China's economy is very sick. What to prepare for?

[DrBeer]

It's no secret that after the Kovid pandemic, China's economy has been hit pretty hard. Further problems were a continuation of the economic confrontation with the U.S., which was not a smart move on China's part, as overestimating its strength is the biggest mistake.
Then there was (and now the problem continues) Evergrande and in general the real estate market and related sectors of the economy....

And the day before yesterday the news came out: China is considering the option of withdrawing 2 trillion yuan ($278 billion) from offshore accounts of state-owned companies to save the record falling stock market. Bloomberg writes about it.
According to people familiar with the matter, Chinese authorities are considering a package of measures to stabilize the falling stock market after previous attempts to restore investor confidence failed and prompted Prime Minister Li Keqiang to call for "forceful" steps.

On the one hand, it seems to be the world's second economy, "the world's factory", nominally "the second pole of the bipolar world", on the other hand, it is no longer possible to hide the problems and it is necessary to take such measures.  The question is: since the situation with the Chinese economy is no longer manageable, and we have to take tough and prompt actions to save the economy - how do you think this will affect the global economy, the crypto market, and what to prepare for?

[joniboini]

I'm not very knowledgeable on their detailed status, but from what I've read there is still no plan for the future which is the key reason why investors don't have enough confidence in their market. If they can somehow provide that, would the market change as quickly as it needed? What is the timeframe for this doomsday scenario? What is the worst-case scenario that will likely happen, other than the fall of the Yuan as a currency?

If we limit the scenario to that one, I believe some people will try to quickly switch to gold or even crypto, not publicly of course. We can also argue that miners will probably get a short-term benefit if they can sell some of their BTC and then convert the fiat to other currencies quickly. Businesses will probably operate as usual, but if some of them were forced to move out I think a price hike on stuff like electronics might happen if they can't find another place to get cheap labour. CMIIW.

[DrBeer]

I'm not very knowledgeable on their detailed status, but from what I've read there is still no plan for the future which is the key reason why investors don't have enough confidence in their market. If they can somehow provide that, would the market change as quickly as it needed? What is the timeframe for this doomsday scenario? What is the worst-case scenario that will likely happen, other than the fall of the Yuan as a currency?

If we limit the scenario to that one, I believe some people will try to quickly switch to gold or even crypto, not publicly of course. We can also argue that miners will probably get a short-term benefit if they can sell some of their BTC and then convert the fiat to other currencies quickly. Businesses will probably operate as usual, but if some of them were forced to move out I think a price hike on stuff like electronics might happen if they can't find another place to get cheap labour. CMIIW.

What we're seeing are already manifestations of the problem. One of the key problems that has arisen in China, as a result of the political confrontation with the West, is the outflow of investors and investment funds. And the scale of this process is huge.
The loss of investment attractiveness for China is essentially a 180-degree turn to the past, which is not the most successful. Because it was China's investment attractiveness in the 80-90s of the last century that made it the "Chinese miracle" in the 2000s.

[0t3p0t]

I'm not very knowledgeable on their detailed status, but from what I've read there is still no plan for the future which is the key reason why investors don't have enough confidence in their market. If they can somehow provide that, would the market change as quickly as it needed? What is the timeframe for this doomsday scenario? What is the worst-case scenario that will likely happen, other than the fall of the Yuan as a currency?

If we limit the scenario to that one, I believe some people will try to quickly switch to gold or even crypto, not publicly of course. We can also argue that miners will probably get a short-term benefit if they can sell some of their BTC and then convert the fiat to other currencies quickly. Businesses will probably operate as usual, but if some of them were forced to move out I think a price hike on stuff like electronics might happen if they can't find another place to get cheap labour. CMIIW.

What we're seeing are already manifestations of the problem. One of the key problems that has arisen in China, as a result of the political confrontation with the West, is the outflow of investors and investment funds. And the scale of this process is huge.
The loss of investment attractiveness for China is essentially a 180-degree turn to the past, which is not the most successful. Because it was China's investment attractiveness in the 80-90s of the last century that made it the "Chinese miracle" in the 2000s.

I agree. Chinas agressiveness on it's neighbors and the world is what makes them face consequences right now. Though there really is no assurance that what happened in China right now isn't staged or something because even though there are difficulties and challenges they are facing today that was being said by the CCP's Dictator they are still provocative and agressive on the SCS. Propaganda is quiet common this country so I am a little confused about it right now.

A lot of allied companies and investors backed out of China because of this behavior so I am not surprised if China will play victim here to get international attention. But yeah I don't know it's quiet confusing.

