China’s Economic Status for Investors in Q2 2022
The Good News for China’s 2022 Economy
- Germany and other western European countries are saying they will try not to buy Russian oil, which leaves more oil for China.
- “Only 15% of remaining real estate holdings are at risk,” per the CCP.
- The CCP is “forecasting another 2022 5.5% GDP as well as for years to come.”
The Bad News for China’s 2022 Economy
- Power Outage Ramifications – Due to frequent power outages, many foreign manufacturers are currently moving, or considering moving, their production from the PRC to India, other South Pacific countries, and back to North America by the thousands.
- One Reason for the Power Outages – The CCP banned many Australian imports due to Australia asking for an investigation on the origin of the COVID virus. Mistakenly, included in the banned list was Australia’s coal. Australia is China’s primary importer of coal for the PRC’s 1,800 coal plants to heat as many Chinese homes as possible and reduce blackouts to manufacturing plants as much as possible. Going into warmer months will reduce demand. The CCP will keep its official ban on Australian coal but unofficially is now importing Aussie coal due to no choice.
- Millions of Chinese Jobs Eliminated and the Ramifications – With these companies leaving the PRC or failing, the macro-effect of losing millions of jobs and the disposable income of millions of Chinese workers may make many local economies continue to spiral downwards further. I’m not sure how the 5.5% GDP is attainable. As an investor, you will need to predict the future GDP % and the ramifications of your investment decisions. (With great restraint, that is the nicest way I can explain this point!)
- CCP take-over of Supply Chain. The CCP annexed the massive Alibaba in late 2021 and 2022. Alibaba was China’s version of Amazon and one of the most significant supply chain providers globally. Jack Ma disappeared for a few months and did reappear in Hong Kong. However, he is no longer involved with Alibaba. The CCP’s blatant take-over of Alibaba is another “chilling effect” on Chinese and foreign companies.
- What of left of the Chinese Middle-Class Disposable Income? Many millions of Chinese middle-class have lost their multi-generational life savings in high-risk real estate deals gone bad via Evergrande, Fantasia, China Properties Group, Modern Land, and Sinic Holdings, to name a few. Again, with the Chinese middle-class being crushed financially, this will affect China’s internal macroeconomic short-term and mid-term demand.
- On top of that, then the Natural Disasters. In 2021, many catastrophic floods hurt food production and left many towns wiped away. CCP is trying to import as much food as possible. Reliable food production and importing data are hard to find. The food angle may be an under-publicized area for investors to leverage and consider.
- Many banks in China have failed or have less funds to lead. With money being tight, many manufacturing companies can no longer finance the purchase of all the raw materials they need to produce their products and fill orders.
- PRC Local Governments Dire Problem. Since most PRC local governments’ yearly budgets are based on property sales fees and transactions, with the reduction of capital from the banks and the balance sheet losses from the middle class, there will be reduced demand for property. The reduced demand for property may cripple or devastate some local governments and the service they provide to their people. The result will be a further economic and social spiral downward.
Geopolitical and Military Developments that may impact investors.
- NATO is More Unified than Anyone Expected. With Russia’s invasion of Ukraine, the CCP has seen the unification of NATO. Therefore, if the NATO coalition holds, this unification factor needs to be included in the CCP’s calculus on the timing of the pending invasion of Taiwan.
- US Marines Hidden in the South Pacific with Anti-Ship Missiles. The US Marines are putting anti-ship missile platoons on many islands in the south pacific.
- US Marines Hidden in the South Pacific with F-35Bs with Anti-Ship Missiles. It follows that the US Marines can rotate the Marine versions of F-35s in the south pacific islands as well. Both the Marine anti-ship missiles and the F-35s with air to air and anti-ship missiles are lethal to PLAN (Peoples Liberation Army Navy) warships.
- It has been said that the “F-22 has the radar cross-section of a ping-pong ball or bumblebee, and the F-35 has a radar cross-section of an orange.”
- That means, in most cases, the F-35B can launch and land without the need of a runway and can approach and fire its anti-ship missiles without being detected.
- They also carry the US “state of the art” LSAM anti-ship missile.
- This is a real risk to PLA warships, warplanes, and strategic CCP plans.
- The PLA and PLAN have made new technical strides in laser weapons.
CCP’s Biggest and Scariest Problem in There Eyes | The CCP’s “Mandate from Heaven” Real Problem
- “The Mandate of Heaven is a Chinese political philosophy that was used in ancient and imperial China to legitimize the rule of the King or Emperor of China.”
- The Chinese “Mandate from Heaven” is a real thing in Chinese culture.
- The problem is the above geopolitical, economic, and natural disasters. If the Chinese people blame the CCP, the narrative may begin that the CCP has lost the “mandate from heaven,” then their power may be at real risk.
- Once the Chinese people believe that the CCP no longer has a “mandate from heaven,” the CCP will lose a percentage of its ability to lead the masses.
In Summary for Investors
- There is great macroeconomic and geopolitical risk in the investing world today.
- Inflation needs to be considered and leveraged as an investing factor
- The investor tips are that China needs food, oil, and coal. The CCP is losing manufacturing fast due to electricity shortages and internal supply chain short-term loans to buy raw materials.
- The Chinese middle-class has lost significant disposable income due to lost jobs, tight banking, and lost housing investments.
- In change, there is always opportunity. In great change, there is also a great opportunity.