China

transitory now I did contort the

headline a bit it's actually a financial

times headline that suggests that

Chinese deflation is likely to prove

temporary but let's just say I have a

suspicion it's going to end up being a

lot larger and a lot longer lasting than

anybody is expecting mostly because of

the real systemic issues in China's

economy many of those which we're going

to talk about right now but before we

hit some of the banking crises and real

estate crises that are now flaring up

even worse it's worth looking Beyond

just the inflationary numbers and

understanding that production is at a

negative 4.4 percent read exports are

down 14.5 percent Imports are down

12.7 retail sales in China are also much

weaker than expected at two and a half

percent versus the larger numbers we've

had in previous months and the four

percent we were expecting

on top of this you've got a massive debt

problem when you combine household

corporate and government debt you're

sitting at total debt in China at 281

percent of their gross domestic product

this is not to be confused with just

dividing government debt by GDP that is

of course a smaller number this is

adding everything together and the

reason we're doing that is because it's

everything corporations households local

governments the big government the CCP

all of them have too much debt

unfortunately when you have more debt

you end up being able to invest

substantially less money when you'd

actually like to the most you'd like to

invest when prices are low but if you

have too much debt your payments are too

high the local governments can't invest

in local infrastructure and you actually

end up exacerbating the problem rather

than taking advantage of lower prices

that's the problem with bubbles

everybody invests the money they have as

things are going up up in a way as in a

bubble and then as soon as prices come

down they don't have money to actually

invest when prices are low before we

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kevin.com thanks so much so those are

