There more you start poking around online, the more you turn up reasons why China is screwed.
The first installment in this series was popular. Well, there’s a lot more reasons why China is screwed.
It’s screwed all the way down.
First up: Demographics:
Takeaways:
That’s part 1. Part 2 focuses on China’s out of control property market:
They created what are basically state-owned shell companies called “Local Government Financing Vehicles”. They gave these LGFVs free valuable land, which they then used to take out loans that local governments themselves couldn’t. The trick is that because their debt is hidden, local governments appear far healthier than they really are, while at the same time, meeting the quotas set by Beijing. Following the 2008 crisis, LGFVs transformed from a little quirk of its financial system to the backbone of local economies. If these ‘financing vehicles’ default on their loans, or if housing prices fall too steeply, local governments now have just as much to lose as homeowners. If a local government stops taking out loans, it instantly loses over a third of its revenue, causing a different kind of doomsday. So while the central government may direct local officials to control their debt, the best they can really do is feign cooperation.
There are a lot more videos of China suckage, but I’ll have to split this up and get to those another time.