China’s Economic Woes Are America’s Investments

Crossville TN

Description

BlackRock wants market access to China’s huge but troubled economy, putting the Chinese Communist Party in a position to manipulate BlackRock and Wall Street. The company recently became the first foreign-owned company allowed to offer a set of mutual funds and other investment products for Chinese consumers. China’s Economic Woes Are America’s Investments First, take a step back. Chinese stocks have performed terribly in 2021. The Chinese economy is slowing, and the country has substantial underlying problems. The population is aging fast. Meanwhile, the property sector is in trouble. Because of China’s state-run banking system, which underpays for deposits in order to subsidize loans for state-owned companies, and because of a lack of trust in China’s public markets, Chinese consumers have plugged money into property to amass multiple condos and flats. A large chunk of the sales in the last year alone were for “investment” purposes. In other words, it is extremely common for middle-class Chinese families to sit on a half dozen flats or condos as a retirement asset, hoping to pass these along at a higher price when they need to raise cash in retirement. This type of behavior and market structure is unstable. Chinese residential property is a $60 trillion asset class — the biggest in the world — and activity related to the property sector contributes to nearly a quarter of Chinese economic activity. China’s overall corporate sector sits on a massive debt load relative to the size of China’s economy. You’ve heard about this in the news if you’ve heard about Evergrande, but this is only one of many troubled property developers. As China’s government confronts these problems, the government is also cracking down on industries and launching anti-monopoly measures, especially where the investors who lose out are mostly Americans or other foreigners. China’s industry crackdowns have been abrupt and sudden, and American investors have been taken without warning. At the same time, many other Chinese companies have been subject to accounting scandals — a result of poor accounting standards in China and China’s unwillingness to allow their companies to be subjected to American accounting standards, despite these companies having many American investors.