some of the underlying problems in China

but now we're starting to get 2021

problems back yet again leading some

like JP Morgan to write the following

Chinese housing set for double dip crash

our property analysts are revising down

their full year forecasts wait a minute

what happened here so what's worth

noting is that Chinese property values

plummeted in 2022 as much as 40 percent

especially as many of the ghost cities

in China ended up vacant and the

companies ended up bankrupt as many as

40 percent of Chinese housing developers

have ended up missing payments or going

bankrupt that is a massive number of

companies but things seem better in 2023

since in 22 23 where we're comparing to

that hole in 2022 that is prices fell

down in 22 and then kind of started

rebounding in 2023 and so you look back

you're like oh look prices are up 10

year-over-year that's great after being

down 30 to 40 percent okay fine some

recovery but wait a minute now things

are trending down again and one of the

reasons things are trending down is

because the Chinese consumer has given

up we had a surge of spending in January

of 23 as coveted lockdowns were finally

released or ended we finally had our

Chinese New Year celebrations and there

was hope that China would become so

productive this year that to some extent

Not only would it rise Global GDP but if

anything it would actually potentially

risk the chance of inflation Rising

globally which is of course not

something we would hope but we would be

able to grow and have growth to prevent

a recession which is ultimately what

everyone one in the world wants to avoid

a recession that leads to layoffs

joblessness and more bankruptcies

because recessions are painful don't get

me wrong prices going up are painful as

well some inflation is

preferred though over a recession that

is why we have an inflation Target at

two percent and not zero because we'd

rather have a little bit of inflation

than have a recession now of course we

definitely need to have less inflation

than what we've had especially since

inflation is cumulative after all prices

have gone up substantially but what's

now happening in China well remember

this China's real estate economy is

about 30 percent the size of China's

entire economy that's about one-third so

one-third of every dollar in China's

economy real estate in the United States

it's about half that only about one in

six dollars and unfortunately we're

looking at defaults consider what's

happening with Country Garden Country

Garden survived the first wave of crisis

in 2021 but now it's missed coupon

payments and it's negotiating extension

plans with those who have invested in

Country Garden debt this is not great

because it could be the signal of the

start of that double dip housing crash

in China

what's worse is we thought evergrand was

bad ever Grand by the way just filed

chapter 15 bankruptcy in America that is

for its U.S related debts it's already

been a bankrupt company as it failed two

years ago so it's kind of like old news

we've seen it coming but they did just

file chapter 15 just yesterday in the

United States but what's worth noting is

that Country Garden was building as many

as four times the amount of properties

and homes that ever Grand was that

doesn't necessarily make them bigger but

amount wise Country Garden is a massive

developer in China now you're having

serious concerns with a potential double

dip housing crash which more housing

pain leads to less consumer wealth we

know this because Robert Schiller who's

a famous economist famous for of course

not only his research but also the case

Shiller index as well as other

predictions Robert Schiller has made it

clear that it's not so much stock wealth

that leads people to spend more or less

than normal person or the average person

spends more or less based on the value

of the home that they own the same is

true in America as in China now In

fairness in China 90 of real estate is

actually owned by the CCP but that's of

land buildings are sold it to

individuals and when you have a let's

say you have no ownership of land and

your building is now losing value in a

housing market crash to where you're

looking going well don't own the land

the part that I own is losing so much

value it tends to lead to some inward

lookingness in other words people

spending less money but not only are

people spending less money because of a

potential housing crash they're spending

less money because they have less money

to spend compare China's consumer

stimulus to what American is received

Americans were locked down for like

three to six months okay in some lame

States up to a year in China Chinese

were locked down for up to three years

what do we have in America an average of

six thousand dollars of stimulus per

person China on average five hundred

dollars so in America we got

12 times the stimulus being locked down

one third as long

and now other companies are starting to

burn their customers in China as well

consider for example the company zhongzi

Enterprise Group this is uh generally

deemed to be a shadow Bank where you

deposit money at this Shadow bank it's

an investment company they're a private

manager of about 137 billion US Dollars

I've converted the currency uh and this

company has halted payments to thousands

of customers on some of their higher

yield products where they were promising

yields about twice as much as what local

banks were offering and usually with

higher yield comes a risk but let's just

say what we don't need in China now is

more bankruptcy restructuring and

collapse if that's exactly what we're

getting in fact behind the scenes this

company has already hired KPMG to likely

start their restructuring process

they're also likely to dump Assets in

the way of basically liquidating so they

can finally make their Ponzi payouts

this is a problem because then it lowers

asset prices more stocks falling more

real estate values falling and

unfortunately the more stocks fall in

China the more desirable they get for

foreign investors to potentially buy the

dip on Chinese stocks rather than

American stocks it's all connected so

something gets really really cheap in

one area people flock to that rather

than potentially American stocks which

means potentially lower American Stock

valuations as well but things are so bad

in China that now you've got the police

calling customers of this company the

shadow Bank warning them not to protest

at the same time the police is setting

up aluminum fencing not chicken wire

like seriously strong aluminum fencing

around this company to prevent it from

being attacked by the people who are

