The Chinese and US economies are tied together and any disruption to one greatly affects the other. But what happens when BOTH of them are in jeopardy? Well, let’s say the whole world is put on notice. We have a pretty good idea of what’s going on here in the US; our leaders are addicted to printing money and our money isn’t based on anything except “the full faith and credit of the US government”- oh goodie. But in China, the problem cuts deeper and the motives are sinister. Behind a curtain of CCP propaganda and manipulated numbers is a system of control put in place to do one thing: keep the CCP in power no matter what – even if that means bringing everyone down with them.
Welcome to Bitboy crypto. In this video, I’m going to cover how the Chinese economy is poised to take the rest of the world economy down with it. I’ve found critical information that other analysts have overlooked that you need to understand just how big this crash is shaping up to be. All this information is being suppressed by Youtube and in fact CCP bots have been brigading any video about this subject, flooding it with dislikes, negative comments and bogus community standards strikes. So do me a favor and hit that like and subscribe button to let the algorithm know that this video is worth watching. Thanks. Now onto the story.
The Great Migration.
A lot has already been said about China’s real estate market bubble – but the bubble is a byproduct of rapid growth. No one can deny that the last thirty years have been very good to the average Chinese citizen. In the 60’s and 70’s China was a third world country where bicycle powered rickshaws shared the road with modern vehicles, most of the population got by on subsistence farming and the literacy rate was in the low thirties. But in 1972 Richard Nixon opened up diplomatic relations with China, kicking off a surge in trade with the international market. Since then middle class has exploded in size, going from 3% of the population in 1978 to over 50% in 2018. The literacy rate is at 96% and the Chinese space program is one of the biggest in the world. This influx of wealth has slowly warped the PRCs communist controls into a quasi-capitalist economic engine that changed the world.
But all of this growth came at a cost and just like in the US…it’s time to show the receipts.
The basis for China’s growth has always had a bit of a problem. And most of that comes from two things. first – China manipulates its currency, and second – the banking system in China totally broken
Most currencies ebb and flow in value based on market conditions. But China is controlled by communists – so instead of allowing the market to decide what the value of the RMB is against the dollar, the government decides what RMB value is and allows traders to arbitrage a little on the up and downside by a few fractions of a percent.
This behavior has led the US and other countries to label China as a currency manipulator several times over the last few decades. It’s just a symbolic label to show their disapproval of the practice because manipulating your money can be great for growth and that’s exactly what China did. It depressed the value of the RMB relative to the dollar so that Chinese goods were ALWAYS cheaper than American goods. This led to rapid manufacturing growth in China and cost the US over 1 million middle-class jobs.
That brings us to the Chinese banking system. Already we have problems right off the bat; a fiat currency that is actively manipulated. Well, it just gets worse for your average Chinese person. The largest banks are in place to serve the needs of the CCP and other collectives in the country, not as a safe place to store money or be a growth engine for capital to be used by private citizens. Interest rates at Chinese banks are abysmal so anyone looking to make a return or use a financial product from a bank would have better luck playing the lottery. Because the major banks are serving the needs of the Party the balance sheets of the big four banks don’t make any sense since debts come and go at a moment’s notice and audits never happen. Government projects show up looking for money, get the money as a “loan” and leave. They never have to account for anything, show a profit or even pay it back. This has been an ongoing problem and even as far back as 2007 it was well known by the World Trade Organization that the Big Four banks in China are a “ticking time bomb”.
So what is a Chinese person supposed to do with their money? The banks don’t work and keeping cash is a guaranteed loser…why not put your money into a hard asset like real estate?
That’s exactly what they did. Real estate was seen as a bank account. And combined with the rush of rural workers into the cities to make a better life for themselves; real estate was HOT and prices started to skyrocket.
Enter Xu Jiayan, the CEO of Evergrande Real Estate Company.
Why China Loves Real Estate & The Rise Of Evergrande
With a tsunami of middle-class Chinese looking for work in the big city, real estate was seen as the go to investment play in China. Construction could barely keep up with demand and the property developers that were in the right place, they were set up to make loads of money. Evergrande was just such a company. Its charismatic CEO, Xu Jiayan was known for making large deals and lavishing gifts on his associates. He hung out with Jack Ma from Ali Baba, bought a soccer team, has his own super yacht and became of the richest men in all of China. His strategy was simple: make high-rise condos as fast as possible. But Evergrande took it one step further, if they couldn’t get the land lease in a city or town…they would just BUILD AN ENTIRE TOWN. Sometimes out in the middle of nowhere. As long as it was in the plans for the massive Belt and Road initiative, then the leases could be gotten for pennies on the dollar. This rapid expansion fueled by cheap debt and hardly any consumer protections lead to the real estate industry becoming a monetary silo that created its own feedback loop of sales, construction, pre-sales, construction and so on. The pace of building and lending became so fast that pre-sales were happening YEARS before the properties would be completed – but according to Chinese law Evergrande could write mortgages that required payment AS SOON AS THE PAPERWORK WAS SIGNED. In contrast, that to here in America were home pre-sales happen all the time but the difference is you don’t start paying your mortgage until you can move in.
The real estate frenzy was hot and heavy in the early 2000s and home prices saw unprecedented growth and Chinese cities made the lists of most unaffordable in the world time after time.
But an undercurrent was starting to form. As the Chinese middle class grew, so did its wages and as wages grew its competitiveness on the global manufacturing market started to wane. As years went on in the middle 2000’s manufacturing companies started to move operations to neighboring countries with cheaper labor like Vietnam and Cambodia. Unemployment started to come into the picture and the Chinese started to get a little more prudent with their money. If you go by the official state data the graphs look good. But if you survey the Chinese by household it paints a very different picture. For example: as of 2022 nearly 20 percent of college grads can’t find a job. So far it’s looking like China’s economy was set up to fail via good old-fashioned greed and bureaucracy. But this is where the story takes a dark turn because China’s economy hasn’t just been growing due to making iPhones and Baseball Caps.
