🔔 Confucius Say... China Still F***ed

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Every time I write about China, I feel like a broken record, a negative Nancy (not the stock trader one). Yes, there have been some notable changes in China lately.

However...

Bloomberg has an excellent summary of the measures here 👇

A 'soft-landing'. Sounds familiar. The TL;DR is that China is pushing new financing to bring some relief to the property sector. Mainly by ensuring that property developers have funding to complete the projects (or can be bought out by larger players who will do so), plus support for buyers and existing owners 👇

• Support local governments to “reasonably” set down-payment thresholds and mortgage rate floors in a city-specific approach to accommodate basic and improving housing demand.

• Optimize purchasing rules on first homes by new city dwellers.

• Encourage banks to negotiate with homebuyers on extending mortgage repayments if their property purchasing contracts have been changed or canceled, or if they are under Covid-induced unemployment.

• Buyers’ credit scores will be protected. Credit scores have been the center issue of a widespread mortgage boycott since July, as impaired creditworthiness would make it harder for people to buy real estate in the future.

All of this is absolutely a good thing for the property sector. The measures should stop the property slump from worsening, or at a minimum, slow the pace of the property slowdown.

However, most of these developer financing measures are 'temporary', and this is a permanent problem, with another big hurdle to overcome next year.

That debt maturity peak would be the 'at least $292 billion of onshore and offshore borrowings coming due through the end of 2023'...

The weaknesses and risks are still the same in China's economy, even as Covid Zero is gradually reversed. But we don't talk about things like that 🤐

You can always rely on outgoing officials to speak freely once the restraints are removed... 👇

There's a conflict between this supposed reversal in policy. The ideal of 'common prosperity' requires an increase in domestic demand... 👇

Yet many German companies are still looking to shift production to China (to benefit from production subsidies and relatively lower wages).

How does that boost domestic demand in China? And does it make sense for Germany as a nation??

China's importance as an export market for German industrial goods plateaued a decade ago...

Just because the exports stopped growing, that doesn't make it unimportant, but China's increasing role as a competitor for Germany (especially in the auto sector) should be a big consideration.

The relationship between Germany & China is already under scrutiny and no longer seen as the obvious path that it once was 👇

Meanwhile, the US is actively ensuring that ties with China cannot deepen further unless China reverses the same "non-market economic practices" that make them so appealing to multinational companies in the first place...

Here's the US statement on the Xi-Biden meeting from earlier today 👇

China's domestic problems are far from solved, and the political tide has already turned in the West...  Banks are giving up too 👇

And while we're talking about China... Presume you're a very wealthy person that realises the tide is turning for the Chinese economy at some point in the last five years or so. You want to get your money out.

China's capital controls are a problem for you. Was crypto a solution? Specifically Tether?

If this was a superhero movie and these were the origin stories of the main Tether characters... 👇

Wouldn't you have a few concerning, unanswered questions about Tether's true purpose?

In other amazingly awesome news, we did a video (for the first time in MONTHS) on why FTX is not Lehman. Give it a watch/listen! 👇