frustrated that their promised payouts

aren't coming but then again this is

communism for you it's literally like

the thought police they're calling you

up just because you are thinking about

protesting telling you not to and that

you'll be arrested if you go protest

because ultimately with too much protest

comes a loss of government power and

that's exactly what the CCP Communist

party is afraid of now we'll see this

company the shadow bank has filed uh

statements on Friday that they've missed

payments and that they're working with

their customers especially next week on

coming up with some kind of resolution

for making these payments again but a

lot of folks are saying look lower stock

market housing market Falling Again

country garden going under the shadow

Bank starting to not be able to make

payments and consumers not spending

anymore this is the perfect setup

for a double dip crash in China and

unfortunately it is going to have

massive implications throughout the

world

this is at least for now why foreign

investors have dumped a lot of stock so

far in China now and know that can be

confusing because I said hey if Chinese

stocks get cheap enough other people

start buying in China instead of America

this is true well right now we're still

in the fall and since January

7.4 billion dollars in foreign purchases

have been reversed and that's because of

falling confidence that China is

actually going to be able to prevent a

real crisis here even Michael burry sold

his Alibaba stock which he was Shilling

for a long period of time so

Where Do We Stand now well we actually

stand at a real problematic Crossroads

because not only do you have a lack of

savings massive amount of debt

especially local debt and high youth

unemployment in some counts over 25

percent maybe closer to 20 if you

believe the official numbers but now

even those official numbers are being

yoinked that is China won't be providing

them anymore amplifying the distrust in

the CCP that individuals already have

but the government is stuck between a

rock and a hard place in China why

because get this the more China starts

stimulating and China prefers corporate

stimulus you end up getting more power

amongst those corporations consumers

aren't getting the stimulus maybe that

would be a good idea but they're not and

so far China is really just talking

about lowering rates which they just

announced and maybe some more top-line

stimulus trickle-down economic style but

China has a real fear that if you

empower the corporations like Jack Ma

and ant they will end up vocalizing

their discontent with the government

becomes so powerful that they could

potentially overthrow the government so

the CCP has to walk this fine line

between stimulating but not over

stimulating because then they might lose

power but this is where you end up

walking a even more dangerous line and

this is where the problem of deflation

sets in ready for this

once you are in a cycle of deflation

people distrust the government so much

that even when you receive stimulus you

don't end up spending it this is when

you get to the failure of monetary

policy this is what happened in Hungary

and turkey where you have the monetary

side printing money but nobody's

spending it so you're actually staying

in recession or in deflation

while you're printing money and

increasing your debt burden that is how

currencies fail that is how governments

fail that is how you create a

deflationary spiral why is the

deflationary spiral bad think about it

companies stop hiring

when companies stop hiring they stop

being able to pay people as they stop

being able to pay people people get laid

off people who are laid off can't spend

money people who don't spend money lead

businesses to have to lay off more

people and spend less money and this

leads to ultimately less Innovation

lower GDP for the long term and

potentially a lost decade much like

Japan had where you essentially have

this extended recession slash depression

and you actually can't print your way

out of it Japan has been having this

issue they've been printing money hoping

to get out of this problem but they're

not able to get out of the problem this

is why Citigroup is now arguing that

China is on track to basically japanify

okay maybe that's not the perfect word

to use but China's future growth

prospects may be decelerating more

sharply with growth enhancing structural

reforms looking elusive we argue that

China is on track for japanification

based on policy responses delivered so

far now China does have more groom to

grow than Room to Grow than Japan did in

the 90s but its productivity growth may

be slowing more sharply undermined by

the dominance of the state that's the

power of the state above and beyond the

corporation geopolitical headwinds drags

associated with middle-income economies

basically people being fearful to spend

and China's demographic profile now

deteriorating faster than Japan's did

with a much lower level of per capita

income in other words a slowing a

slowing population growth if anything a

declining population and number an aging

population and those things happening

worse than when it happened in Japan

post their bubble all of this has led to

some pretty crazy pieces take a look at

this one foreign affairs the end of

China's economic Miracle how beijing's

struggles could become an opportunity

for the West now I've highlighted some

things in here that I'd like to point

out the decline of China's durable goods

consumption and private sector

investment rates to a fraction of their

earliest levels and by the country's

surging household savings rate reflect

the long-term loss of faith that people

and companies have in the Chinese

government and the country this

unfortunately creates very deep problems

it's worth noting that currently the

savings rate household savings rate as a

percentage of GDP has risen to 50

percent it's 17 in America now for a

moment you might be thinking oh all

people are saving more money that means

they have more money to spend right

maybe but they're fearful to spend

that's the structural problem some are

now calling this an economic case of

long covid like economic long covet and

that's because fear is coming in now

it's of course reasonable to be fearful

I mean they say here in the face of

uncertainty and fear households and

small businesses prefer cash savings to

a liquid Investments as a result growth

persistently declines now what kind of

cash well actually the most desirable

would actually probably be the dollar

for China now there are capital

restrictions you could only save about

50 000 USD but given that the per capita

