Tuesday, September 21, 2021

Evergrande Crisis Getting Worse: Big Problem For The U.S. Economy?

 This ex trader says that the CPC will bail out Evergrande, but as it will embarrass them - communists saving the capitalists - they will do it through the back door, ie, by telling China’s banks to save the company 


He thinks Evergrande's collapse won't affect the Western economy too badly in the long run, and in fact, he says it will improve things, as money will fly out of China back into the American markets, but he's modest enough to say he's been wrong before.



Evergrande Crisis Getting Worse: Big Problem For The U.S. Economy?

13 comments:

Marian Ruccius said...

Nice piece, good post.

Tom Hickey said...

China will likely use the crisis as a tool in its turn from capitalism toward socialism as it rebalances the economy and society, recognizing the economics is actually socio-economics.

The government will probably allow enough pain to show people the results of capitalism. In the end, the government can always just nationalize failing companies, which cuts to the chase in returning to socialism. But I don't think that they want a full-on return to socialism at this point.

The Chinese style is gradualism. They will continue to permit capitalism but with a tighter leash on it, which in my view is a good thing for China both short-term and longer term.

Matt Franko said...

Well somebody at least tangential to the US is going to take a big hit… a lot of their default is in USD commitments…

Marian Ruccius said...

Tom Hickey, do you not suppose that much of Xi Jinping's strategy, and move back towards socialist models, has been precisely done in preparation for the current events (or something similar), which he and his aides likely saw coming? Very smart and effective on that score -- but it one thing to know what to do and to prepare for an event, and another thing to actually wield institutions effectively to do what is necessary. We shall have to see if the response lives up to the analysis and planning.

Marian Ruccius said...

Further to Matt Franko's comments, I wonder if investors from peripheral countries (peripheral to the US and China, like Australia, Canada, or even say the Scandinavians) may not be particularly affected. On the other hand, Sydney and Vancouver have often been "safe havens" for frightened investors (perhaps less in the Meng Wanzhou era -- let's hope that is resolved by a plea deal with the US DOJ soon)

Tom Hickey said...

@ Marian

I think that the Chinese leadership, or at least some of it, saw the Deng reform of "opening up as temporary. It would only persist until China was developed enough to stand on it own legs. So this was coming anyway. I also think that the factor that prompted the action now was the shift in US from assuming that China would fully liberalize to realization that China was now an economic and military competitor. When US policy shifted, so did China's in reaction. It will be interesting to see how this unfolds.

The submarine deal with Oz is a piece of this. The big advantage of the US is the far superior submarine navy compared with China. This allows the US to control the shipping lines of communication in the world's waters, here specifically the South China Sea.

The Australian bases lie beyond the range of Chinese intermediate range missiles, so it would take an ICBM attack to eliminate them, same as with US. This would be a huge escalation and would likely lead to full-on war. So strategically it makes sense, but at the expense of China arming up faster and increasing the odds of a full-on China-Russia military alliance including technology exchange. In other words a full-on arms race.

Anyway, the game has changed recently big time, and the US abrupt pull-out from Afghanistan was to concentrate forces against China and Russia.

This is not going in a healthy direction especially considering the pandemic and climate change, both of which require concerted action.

It doesn't bode well for the global economy either, since China is so interwoven. For example, the situation would be very different for Australia if its export market with China came to an end. Then there are all the broken supply-chains globally that would have to be reconstructed. It would be a mess.

Mostly because the US is fixed on unilateral dominance rather than multi-lateral co-existence.

Marian Ruccius said...

Hi Tom, you may well be right, but the current return to the language of communism, while consistent with that broader narrative, strikes me as a shorter term tactical response and a way of managing current social and economic pressures. It is rather in the same vein as moving half the People's Liberation Army's forces into the People's Armed Police (the internal militia for stifling dissent) in the early mid-2000s. A preventative measure to control and limit internal disruptions.

Marian Ruccius said...

Also, to Matt:

https://www.hellenicshippingnews.com/cramer-says-u-s-economy-unlikely-to-face-major-damage-from-struggling-chinese-developer-evergrande/

Tom Hickey said...

Marian, I think that China's recent actions over the past year regarding HK, Xinjiang and Tibet demonstrate that the leadership is aware of the US-UK doing their best to foment regime change in China internally. Of course, the Chinese leadership is going to meet that head on, as it did in China. Same with Russia in kicking out the foreign NGOs and other entities deemed subversive and changing laws to circumvent subversion by Russian nationals through political means.

This is how the historical dialectic unfolds, with players adapting to shifting conditions.

Marian Ruccius said...

Tom, this fellow I think largely overstates the case (and maybe it is just wishful thinking or outright propaganda), but it is nonetheless an interesting hypothesis:


SD Pradhan: S D Pradhan has served as chairman of India's Joint Intelligence Committee. He has also been the country's deputy national security adviser. He was chairman of the Task Force on Intelligence Mechanism (2008-2010), which was constituted to review the functioning of the intelligence agencies. He has taught at the departments of defence studies and history at the Punjabi University, Patiala. He was also a visiting professor at the University of Illinois, US, in the department of arms control and disarmament studies. The ministry of defence had utilized his services for the preparation of official accounts of the 1971 war and the counterinsurgency operations in the northeast


Chinese economy in doldrums
September 20, 2021, 3:13 PM IST SD Pradhan in Chanakya Code, World, TOI

https://timesofindia.indiatimes.com/blogs/ChanakyaCode/chinese-economy-in-doldrums/

Peter Pan said...

There is no socialist model. There is embarrassment, when the usual suspects undermine parts of the economy. Corruption doesn't care about state ideology.

China has been embarrassed, but they won't abandon consumerism, or commodity production. What ordinary people care about is their standard of living. It's full steam ahead, until globalism reaches its unsustainable conclusion.

Worst case scenario, as always, is nuclear war.

Tom Hickey said...

@ Marian

Just what one would expect an Indian intel officer to say about its historical rival in the region. In comparison with China's rise, India remains a basket case, which Modi's neo-liberal neo-fascist government has made worse, I am sad to say since I would like to see India succeed. As they say, "India has a lot of as yet unrealized potential."

Marian Ruccius said...

In real terms the dependency ratio is very dire, that is certain. An opportunity to mechanize and digitize, like Japan, but there might be a savings crisis now, no small thing for pensioners. And China HAS been diverting immense resources to its military and internal police state, although that might be "growth supporting", even if neither is particularly "useful".