How China could Destroy the Fed's Great Reset.

China's growth stall will keep Global

disinflation Trend in tract or in intact

rather now this I think is also very

interesting so let's let's take a minute

here just to address China

is slowing uh substantially

China

generally grows at a rate of eight to

nine percent

it is expected to only grow at a measly

five percent

however that expectation was propped up

based on what we saw in q1 which was

relatively propped up on uh Services

spend and pent-up demand spend

and as that Fades China's economy might

not grow at five percent

it might not even grow at four percent

it might grow at closer to three and a

half percent

that could actually put downward

pressure on Commodities you could look

at futures for iron ore copper ore and

see exactly those Industrial Metals

slowing down it also puts downward

pressure on oil oil prices certainly way

lower than individuals I think expected

we're back down to pre-ukraine War uh

time frames for oil prices and while

there's talk that OPEC is once again

going to cut production uh they just

haven't announced that yet and so the

oil market so far has not reacted

terribly positively to this idea that oh

yeah definitely more Cuts coming uh

instead more Focus for oil pricing and

inflationary pricing is focused on China

and this this negative outlook for China

as much as it's bad for Chinese

individuals it's absolutely fantastic

for the globe because what you're doing

is you're literally flip-flopping what

people expected now this really excites

me because you talk to me about

flip-flopping I get excited okay but

think about this for a moment

last year

markets had this expectation that was

fallacious but they had this expectation

that

oh as soon as China ends Cove at zero

we're gonna see this massive

inflationary boom and and China's gonna

contribute massively to inflation

Commodities are going to Skyrocket oil

is going to Skyrocket manufacturing

inflation is going to Skyrocket

everything's going to Skyrocket because

of China China's reopening is going to

cast this massive re-inflation instead

what you have it had happened in q1 and

into Q2 here is this

okay China just kind of went back to

normal for the first you know five

months of 2020. uh three but now what

are you seeing and you're seeing this

consistently reports from UBS Goldman

Sachs Barclays Morgan Stanley I read

these reports regularly what I'm seeing

consistently and all of them referring

to China I'm just giving you a quick

bottom line here is they're all talking

about a massive slowdown in China in

fact Wall Street today uh via Bloomberg

discussing quote This is likely to

continue for the time being given the

situation in China after another false

start China's Outlook has taken a

negative turn real estate activity

continues to decline house price growth

is low yields have started to fall again

Imports have dropped all reflecting

stagnating demand

the typically sure fire sign all is not

well in China is when Capital outflows

pick up and guess what that is exactly

what appears to be happening rising

outflows of capital once again in China

people trying to get out of China and a

lot of the wealthier folks in China tend

to move their money over to uh wealthier

uh districts such as uh you know

Singapore or otherwise Hong Kong but uh

slow down which is the exact opposite of

what economists were projecting at the

end of last year and I remember saying

that on this channel too I'm not trying

to Pat myself in the back but I made it

very clear I thought this this oh

China's going to reactivate inflation

was just complete bull crap and sure

enough it ended up being complete

bullcrap now we're getting this complete

flip-flop I mean look at this this chart

right here shows you capital outflows

from China

uh and and how you're seeing more

capital outflows from China uh with this

over here is the outflow gauge and while

you had a recovery during the reopening

and you saw less outflows less of a

negative number we're now going more

negative again Falling Again implies

Rising Capital outflows it's crazy or

maybe it's not maybe that's kind of to

be expected and maybe this is why you

shouldn't bet against America this is

why at the end of last year when

everybody's like oh Kevin I want to

invest in Chinese companies I'm like

the only exposure I want to Chinese

companies is via American companies

that's it that's the only exposure I

want I will not invest in Chinese

companies I don't trust Chinese

companies because I don't understand

China

I don't understand their accounting I

don't understand their books they don't

trust their books

I'm not interested in China with Beyond

how I would trust American companies to

go figure it out and that's not to say

all American companies are angels just

to say I think they're more Angelic

anyway so if reserves are not growing

despite China running a large Trade

Surplus this tells us Capital outflows

must be leaking abroad this also

explains the yuan's depreciation the

fact that China has not been leaning

against the waking currency tells us

that they are allowing it to decline as

a pressure valve to decrease capital

outflows

trying to slow down will keep the

pressure off global commodity prices

therefore allowing Global disinflation

to continue

and then of course you know there's

always got to be like the clickbait part

for the article however watch for signs

when China is likely to re-stimulate

potentially in a flood-like manner a

sign for when the disinflationary trend

could reverse in other words if China

turns on the money printer again

uh yeah I mean I suppose it's entirely

possible that

China could uh could uh turn the money

printer back on

uh but yeah

you know again investing in China is is

not the most exciting idea right now in

fact you have uh more of a risk to a

downside in China uh though again much

like we talked about stimulus

potentially coming to the lower income

cohort in America

you're likely to get more stimulus in

China however remember the history of

inflation or stimulus in China

China tends to stimulate property

developers and corporations not

individuals uh here's another piece in

in Bloomberg talking about European

stocks with high exposure to Chinese

markets are counting on further policy

support from Beijing to reinvigorate

their gains the trouble is the prospect

of major stimulus appears poor since the

Lunar New Year holidays in late January

baskets of European shares with sizable

income from the country have lagged

behind the stock 600 the Euro stocks 50

generates one-fourth of its Revenue in

Asia this is pretty common of a lot of

American companies as well like Nvidia

one-fourth of its revenue is actually

specifically from China

certain sectors China China has become a

vital source of demand for such as

minors and tech companies some tech

companies relying on China for as much