China is colonizing the world and is using debt to do it. Since the late 90’s China has been handing out loans to emergent economies in the Middle East, Africa and Southeast Asia. These countries are trying to grow but don’t have access to loans from the IMF because they are considered too risky. That’s where China has stepped in with an open checkbook. Normally government loans have terms that are low interest and are paid back in decades. But Chinese loans are different, the interest rates are up to 400% higher than normal and the payback terms can be as little as five years. To some of these countries, a loan from the CCP is a lifeline to build critical infrastructure to help their people. But the details of many of these loans are where it gets dark. The CCP loans often come with enough strings to outfit a symphony.
For example, the nation of Laos took a CCP loan that connected their country to China, hoping for increased trade with its neighbor the 5.8 billion dollar loan dwarfed their budget but were able to finance their 480million dollar portion of the loan, with the CCP taking up the rest. But the project is huge and connecting the two countries via railroad means drilling and blasting through impassible mountains, so the project was immediately hit with delays. The delays affected the Laotian international credit score, and it was downgraded to junk status. But when Laos tried to renegotiate, they found that in the deal they are fully responsible for the debt and if a default occurs the CCP takes control of the railroad and the land. In 2020 when Laos faced insolvency, they were forced to sell off part of their power grid for 600million dollars to China. Now they are buying power from China off of their OWN GRID.
That’s the CCPs play. Sell a too good to be a true deal to a developing nation. Hide crucial details of the agreement. Collect some payments and late payments. Eventually, let the debt default. Take the land. Rinse and Repeat. You would think these countries would see a pattern forming and wouldn’t do business with China anymore, but it’s the squeeze that’s gets the juice. CCP loans aren’t done with oversight from any credit agency. It’s all off the international books. You can’t check the receipts. Finding data on just how much CCP money is floating around is hard to ascertain but credit monitors say that there could be hundreds of billions in bad loans.
This sort of loan sharking has been happening at a rapid pace and the high interested repayments have been a crucial part of keeping China’s economy afloat.
But every grift has flaws and that flaw has been Xi Jinping’s obsession with ZERO COVID.
The Party response to COVID has been nothing short of dystopian. Entire city populations were locked or in some cases WELDED SHUT inside their apartments. Transportation was shut down. Anyone refusing quarantine was locked away and never heard from again. Health tracking apps monitored everyone’s movements and medical directives were carried out by force.
Since 2020 China has shut down part or all of the economy more than any other country. This has had serious side effects on its trading partners, who is basically everyone and has proven to be the crippling body blow to the Chinese Financial system that the CCP has been able to dodge for almost thirty years.
In September of 2021 the Financial Times reported that Evergrande was using retail money, money from its mom-and-pop customers, to fill funding gaps in construction projects and other parts of the business. This was after the PRC implemented the Three Red Lines law that was meant to curb leverage at financial institutions but by this time 14 of the largest banks had violated all three of the lines and were banned from adding to their positions. Evergrande was chief among them and had over 310 billion dollars in liabilities.
As money started getting sucked out of the system construction projects started to fall behind so much so that a viral “Mortgage Revolt” campaign started. Tens of thousands of Chinese boycotted their mortgages and refused to pay until the properties were completed. Even with the CCP stepping up their censorship of the boycott, the campaign caught on and soon became a national movement. This pulled the plug out of Evergrande and popped the real estate bubble.
Soon banks associated with Evergrande and Evergrande itself were freezing funds. A series of bank runs ensued and even though the PRC did it’s best to crush the panic, even sending in Tanks against its own citizens, the panic hasn’t subsided so the government was forced to give Evergrande an extension on paying its debts for another six months. This is just kicking the can down the road but is giving the CCP time to “redact” any data or deals within the toxic Evergrande debt that could hurt the party. Now the CCP is playing a cat and mouse game of trying to shore up investor confidence, dissolve bad debt without printing money and salvage the value left in the Chinese real estate market. If the money printer turns on, inflation is going to come on strong. If the debts collapse, millions of Chinese will lose their life savings and the party may collapse.
That’s all very bad. But why should someone in the US care? Well guess what buttercup…you’re holding the bag.
Our friends at Blackrock, UBS, HSBC and Ashmore Group have hundreds of billions in Evergrande debt that’s hitting their balance sheets and are going to pull GDP further down with it over the next few months as Evergrande starts restructuring.
We are in a Debt Singularity, a black hole of bad decisions, fake money and greed and it that will pull down the rest of the world economy. But as that happens the the smaller countries are going to default first. Just look at Sri Lanka and the total collapse of its government. It is a failed state. And coincidentally it owed a lot of money to China.
As worldwide defaults spiral out of control it’s the CCP who is exposed and is going to be bearing the brunt of that pain. But the instability caused by multiple governments going under is a threat to global peace and nowhere is that more apparent than Pakistan who was told by the IMF that they have only a few months until they are insolvent. This news has made already dire political situation in Pakistan is a full-on crisis and the West is highly concerned because the last thing anyone wants is a fight over who controls the nukes in Pakistan.
Like it or not the West is on the hook for this Evergrande debt. Our economy and supply chain is tied to China, our debts are held by China and our fragile peace with China depends on them having a stable government.
It’s important that you know what is happening in the world and that your money and livelihood is being used as pyramid blocks in a global get rich quick scheme. When it comes to financial stability, there is no “set it and forget it”. You have to actively manage your money and well-being. It’s time to be your own bank. Anyone else is just using you to line their pockets.
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