income in China is less than 50 000 USD

per year and you're not going to save

every dime this probably isn't a big

deal for 99.9 of Chinese it's probably a

bigger deal for uh people who are

wealthier but for the average Chinese

it's probably not such a deal and you

could practically save money in US

dollars

or potentially crypto but crypto is

going to be obviously a bit more

volatile so potentially less likely of a

choice for Chinese in the environment

that we're in today instead people sit

on the cache so they can get their hands

on in the past citizens used to believe

hey look as long as I don't get into

politics no problem but unfortunately

following what happened with Jack ma

people are fearful that everyone is at

risk and remember what happened during

coven during covid somebody ended up

with covet in your area guess what you

had robots start flying around robotic

drones shouting with megaphones to lock

everything down and stay home and then

you're arbitrarily left without income

stimulus or customers for your business

for months at a time thanks to the way

the Communist Party handled lockdowns so

of course you're going to have some fear

when your government can pull this off

but on top of that people's lack of

spending is driven by the belief that

people are at the mercy of the

government's whims of a real estate

bubble and fears of over-regulation

fortunately we still have a lot more

freedom in America although people are

beginning to doubt that as well now it's

also worth noting that policies can be

enforced arbitrarily that is it's not

even equal application of the law for

everyone in China A lot can be driven by

the party's will which actually sounds

very familiar to some of the problems we

have in America where a government party

or an autocratic regime chooses to

enforce laws against certain people and

not others well once you lose that

confidence in average people really

difficult to win that back that's

unfortunate for China because it's

happening not just in one part of one

party but it's happening across the

board this could lead to a decades long

drag on productivity and economic growth

in China and when another Global

recession hits unfortunately China isn't

going to be able to help now foreign

affairs believes that the best thing the

United States could do was actually

trying to accommodate China by being

less restrictive and getting some more

investment going into China and

encouraging uh you know maybe

intellectuals from China to come to

America easing immigration policies and

actually coordinating the economies more

that would actually play into Kathy

Woods argument that hey China can export

lower inflation to the United States

because we could take advantage of lower

prices

but our government today seems steadfast

on the idea of separating itself from

China and putting more barriers between

us and China that was true during the

Trump Administration it's true now with

the Biden Administration both

administrations were very fight China

and Thai China This Is Not Great and of

course some things we should definitely

Harbor for ourselves like our artificial

intelligence Technologies and some of

our best military secrets and plans for

the best weaponry and planes and

otherwise of course that is one way that

we can maintain some of our National

Defense to the extent that we have

National Defense

but what does this really mean in terms

of what's next well some say this could

all be a blip that China will recover

soon enough

others say no China's actually going to

have to go through a massive debt

restructuring a big reset and only

through a big reset can you actually end

up regaining people's trust maybe you

even need new politicians in China

though that's probably only going to

come through serious revolt and that's

actually dangerous because it makes

nuclear war a possibility the more

China's economy falters the more

dangerous the CCP becomes as it tries to

grasp on Power and especially as they

relate more to Russia as a way to

balance out the West there is a greater

risk of nuclear war with China the worse

their economy gets Ray dalio says in his

book principles that there are a few

ways to have a debt restructuring you go

through austerity which Europe went

through post 2010 you could ask people

to basically cut what they're expecting

to get back from the government take a

haircut on their loans you could

redistribute wealth to the extent that

they already haven't done so you could

print money but that doesn't work if you

have an already weak currency and people

are in a deflationary mindset or you can

boost productivity which is probably the

best thing to do and it's what America

does America can boost productivity and

boost its GDP and Escape some of the

deep debt problems that we have

hopefully knock on wood that's the goal

China seems like a less convincing story

for real productive gains that is

actually scary because it does mean that

China could be a sandbag for Global GDP

much longer but in addition to War what

else is an issue well earnings consider

that 25 of Nvidia AMD

revenues come from China consider a

large percentage of production that's

completed by Tesla in China around 45

percent now they use China as an export

market so maybe that's a way to take

advantage of some disinflation but

Starbucks apple Nike Under Armor Coke

and many more companies rely on revenues

from China

a decline in sales here could offset the

strength that the American Consumer is

showcasing leading even America into a

recession this is of course leading a

lot of folks to avoid investments in

China and sell-off investments in China

in the short term but eventually that'll

lead to by the dipping in China which is

also a drag on the U.S stock market

so what else do we consider well

consider that

there's a velocity of money globally

that occurs when India and China trade

less India has less money to invest in

American companies trying to invest in

India the same is true for other

countries around the world China is a

big anchor to the global economy so a

great reset in China is going to be

painful for the entire world it could

end up being an opportunity for the

United States if our economy grows

enough but we're going to have to grow

so strongly and so rapidly that we

actually offset their anchor that is

going to force the Federal Reserve to

cut interest rates sooner than they're

currently leading on in other words more

pain in China more likely rate Cuts

sooner

but in the meantime be careful making

bets on China because we just don't know

where the bottom is yet

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