China is likely headed for a lost decade and won't 'eat our economic lunch,' former IMF official says

[onthedarkside]

 

China's economy is likely headed for a so-called lost decade akin to the slump that hit Japan three decades ago, according to a former International Monetary Fund official.

 

After rebounding strongly early this year from the end of COVID restrictions last year, more recent indicators have pointed to sputtering growth. 

 

In an op-ed in Barron's, Desmond Lachman attributed much of that to the bursting of China's housing and credit market bubbles, noting that Japan experienced a similar bust in the 1990s.

 

https://markets.businessinsider.com/news/stocks/china-economy-lost-decade-global-growth-driver-xi-jinping-gdp-2023-6

 

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Xi inherited a strongly growing economy thanks to the policies of his predecessor to step bank and let free enterprise flourish. I know that's a simplification but the fact is that the Chinese govt was far less intrusive in the commercial and previous policy than it is now. Not only is the government inserting political apparatchiks into businesses, but it's also requiring them to contribute cash to prop up unprofitable state enterprises. Once again, the government sector is bigger than the private sector.

The size of China's debt problem is truly staggering. At last measure, debt of all sorts – public and private and in all sectors of the economy — amounted to the equivalent of $51.9 trillion, almost three times the size of China's economy as measured by the country's gross domestic product.

https://www.forbes.com/sites/miltonezrati/2023/01/16/chinas-overwhelming-debt-burden-points-to-still-deeper-problems/?sh=2001ac9b4433

Much of this is due to the government's overreliance on the construction boom in the real estate market. At one point, 37% of economic activity in China was in construction. That's huge. It's about the same as in the US. But US private debt is in a lot better shape than Chinese private debt given that much of China's debt is in the overbuilt real estate sector.

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Just a further note on Chinese debt:

China’s debt overhang far exceeds the burdens facing the United States. As recently as 2020, total debt in the United States relative to GDP exceeded China’s. But as of mid-2022, China’s relative debt burden stood 40 percent higher than America’s. If this comparison does not highlight China’s precarious situation, it is worth considering that more developed countries, such as the United States, tend, because of their greater relative wealth, to have higher relative debt burdens and can support them more easily than less developed economies, such as China’s.

https://www.forbes.com/sites/miltonezrati/2023/01/16/chinas-overwhelming-debt-burden-points-to-still-deeper-problems/?sh=2001ac9b4433

[Pink Mist]

Something else to consider

 

https://www.realclearmarkets.com/articles/2023/06/09/recession_in_china_first_followed_by_the_world_939645.html

 

As the global economy hits recession, that recession hits China before boomeranging back around the world. Real estate woes there and everywhere become damaged systemic avenues walling themselves off from every possible angle of further trouble. Calling it de-risking makes it sound almost benign when it is anything but.