[Dr.Bitcoin_Strange]

I quite agree with what you are saying, sir, @DrBeer, but I also believe that the country's economy is still better than some other countries. Some countries have a huge amount of unpaid debt, which was the loan collected from other countries.

For stock investors, if they actually believe that the stock market will greatly bleed and cause them loss, then I just think they have to devise their investment to Bitcoin, and then the government of China should do what they feel is right (what will work) to make sure they strengthen up their economy. IMO, that's what I can say.

[DrBeer]

I quite agree with what you are saying, sir, @DrBeer, but I also believe that the country's economy is still better than some other countries. Some countries have a huge amount of unpaid debt, which was the loan collected from other countries.

For stock investors, if they actually believe that the stock market will greatly bleed and cause them loss, then I just think they have to devise their investment to Bitcoin, and then the government of China should do what they feel is right (what will work) to make sure they strengthen up their economy. IMO, that's what I can say.

It's always like that in life - there will always be someone worse than you and there will always be someone better than you It's the same with the Chinese economy. Yes, there are many countries with worse economies ! That's a fact. But there is a saying, I do not know if I can correctly convey its meaning in English, "The bigger the cupboard, the louder it falls". It's about the Chinese economy. Small economy - small problem, few dependencies, few influences. It's easy to save. But a huge economy that has problems both inside and outside, and each of the problems strengthens the neighboring one, and two problems generate a third.... So far I don't see the Chinese government being able to at least slow down the decline. There are many steps that could theoretically help, but in the end they do nothing - the problems, like a snowball rolling down a snow-covered mountain, grow and gain speed....

The problem that worries me more is who will be in the path of this snowball, and what kind of destruction will this snowball do at the foot of the mountain ?

[DrBeer]

The first serious manifestations of the crisis by the Chinese economy, and the bankruptcy of one of the CRUCIAL companies in China: "A court has ordered the liquidation of China's largest real estate developer Evergrande due to debts. The court decided to liquidate the world's largest debtor with more than $300 billion in liabilities after noting that Evergrande failed to offer a concrete restructuring plan for more than two years after failing to pay debts and several court hearings."

$300 billion. 1 company. A company that impacts multiple industries.

This is just the beginning....

[Don Pedro Dinero]

I do not prepare differently for macroeconomic events than I do in general. Now there are also tensions in the Middle East that could affect the economy in general. What I do is that I have savings in investments and part of them I hold directly as some cash, some gold and bitcoin. If a crisis comes, it is better to be caught with savings, investments and more than one source of income. People who are caught without a penny, in debt and depending on a precarious job to eat are going to have a hard time.

[DrBeer]

I do not prepare differently for macroeconomic events than I do in general. Now there are also tensions in the Middle East that could affect the economy in general. What I do is that I have savings in investments and part of them I hold directly as some cash, some gold and bitcoin. If a crisis comes, it is better to be caught with savings, investments and more than one source of income. People who are caught without a penny, in debt and depending on a precarious job to eat are going to have a hard time.

If such knowledge were given to children in school - how to manage their money, what is investment, what is diversification, and what is logical consumption - the majority of the world's population would not be in such a difficult situation. And for many generations.
So for your approach + !

But back to China. In fact, the global crisis of the Chinese economy, can lead... to the improvement of other economies! Closure of factories and plants will create a "vacuum" of goods, which were massively and inexpensively produced by China. As the saying goes, "The holy place is never empty". This may lead to the restoration of localized production in other countries, including countries that are major consumers of goods from China. I, for example, would prefer the same goods, but produced in my country, even if with a higher price. But I would know that these goods work for the economy of my country

[Peter90]

China’s gold imports surge to record high as appetite increases, middle class seek wealth security​


China’s appetite for gold rose to record high levels last year, as investors sought to secure their assets and limit uncertainties caused by a weak yuan, an ongoing property slump and fears over a stock market rout.

Imports of gold for non-monetary use – products including gold jewellery – rose to 1,447 tonnes last year, breaking the previous record of 1,427 tonnes in 2018, according to the General Administration of Customs.

Domestic sales in China also hit 1,090 tonnes of gold last year, according to the China Gold Association, with gold jewellery consumption increasing by 7.97 per cent year on year and purchases of gold bars and coins increasing by 15.7 per cent.

With limited access to overseas assets, China’s middle class are seen to be attempting to preserve their fortunes, which have dwindled amid the slumping property market.

“Facing the property and stock market slump, global geopolitical instability, and the fall of the Chinese yuan’s exchange rate, gold purchasing is currently the best way for Chinese residents to preserve their wealth,” said Peng Peng, executive chairman of the Guangdong Society of Reform.



