‘Red’ China now a Financial Term

China’s Economy in Trouble

The list of woes reads like a failed state. Except it’s China, the world’s second biggest economy. So the world cannot afford to let it fail.

Let’s look at the data first.

The Yuan has fallen to its lowest level in a decade and a half. This is a currency now competing with the dollar to take over its status at the global benchmark.

The stock exchange went into bear market status just before the weekend, losing 20% of its value. That’s a crisis; you might as well put a neon sign above the Shanghai Securities Exchange that flashes SELL!

The Government won’t even release data on how bad the unemployment figures are for youth. They stopped doing that a while ago.

There’s a real estate crisis triggered by property developers defaulting on loans.

Exports have taken a pretty hefty hit, leaving the country’s trade surplus at unhealthy levels.

Consumer prices continue to fall.

And then there’s the irony of a population implosion. Fertility rates are now below Japan’s (which is bad) and this means that the population is aging. And within two decades will render 70% of the population unproductive.

Of course, it hasn’t helped that a decision was reached today to reverse an earlier pronouncement that the lending rate would drop significantly. Investors, borrowers and governments are now looking at China with furrowed brow. If I were an investor right now, I wouldn’t need a neon sign flashing at me.

I’d just get out.

Send in the Cavalry

Someone who’s going in the opposite direction, however, is US Commerce Secretary Gina Raimondo. Her visit to Beijing is widely perceived to trigger some sort of call for help. What doesn’t help is ol’ Joe’s public comments recently about the Chinese being bad folk.

We’ll see.

But China will not become a failed state, bad folk or not.

Because it’s not just the US that wields a big stick anymore.

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