Chart of the Day: China Outflows Accelerate – The Stampede Begins?

Contact Your Elected Officials

With the rest of the world heading towards tumultuous economic times, is China also showing signs that the house of cards economic downturn is about to accelerate too?

Rumblings of a debt crisis began earlier this year when Chinese authorities demanded several of the country’s heavily leveraged property developers rein in their debt exposures. Developers were told that if they failed to meet one, two, or all of the three debt “red lines,” regulators would place limits on the extent to which they could grow their debt.

Subsequently, all across China, there are ghost citiesunfinished projects (some decades old), and many built with substandard quality. See above is an amazing video where the Chinese demolished many of these problematic properties.

More recently, a fire engulfed a skyscraper in the central Chinese city of Changsha, with authorities saying that no casualties had yet been found. Was this a result of substandard building? The blaze broke out in a 42-floor building housing an office of the state-owned telecommunications company China Telecom, according to the state broadcaster CCTV. See the video below, as it appears as if the skyscraper is made of wood.

We have previously reported on China as a house of cards ready to fall. However, it’s always an issue of timing. The build-up of bubbles is often gradual, with a crash that is often quick with its timing hard to predict. China, with its $54 trillion financial banking system, is more than double the size of assets across US commercial banks. The Chinese property market is the largest asset class in the world.

The recent problems are compounded by the collapse of the real-estate sector. The debt of real-estate companies is down over 60% from last year’s peak. Overall, China has seen a rapid rise in debt over the last ten years, with the cost of servicing it increased to over 20%, a level that has previously triggered debt crises in other countries.

Real-Estate at the Vanguard of China's Growing Debt Problem

China’s growth model of subsidizing the export-facing state-owned enterprise sector by repressing the household one – a policy reinforced by the pandemic – means that China’s ballooning trade surplus is a sign of weakness, not strength.

In a nominally closed capital-account country, a proxy for capital outflow is given by the difference between FX reserves and the trade surplus. If such a vast surplus was good for growth, we would expect to see FX reserves and deposits rise (even taking into account dollar-devaluation effects on existing reserves).

Instead, both are falling, highlighting that the trade surpluses are triggering a growth slowdown and net capital flight. See this in the chart below and learn more here.

Rising China Trade Surplus Leading to More Capitol Outflow

This puts pressure on the Chinese currency – the yuan. Some weakening in the has been sanctioned by the Chinese authorities, easing some of the negative growth impacts from the capital outflow. But it is clear they are now trying to push back against the yuan’s decline. See the latest declines in the yuan below.

U.S. Dollar Chinese Yuan 2022

To try to avoid a debt-triggered crisis, one lever China can pull is allowing the yuan to weaken further or even dropping the fixed-exchange rate altogether. It is the time test way for governments to cover financial sins – currency debasement. It is also one way to stave off the greater evil of widespread unemployment and civil unrest dangers China could well face if growth continues to fall.

With China’s continuing real estate debt crisis, early signs of capital flight from China may be an indicator that the house of cards exit may become a stampede. Watch these indicators to see if this is the trigger and the beginning of the stampede of capital flight from China and its certain economic severe economic downturn.

By Tom Williams

Right Wire Report
Right Wire Reporthttps://rightwirereport.com/
Right Wire Report was a group of concerned citizens who took action to promote traditional values and work for a better America.

With or without

The mullahs of Iran have been at war with the West, particularly the US, for half a century and Iran is also the world’s foremost champion of terrorism.

Artificial Intelligence Equals Awful Iniquities

WSJ article “AI is Learning to Escape Human Control” said in 79 of 100 trials, the o3 AI code systems edited their own code to prevent human shutdown!

VIDEO: Deranged Feminist vs. Mating Ducks in Epic Public Meltdown

A middle-aged white lady lib harasses mating ducks to “stop it!” because the rough sex they enjoy appears non-consensual on the part of the female.

RFK Jr. Slashes ALL U.S. Funding For Bill Gates’ Global ‘Vaccine Alliance’

Robert F. Kennedy, Jr. recently pulled all U.S. government funding from Bill Gates’ Global ‘Vaccine Alliance’ GAVI.

Seven Things Democrats Are Doing Wrong

Ask Democrat voters why Donald Trump was elected president again and you will get answers that show a lack of self-reflection and a ton of deflection.

Nevada Seen as Case Study in Rapid Urban Sprawl Amid a Water Crisis

Nevada’s rapidly growing population has reached a critical intersection with the region’s worsening water crisis, according to experts.

US Streamlines Rule for Fining Illegal Immigrants, Will Issue Nearly $1,000 Daily Fines for Noncompliance

DHS and DOJ announced a new joint federal rule that streamlines the process of issuing fines for illegal immigrants, making it easier and more efficient.

Man Indicted on 12 Hate Crime Charges in Attack on Boulder Demonstration for Israeli Hostages

Boulder, CO man accused of hurling Molotov cocktails at demonstrators supporting Israeli hostages indicted by grand jury on 12 hate crime counts.

Newsom Signs California Budget Aimed at Addressing $12 Billion Deficit

Gov. Gavin Newsom signed California budget projected to close a $12 billion deficit through spending reductions on some of the state’s ongoing programs.

Termination of ‘Wasteful Contracts’ Saves US Government $470 Million Last Week: DOGE

Over the past seven days, various government agencies have terminated 312 “wasteful contracts” with a ceiling value of $2.8 billion, the DOGE said.

Trump Says He Will Only Appoint Fed Chair Who Wants to Cut Interest Rates

President Trump said he may appoint someone who is more inclined to lower interest rates to succeed Federal Reserve Chair Jerome Powell.

Trump Says US Ending All Trade Talks With Canada

Trump posted he is ending “all” trade negotiations with Canada due to their plan to impose a digital services tax which affects U.S. tech companies.

White House Confirms US, China Have Reached Additional Trade Agreement

A White House official said the United States and China have reached an additional agreement as trade talks between the two nations continue.
spot_img

Related Articles