Current situation in China (ft. perfect storm from China)

🚨Current situation in China (ft. perfect storm from China)ㄷ
(What’s happening in China right now // ft. Perfect Storm from China)

Recently, China announces large-scale stimulus package as recession looms

• Lower reserve ratio by 0.5%
• RRP rate cut by 0.2% on the 7th
• a mortgage rate cut
• $142 billion injected into the bank
• Forced further rate cuts suggested

In response, retail investors are buying stocks as if unprecedented stimulus from the pandemic era is back, but there is something serious wrong with China right now, and it is too late for stimulus

In fact, the whole mess started with a huge crash in real estate in China. Indeed, the bankruptcy of Evergrande, one of China’s largest real estate giants, has already become a thing of the past. The real estate market in China is now down more than 80% from its all-time high below 2008 levels. As a result, house prices have actually fallen over the past five quarters, resulting in widespread deflation

While the world is dealing with rampant inflation, prices in China are falling, albeit not as fast as the Titanic sank in the Atlantic Ocean. Ray Dalio, who sold a large number of Chinese stocks in the second half of last year, pointed to the recent situation in China as “more difficult than in Japan in 1990. He stressed the need for restructuring of China’s economy. In fact, consumers are anxious not to spend and, as a result, businesses are struggling.”

In any case, the Chinese stock market surged as if the all-time stimulus package from the COVID-19 pandemic had resumed in March 2020 after the news of the Chinese authorities’ strong will to boost the economy. In fact, the Chinese stock market recorded its biggest rise since 2008. Interestingly, the U.S. market also surged as the S&P 500 index approached 5,800 on news from China

However, the problem is that stimulus alone is not enough to revive the economy, as many countries learned from the COVID-19 source lockdown measures in 2020. A bigger problem is that with China’s property index down more than 80%, there is an urgent need for a serious restructuring

In the end, to end deflation, both the people and businesses need to restore confidence in the economy, and the sacrifice will be huge. As a result, China’s nominal GDP is expected to shrink and fall into a recession. China’s current level of economic stimulus may be too late to avoid a recession by 2026

In conclusion, the latest stimulus package could signal the beginning of China’s long-running economic recession. Therefore, I conclude that the onset of a recession in China will have a significant impact on the global market and the global economy, including the coin market, in the years to come, and that China’s full-fledged recession could trigger a downward cycle

*This column paraphrases and adds the thread of The Kobeissi Letter, and the link to the original thread is as follows
x.com/KobeissiLetter…