as half of their revenue among

industrial Auto and luxury spending

stocks the share is around 15 to 30

percent and almost all of the latest

data points pointed uh Point uh or

indicate rather that China's economic

comeback is sputtering

yes

yes

this is exactly correct but again it's

not a bad thing if you are here in

America or in Canada or in Europe you

should look at what's happening in China

and say thank you thank you for cons

contributing to Global disinflationary

pressures that is good that is a good

thing to avoid a tighter fed in a

recession remember folks Jerome Powell

does not want to force a recession if he

does not have to right now it does not

appear we need a recession to get

inflation down yes it is possible that

the FED has overtight so far we're not

seeing indicators that is true so

again you know I'm I'm yes it's so funny

again somebody left me this comment the

other day and I don't know why it's

bothering me so much but they're like oh

well you're just a permeable and I'm

like who's the first Finance YouTuber to

flip-flop I flip-flopped so freaking

fast people are like you couldn't

possibly have flip-flopped in the span

of 48 hours I'm like no I did and here's

why I mean I went on multiple interviews

explaining why us you know I was so

fearful of what was coming and why

flip-flopped

and uh nobody wanted to hear it

but uh but but yeah I mean unfortunately

it wasn't popular to be a bear now it

wasn't it was not popular to be a bear

in January of 2022 when I was a bear

now ironically it's not popular to be a

bull you know people are more bearish

it's just like ah to some extent though

I kind of like that because you know if

you're doing what everybody's doing

you're probably

Doing It Wrong

uh that's that's just the contrarian

point of view though so it's not always

the case but it's it's uh one of the

indicators so anyway uh this trying to

slow down fantastic again for um for

inflation here's another piece actually

uh what is this China is rolling out the

red carpet for Global Business Leaders

like Jamie dimon and Elon Musk that's

true both of them just talking in China

and and pitching How Great China is even

Apple like we're not trying to decouple

from China you know we're just putting a

little bit of a production somewhere

else

uh chief executive is from JP Morgan and

Tesla both met separately with senior

Communist Party officials this week he

gets a backdrop of tumbling Chinese

markets and disappointing economic data

you know this was another thing I talked

about as well

China people are like oh China's gonna

you know punish Tesla no they're not

you know when you look at the Chinese

the South Chinese post whatever it's

called Uh look at their their I have

their iPad app like them every day

almost every day I think it's funny

because it's

it's pretty much Chinese propaganda

written in English it is a Chinese

sponsored News website

state sponsored and I love it because it

basically tells me

what this the the the the Communist

Party of China thanks

and they basically just get on their

knees for Elon Musk

I'm not trying to be offensive I'm just

trying to be realistic they use Shanghai

as a bragging right because think about

it if you can go to Apple and say look

we know you guys are going to India and

you think you want to set up

manufacturing infrastructure over there

how about we uh also get on our knees

for you and help you build a new Factory

over here in China

because we really need it what can we do

to convince you to get over here that is

the kind of stimulus that I expect China

to continue with

hot people stimulus company stimulus if

you want corporate welfare

China

members of the Chinese powerful

politburo also sat down with Executives

from Starbucks in recent days with top

ministers welcoming leaders from

investment firms and other semiconductor

firms Nvidia Jensen Huang also made a

CEO also is heading to China this month

according to people familiar with the

matter he was just in Taipei flurry of

Engagement comes after an Espionage

probe into expert consultancies used by

firms to operate in China spooking

foreign investors but Xi Jinping calling

on protecting industrial security as a

priority of priorities

okay

nervousness around anti-foreigner

sentiment comes as China faces a

sluggish post-pandemic recovery

reporting weak manufacturing and export

data as well as a property slump

geopolitics has also made investors wary

as U.S President Joe Biden leads a

global campaign to block China from

high-end ship manufacturing via the

chips act though Joe Biden did recently

talk about this cooling potentially

coming in relationships or thawing of

relationships coming between China and

the United States makes you wonder can

Biden go to China you know like uh Nixon

goes to China kind of thing foreign

direct investment FDI in China has also

plummeted with investors pulling 30

billion out in the first quarter and

that's foreign investors you know we

have more outflows uh when when you look

at even just individuals within China

the MSC msci China index is down more

than 50 from its 2021 Peak Chinese stock

market not doing that well you know

today either this year and this

resumption of global Business Leaders

engaging in person with Chinese

officials uh is is reminiscent of a

friendlier era uh AF really from before

the pandemic in this three years of

isolation and lockdowns you've also now

got political leaders like Olaf Schultz

of Germany and the ECB president ER

Ursula Von deliren uh using recent trips

to China to press Beijing on hard topics

such as territorial claims on Taiwan

this is actually kind of important a lot

of people think China is going to invade

Taiwan China has got an economy to worry

about folks their economy is not strong

enough to invade Taiwan and while they

might wave the saber so to speak they

would absolutely destroy their Global

standing and they'd become ostracized

like a like a Russia and be so stupid to

invade Taiwan uh and and I know that

makes for a good clickbait

but it's just nonsense I I it's it's not

something that I I build into my

forecast as a base case I could be wrong

but uh it just seems nonsense especially

with the position China's economy is in

now they remember what they talked about

in their Chinese Communist party uh um

Congress which happens every five years

they literally talked out of both sides

of their mouth you can't make this up

they're like I'm gonna paraphrase here

capitalism is great we still believe in

socialism but all capitalism is actually

really nice socialism is great don't

worry we still believe in common

Prosperity but oh capitalism it's

actually a great thing

uh you could read you could read the

translations of of the uh party Congress

statements and you'll see what I'm

exactly what I'm talking about I find it

uh very interesting

so uh that that gives us an update on

China