Skip to main content

China's newest problem: Excess capacity

 Consider that until about two years ago, about a quarter of China's GDP was related to the construction industry.   In the past two years, dozens of construction companies have gone into bankruptcy.   The big names are known the world over, Country Garden and Evergrand, they were/are massive companies with hundreds of billions in debt and tens of thousands of unfinished projects (I am not making this up).   The Chinese government "decided" that others than the construction industry would now benefit from the largest increase in capital (aka lots of cheap/free debt), and so manufacturing production rose.   

It is important to understand that the goal in China is not the end result but the process.   It is not the millions of empty, useless apartments that have been built (the Chinese government recognized formally a year ago that there are more than 500 million empty apartments in China) it is the purchase and building of things and the jobs and GDP statistics it provides.   The objective is to show that China has a healthy job market and a fast-growing economy,  The easiest way to quantify your success is to count the number of widgets you produce.

Six months ago, Janet Yellen went to China, left as the most pro-China American member of the administration but returned as a hawk.   Anthony Blinken went to China to have a serious conversation with Xi Jinping and was ignored.   Anthony Blinken does really care, he's apparently a mean SOB, but he confirmed what the Biden administration long assumed, that the Chinese government is dumping its express production on the world market.   The biggest are solar panels but soon electric cars.

Not only is the US in the middle of a presidential election year, but the Chinese are making it easy for Biden to take a very anti-Chinese position and impose massive restrictions on the import of Chinese goods that are deemed to be dumped.  Normally this would give rise to a trade war, but China has actively restricted the sale of consumer goods in China for years, the biggest brands (excluding top luxury goods) are no longer available in China and have not been available for years.   funny enough the company the most at risk here is Tesla, 80% of all Tesla Y are exported out of China and not sold domestically, so far none are sold in the US (Canada and Europe only) but still... Trade wars have a way of escalating!

Comments

Post a Comment

Popular posts from this blog

what people get wrong about tariffs

 The issue is simple. What percentage of the economy is dependent on tariff goods? The truth, is that the US economy is far more closed than people understand. People genuinely believe that all manufacturing has ceased to exist in the United States all given to China on the altar of woke policy the truth can be further from That statement. Only about 15% of US GDP is related to foreign trade. Of that amount, slightly more than half is from Canada in Mexico. And half of that is energy. What that means, is that about 7% of US GDP is tariff dependent. The proof in the pudding, is how little money tariff generates. People think that 30 or 50 billion is a lot it’s not in an economy that has $3 trillion. The impact on the US economy will be less visible but not absent. Inflation hasn’t occurred yet first because tests have hardly started to bite, but more importantly it’s such a small percent of the economy. Now certain things are critical. The rare earth metals from China were critical....
Post a Comment
Read more

The end of Tesla?

 it takes a special kind of idiot, to think that he can antagonize his entire customer base, and think that it will not impact his business. When Elon Musk went to work for Donald Trump, and created the doge department, he antagonized every liberal, and these people represent 90% of his client base.That’s not a brilliant move. Now Elon Musk is worth hundreds of billions of dollar, so he shouldn’t care a great deal, however, he needs to care because of several other issues. The cyber truck has been a disaster, most have had to be recalled because of defective glue, it’s not a truck, it’s not a car, it’s noisy, relatively uncomfortable, but great as a development platform. What Tesla has learned in making car manufacturing more seamless is truly amazing. The problem was that Elon Musk was so pissed with the Democrats, and with Joe Biden, in particular because of some slight, which were just plain stupid too. By the way, that he decided to support with hundreds of millions of dollar, ...
Post a Comment
Read more

Trump and Venezuela...

The US now owns Venezuela…and not in a good way.  America is not known for its nation building skills, and yet it now owns the disaster that is Venezuela.   Starvation and exodus are the natural progression.   In addition it will become a haven for narco-terrorists, more so than it already was. I am sure that Trump and his friends really thought that little attack very well…I guess that he will now attack Iran now.  
Post a Comment
Read more