Hao Zhou, chief economist at Guotai Junan International, discusses investors’ reaction to China’s latest stimulus measures and the effect they could have on the overall economy.
Hao Zhou, chief economist at Guotai Junan International, discusses investors’ reaction to China’s latest stimulus measures and the effect they could have on the overall economy.
China faces a dire situation. On one hand they want to maintain dollar peg but on other hand they want to increase liquidity. if they prop up property market, all new credit will get sucked into property. if they dont give stimulus to property, local govt debt will skyrocket as property accounts for 60% of their revenue. so stimulus will get shorter in duration for every new cycle. Chinese Credit growth simple has to mirror US credit growth. if they overshoot that then the currency will depreciate. So if US credit growth is 4%, and chinese overall credit supply is 70% of US, then China can increase credit growth by 6% only. Only way out is to depreciate the currency , so that they can have some room to increase money supply. If they really want to get rid of the dollar peg, then they have to writeoff loans ( it means also deposits). Thats will be mobs on street and CCP will not be in power. So they try the impossible. Increase credit growth and clamp down on FX transactions. Which is becoming increasingly difficult
Because Xi and Globalists Reset and Redistribution approach sucked the working class dry.. Only one way for Stakeholders and Shareholders to absorb some of the effect in pandemic loss instead of delaying and pushing the capitalized costs to punish the consumers!
The problem with Western analysists on China’s economy is that they measure it in USD. China measures its economy in RMB, and the exchange rate being pegged paints two very different pictures about China’s economy, one looks pessimistic, the other one optimistic. You can make China’s economy look like anything depending on what you measure it with.
Well regardless of the currencies, Globalists Reset& Redistribution look more like a proven doomed economy.