With perhaps 93% of Stores closed, is China in a deflationary crash?
This is perhaps the most significant item I came across yesterday
93% of Stores Closed? China’s Economy Is Finished! Top Districts in Beijing, Shanghai Deserted
Data from Redmeal shows that as of May 10, 2023, there were about 201,570 catering establishments in operation in Shanghai, with high-end restaurants with an average spending of 500 yuan or more accounting for 1.35%, and those with an average spending of over 1,000 yuan accounting for 0.31%.
At that time, there were more than 2,700 high-end restaurants with an average spending of 500 yuan or more in Shanghai. Insiders in the industry revealed that the existing physical stores are still closing down in large numbers. One set of statistics shows that the closure rate of physical stores in China is as high as 93%.
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The people who speak about a multi-polar world talk about China can see nothing to criticise in the country and that China is the economic powerhouse that is going to free the global south.
But is it? Really?
I find some of material from George Galloway (describing Falun Gong as a terrible cult ) and Brian Beleltic (who used to go as ‘Tony Cartalucci’) particularly offensive to me. I was once cancelled by Dmitry Orlov for criticising the CCP.
Despite the strategic alliance, I have to make a distinction between China and Russia. Russia appears to be doing quite well economically - if it wasn’t we would know.
Russia, despite being a nation-at-war, with understandable wartime censorship is still a far more transparent country. There are still bloggers who seem to be able to say what they like and I detect no censorship of any kind in the Russian search engine, Yandex that I use, which stands in contrast to every single search engine in the West.
Russia does have a problem with corruption, something that is never mentioned by the usual crowd - something that has become apparant in the last few days with the replacement of Shoigu with Belousov as Defence Minister (Shoigu’s deputy was arrested for corrupton).
Russia is a large country and there are many, many problems, especially in the regions, thousands of kilometres from Moscow.
However, the comparison with communist China could not be more stark in my mind.
Another distinction I make is between China on the world stage (geopolitically) and the situation within China.
I do not think that the following video is just anti-CCP propaganda. It just shows what is there, happening, in the economic power house of Shanghai, not somewhere on the periphery and paints a picture that is somewhat similar to the stagnation happening in the West.
So here it is, for your consideration
From Zero Hedge, yesterday.
China Is Facing An Epic Deflationary Crash That It Can No Longer Hide
It has long been understood that most financial data provided by the Chinese government is propaganda designed to misrepresent the country's true economic circumstances. At best, their statistics provide half the truth and the rest has to be discerned through deeper investigation. When systemic crisis events take place in China it usually comes as a shock to much of the world exactly because they expend considerable resources in order to hide instability behind a thin veneer of fabricated progress.
The biggest story in China in the new millennia has been nation's debt explosion. China's debt-to-GDP ratio is currently estimated at nearly 300% (official numbers), with most of the liabilities accrued in the past 15 years. Chinese debt spending accelerated in part because of the global credit crash of 2008, but a lesser known factor is their entry into the IMF's Special Drawing Rights basket. The process started around 2011 and the IMF requires any prospective applicant to take on a wide array of debt instruments before they can be added to the global currency mechanism.
By the time of China's official inclusion in the SDR in 2016 they had nearly doubled their national debt. After 2016 debt levels skyrocketed.
The debt problem is harder to quantify in China because of their communist structure posing as a free market structure. Corporate debt in China has to be included into the national debt picture because of state funded enterprises and the level of government investment in property and industry.
It is here where we find the most blatant warning signs of deflationary crisis, particularly in property markets and infrastructure development. The CCP has put a "great information wall" in place to prevent accurate data from leaving the country, but some reports on China's failing infrastructure still escape. China's export market is crumbling in the past year, in large part because western consumers are tapped out due to inflation. However, what they prefer not to mention is the damage they did to themselves after three years of near constant covid lockdowns. This destroyed their retail sector and things have only grown worse since.
Then there is the real estate market which has suffered extreme deflation over the past decade, with a larger drop expected in the next year. China deliberately popped the housing market bubble as a means to disrupt what officials considered out of control speculation. This led to the now famous "ghost towns" dotting the Chinese landscape; thousands of neighborhoods and high rises left unfinished and empty after development companies went bankrupt.
One of the more disturbing trends in China, though, is the effort to use large infrastructure projects to hide the nation's deflationary decline. China's propaganda machine is pervasive across the world and most people in the west assume that China is on the cutting edge of progress because of videos on social media. In reality, the Chinese have been building cheaply constructed and poorly designed false-front landmarks that look technologically impressive on the surface but fall apart in a matter of months.
China is planning another 1 trillion Yuan ($137 billion) in infrastructure projects in 2024 alone, but the debt cycle and the deflationary spiral seem to be catching up with them. The IMF claims that China's economy has stumbled but is "unlikely to fall", yet, with their global exports falling, property markets plunging and consumer activity in decline it's hard to see how they can continue without a depression-like event in the near future.