China’s crisis risks triggering a ‘global meltdown’
This is ‘the biggest story in the world right now – everything else is secondary’
Is the world finally waking up to China’s economic emergency? There are certainly signs of a looming catastrophe. One headline, in particular, caught the attention of China Factor.
In stark prose, it trumpeted, China set to trigger global meltdown – ‘we’re ignoring the biggest story in the world.’
Caught up in a deflationary spiral that has parallels with Japan’s ‘Lost Decade’ in the 1990s, President Xi Jinping’s ruling Communist Party is suffering from a bad dose of inertia.
“The biggest story in the world right now is China. Everything else is secondary,” Spencer Hakimian, the founder of Tolou Capital Management, said as reported by The Express, a British media group.
“The last time China was deflating this hard, it was 3% of global GDP. Now it is 20%. This cannot be ignored or discounted,” he told The Express’ personal finance editor Harvey Jones.
Crisis countdown:
- China is drowning in debt after borrowing trillions of dollars in an infrastructure binge.
- In turn, this created a massive property bubble, which popped in 2022.
- Since then, the International Monetary Fund and Wall Street banks estimate that local government debt is hovering around US$11 trillion.
- The knock-on effect has been sluggish consumer spending, stagnating wages, and evaporating manufacturing confidence.
China’s data system is littered with contradictions.
China Factor
Delve deeper: China’s data system is littered with contradictions amid the Communist Party’s passion for secrecy. So, no one knows the real state of the economy.
What that means: “Nobody can say for sure how much China owes. But it could be as much as 360% of its annual economic output. That’s three times bigger than the heavily indebted US,” Jones in The Express stated.
Between the lines: Beijing has shied away from restructuring the world’s second-largest economy by ramping up domestic consumer spending. Instead, it has pumped up China’s “new tech” export machine.
China Factor comment: As the United States, the European Union, and other democratic allies push back in a tariffs trade war, Comrade Xi’s regime has nowhere to hide.