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Sometimes it feels like all we do is talk about China.

We started off talking about Evergrande and the Chinese property market, and that story is playing out now.

Some kind of default is inevitable.

It's already underway...



China's property crackdown has been successful so far (from the perspective of the policymakers), but I can't shake the feeling that this is only the beginning of the pain to come...

The Wall Street Journal offered a snapshot yesterday of what lies ahead...


At the Bank of China, the impaired loan ratio for real estate stood at 4.91% in June, compared with 0.41% a year earlier. So far, it looks manageable but it would become a much bigger problem if falling prices or a weaker job market start to hurt mortgage repayment.
Real estate, construction and mortgages accounted for 41% of the BOC’s loans in mainland China, for example. The housing boom has fueled an enormous rise in household borrowing: it stood at 62% of gross domestic product as of June, compared with 44% five years earlier.

Macrodesiac News Channel
What if China’s Property Crackdown Goes Overboard Too? The escalating crackdown in tech draws attention, but the bigger risk is that the new regulatory enthusiasm tips over a more familiar target Mortgages have also become more expensive and take longer to be approved. And this year, some cities h…

It's early days in China's deleveraging and economic reform cycle.

And there are just soooo many parallels to Japan that shouldn't be dismissed too easily...


"History doesn't always repeat but it often rhymes"

Have a read of this screenshot...



It's nothing to do with China.

Nope. This is from the 'Princes Of The Yen' documentary covering Japan's fall from grace...

The whole documentary is worth a watch.

It's a little on the conspiratorial side, but you can easily track the many parallels between Japan's booming economy in the 80s and China's rise in recent decades...

This clip starts right where I think we are now with China...



Asset prices have stopped rising, window guidance hasn't been abolished although the central bank have cut credit growth for 'the rest of the year'...

Bankers left 'helpless' and complaining that they don't know how to make lending plans any more? Coming soon...

What's next?

Non-performing loans, defaults, and banks too fearful to lend.

Fear of what?

Fear of loss, and fear of angering the powers that be...

Then... asset values fall further, homeowners feel poorer, consumption goes down, unemployment goes up, and the credit crunch compounds...



Rate cuts are likely to follow the downturn, alongside predictions of economic recovery.

We've already seen in Europe & Japan that low rates are no guarantee of a strong economy...


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Investment titans are weighing in to the China debate... 👇


BlackRock Says ‘Invest in China’
BlackRock say that the world’s second largest economy is no longer an emerging market. Older people are deflationary And a Love Island/Basement Jaxx economic mashup!

Soros disagrees, and thinks that BlackRock are selling a bad investment...


Opinion | BlackRock’s China Blunder
Pouring billions into the country now is a bad investment and imperils U.S. national security.

The firm seems to have taken the statements of Mr. Xi’s regime at face value. It has drawn a distinction between state-owned enterprises and privately owned companies, but that is far from reality. The regime regards all Chinese companies as instruments of the one-party state.
This possible misunderstanding could explain BlackRock’s decision, but there may be another explanation. The profits to be earned from entering China’s hitherto closed financial markets may have influenced their decision.
The BlackRock managers must be aware that there is an enormous crisis brewing in China’s real-estate market. They may believe that investment funds flowing into China will help Mr. Xi handle the situation, but the president’s problems go much deeper. China’s birthrate is much lower than official statistics indicate and Mr. Xi’s attempts to increase it have made matters worse.
The president recently launched his “Common Prosperity” program, which is a fundamental change in direction. It seeks to reduce inequality by distributing the wealth of the rich to the general population. That does not augur well for foreign investors.
Pouring billions of dollars into China now is a tragic mistake. It is likely to lose money for BlackRock’s clients and, more important, will damage the national security interests of the U.S. and other democracies.

BlackRock responded indirectly, telling CNBC that its China mutual fund subsidiary set up its first fund in the country after raising 6.68 billion Chinese yuan ($1.03 billion) from more than 111,000 investors.

Dalio still sees opportunity too...


Ray Dalio Says China Opportunities Can’t Be Neglected
Billionaire investor Ray Dalio says China and Singapore can’t be neglected, pointing to his personal investments and family office philanthropy commitments.

And here comes the litmus test 👇👇

This is from the 1987 Foreign Affairs magazine...



"The Japanese are once again girding themselves for a new era"

Sounds familiar, right? All here 👇👇


The Coming U.S.-Japan Crisis on JSTOR
George R. Packard, The Coming U.S.-Japan Crisis, Foreign Affairs, Vol. 66, No. 2 (Winter, 1987), pp. 348-367

Fast forward to the present day and Foreign Affairs are still on the ball...


Xi’s Gamble
Xi has placed China on a risky trajectory, one that threatens the achievements of his predecessors.

Xi is willing to forgo a boost in China’s international financial prestige to protect the party’s interests and send a signal to business elites: the party comes first. This is no David and Goliath story, however. It’s more akin to a family feud, given the close and enduring connections between China’s nominally private firms and its political system.
Indeed, nearly all of China’s most successful entrepreneurs are members of the CCP, and for many companies, success depends on favors granted by the party, including protection from foreign competition.
But whereas previous Chinese leaders granted wide latitude to the private sector, Xi has forcefully drawn a line. Doing so has further restricted the country’s ability to innovate.
No matter how sophisticated Beijing’s regulators and state investors may be, sustained innovation and gains in productivity cannot occur without a vibrant private sector.

Maybe it will be different this time...



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It turns out the Fed DO buy stocks, just not in the way you might think...
👇👇👇


It might be legal but you should still be pissed
Ah... That time again. That time when we realise that everything is just a massive con. Robert S. Kaplan, Dallas Fed President, has been caught buying and selling stocks through 2020. This is no real shock, considering he was at Goldman for many years... The problem lies when you recognise

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