"China's economy is very sick. What to prepare for?"

Let's prepare for higher gold prices 

[DrBeer]

China’s gold imports surge to record high as appetite increases, middle class seek wealth security​


China’s appetite for gold rose to record high levels last year, as investors sought to secure their assets and limit uncertainties caused by a weak yuan, an ongoing property slump and fears over a stock market rout.

Imports of gold for non-monetary use – products including gold jewellery – rose to 1,447 tonnes last year, breaking the previous record of 1,427 tonnes in 2018, according to the General Administration of Customs.

Domestic sales in China also hit 1,090 tonnes of gold last year, according to the China Gold Association, with gold jewellery consumption increasing by 7.97 per cent year on year and purchases of gold bars and coins increasing by 15.7 per cent.

With limited access to overseas assets, China’s middle class are seen to be attempting to preserve their fortunes, which have dwindled amid the slumping property market.

“Facing the property and stock market slump, global geopolitical instability, and the fall of the Chinese yuan’s exchange rate, gold purchasing is currently the best way for Chinese residents to preserve their wealth,” said Peng Peng, executive chairman of the Guangdong Society of Reform.



"China's economy is very sick. What to prepare for?"

Let's prepare for higher gold prices 

You are right that on the threshold of crisis and uncertainty - the population, and even governments - begin to accumulate the most ancient, liquid asset - gold. by the way, note - not cryptocurrencies
But here is a nuance - the population owning gold "for a rainy day", in case of problems, in the mass of its will sell gold to get food, goods of regular demand, medicines, gasoline, .... And this will lead to LOCAL inflation of gold.
Regarding the gold reserves of the state of China - it is a complicated topic, because China has classified its real data on gold reserves and currencies. It is possible to guess, and to PREPARE. Even if we know that China buys a lot of gold, we cannot say where this gold is really located and who owns it .  For example, the same kinesis  has a regular audit ! Who can confirm China's statements about gold ?

[DrBeer]

A very interesting observation about China, which explains what is happening, or rather shows how deep the problem of the Chinese economy lies:
For decades, the Chinese authorities have not missed an opportunity to hide inconvenient facts about the state of affairs in the economy and looked through their fingers at similar practices of local businesses. But as long as the country's GDP was steadily rising and investments in it were yielding profits, Western businesses put up with such specifics and steadily brought in money. The situation changed in 2023, when the usual growth model suddenly failed. Instead of recognizing the problems, Beijing declared an all-out war on negativity and began to assure large investors that nothing terrible was happening. By the end of the year, the country faced record capital outflows and a falling stock market, although, judging by the latest data, it will achieve the announced GDP growth. For 2024, the authorities are going to intensify economic propaganda and attract funds from abroad to get out of the critical situation.

[Peter90]

You are right that on the threshold of crisis and uncertainty - the population, and even governments - begin to accumulate the most ancient, liquid asset - gold. by the way, note - not cryptocurrencies

OMG... finally... I have found LOVE!!!
 

Regarding the gold reserves of the state of China - it is a complicated topic, because China has classified its real data on gold reserves and currencies. It is possible to guess, and to PREPARE. Even if we know that China buys a lot of gold, we cannot say where this gold is really located and who owns it .  For example, the same kinesis  has a regular audit ! Who can confirm China's statements about gold ?

To be honest neither the USA nor any other country let their gold reserves be audited.
China wants to expand the use of their Yuan. They want the Yuan to be accepted when they buy energy, metals, foods and other resources from abroad.
They have amassed gold reserves because backing a national currency with gold it's the only way to make that currency internationally acceptable.
The strength of the $ derives by 8.000 tons of gold supposedly stored in Forth Knox or some other place.

[electronicash]

China's economy is their problem. if they crumble to their own dark ages, its their problem. if their gold couldn't not help them to get back up, they really have the faulty management. but while they are yet crumbling i guess the world who invested in them already have the heads up.

but believe it or not, they are going to expand the use of Yuan just as what every country wants to do. even India wants to expand their use of Rupee. but as of now, we can only see digital yuan already made the first transaction with Saudi Arabia.

[snipie]

I do not think China will have many economical problems unless they will have serious sanctions as what happened to Russia, which is by the way quite useless but that's another story.
China has a link with every single country of the world, a lot of trading contracts where China is the sole winner. The collapse of a famous company or even a couple of them doesn't mean anything since the money is centralised in the government hands. I think it is more of restructuring term rather than a simple collapse.
China is leading in most of the things including electrical cars recently. Certainly the Covid-19 pandemic has a huge impact but with the price of oil taken cheaply from Russia, the economy will return as used to be if not faster.