China

[ICUMD]

From those diagrams, China is still very well interconnected. Further, a made in USA mandate will likely stoke inflation. 

 

No easy choices.

[Luke]

3 minutes ago, ICUMD said:

From those diagrams, China is still very well interconnected. Further, a made in USA mandate will likely stoke inflation. 

 

No easy choices.

Yep

 

 

[cubsfan]

26 minutes ago, Luca said:

Would be bearish for Chinese equities initially if Trump gets reelected...

 

And very bullish for US stocks...

[Luke]

2 minutes ago, cubsfan said:

And very bullish for US stocks...

How many Jobs will fall away if the US can't export to China? I mean yeah, US citizens will buy more expensive US made goods but what about Chinese buying US goods? Is it fundamentally that easy to say "fuck china" and be good? @cubsfan

[cubsfan]

8 minutes ago, Luca said:

How many Jobs will fall away if the US can't export to China? I mean yeah, US citizens will buy more expensive US made goods but what about Chinese buying US goods? Is it fundamentally that easy to say "fuck china" and be good? @cubsfan

 

It was very good for the country when he was the US President, and I see no reason why it won't be again. For one, the energy "jobs" will be a boon to the economy, and the destruction of useless regulations will fuel corporate profits and jobs. President Biden has strangled this economy with low paying jobs and inflation.

 

China can do whatever they like - I'm concerned about a thriving US economy. @Luca

[Luke]

 

 

 

[james22]

Once you start thinking about growth, it's hard to think about anything else.

 

https://fasterplease.substack.com/p/the-china-degrowth-syndrome

[Spekulatius]

Trade war getting serious - Cognac. They cleverly target French goods since French politicians were behind the EU antitrust/ dumping claim for Chinese EV sales in Europe.

https://www.reuters.com/world/china/china-launches-anti-dumping-investigation-brandy-imported-european-union-2024-01-05/

 

Porsche/ LVMH etc also have a lot to lose here.

[Ulti]

https://www.seafarerfunds.com/prevailing-winds/china-commission-testimony-2023/

U.S.-China Economic and Security Review Commission

China’s Current Economy: Implications for Investors and Supply Chains August 2023

 

 At least for me, a well thought out presentation of China's issues and how the US should interact.

 

[Ulti]

https://www.seafarerfunds.com/prevailing-winds/

 

Not an investor in the fund but some occasional  commentary  on China financ\econ (Does not discuss funds).

[Ulti]

https://www.thewirechina.com/

A paid site but seems well worth it if you are investing in China

[james22]

US intelligence indicates that President Xi Jinping’s sweeping military purge came after it emerged that widespread corruption undermined his efforts to modernize the armed forces and raised questions about China’s ability to fight a war, according to people familiar with the assessments.

 

https://www.battleswarmblog.com/?p=56913

 

Has to make action against Taiwan less likely.

 

[Luke]

https://www.bloomberg.com/news/features/2024-01-09/if-china-invades-taiwan-it-would-cost-world-economy-10-trillion

 

https://www.taiwannews.com.tw/en/news/5075352

 

TAIPEI (Taiwan News) — A Chinese invasion of Taiwan would cost the global economy US$10 trillion (NT$311 trillion), equivalent to 10% of global GDP, higher than the Ukraine war, COVID-19 pandemic, and the 2009 global financial crisis, according to a Bloomberg Economics estimate.

 

 

China's relations with major trading partners will be disrupted and it will be unable to obtain advanced semiconductors. As a result, its GDP is expected to suffer a 16.7% slide in the first year.

The U.S. GDP is expected to slump by 6.7% in the first year. Despite being far from the center of the conflict, the U.S. faces significant risks due to its reliance on the Asian electronic supply chain, particularly with companies like Apple Inc.

The world's GDP is projected to drop by 10.2% in the first year, with South Korea, Japan, and other East Asian economies suffering the greatest harm.

 

According to Bloomberg Economics research, if a war breaks out in the Taiwan Strait, the potential global GDP losses could surpass those incurred by the 2020 COVID-19 pandemic, the 2009 global financial crisis, the 1991 Gulf War, the 2001 U.S. 9/11 terrorist attacks, and the 2023 Israel-Hamas war.

Edited January 12, 2024 by Luca

[Luke]

https://www.scmp.com/news/china/diplomacy/article/3248301/belgian-prime-minister-meets-xi-jinping-beijing-vows-oppose-decoupling

[Luke]

https://www.bloomberg.com/news/articles/2024-01-12/tencent-added-back-by-3-billion-top-asia-fund-despite-china-s-gaming-rules?srnd=technology-vp

 

$3 Billion Top Asia Fund Bets on Tencent Again Despite China Gaming Rules

 

Federated Hermes Asia Ex-Japan Equity Fund, which beat 83% of its peers for the past three years, made the purchase in the new year, even after China released a draft rule on gaming restrictions in December. The investment reflects the fund’s optimism over the nation’s beaten-down market, where valuations are “absolutely incredible,” said Jonathan Pines, who manages the $3.1 billion fund.

“We are buying it now because of its very cheap value,” he said in an interview Wednesday, referring to Tencent’s shares. Pines’ fund sold most of its shares in Tencent as well as in Taiwan Semiconductor Manufacturing Co. about a year ago.

Edited January 13, 2024 by Luca

[james22]

15 hours ago, Luca said:

https://www.scmp.com/news/china/diplomacy/article/3248301/belgian-prime-minister-meets-xi-jinping-beijing-vows-oppose-decoupling

 

 

[mattee2264]

So China is a bit of a basket case and outside some of the tech companies is considered un-investable by most investors.

Question is what impact will Chinese economic malaise have on the ROW and specific stock sectors?

 

The failure of China's reopening has clearly depressed commodity prices as China drove the super cycle.

Possibly some benefits for other exporters that can pick up some of the slack.

But maybe some contagion to neighbouring countries such as Japan?

Probably not great for Apple and Tesla which unlike the other Mag7 countries have a heavy exposure to China.

Definitely not good for luxury goods companies (which we are already seeing in results of Burberry/LVMH) 

 

Any other thoughts?

 

 

[Luke]

https://www.scmp.com/news/china/diplomacy/article/3248661/chinas-economy-beat-target-52-growth-2023-premier-li-qiang-tells-davos-forum?module=top_story&pgtype=homepage

 

China’s economy beat target with 5.2% growth in 2023, Premier Li Qiang tells Davos forum

 

 

[mattee2264]

US grew the exact same amount Q3 (before revisions). 

 

I think economic data is pretty suspect and subject to a lot of political motivation in both countries. As a famous politician once said "It's the economy stupid". 

[Joseywales]

Is there anyone on this board who currently resides in China or has lived there in the recent years? I'm interested in gaining some perspective from someone with firsthand experience.

 

From the outside it seems like the sky is falling and people much smarter than me are predicting doom and gloom for the next 50+ years with projections such as demographics, debt, labor, housing crisis etc... 

Edited January 17, 2024 by Joseywales

[hillfronter83]

Just came back from my two-week trip to China. It's the first time seeing my family and friends in more than four years. Stayed in a small city near Shanghai and travel around in the region. Here are some observations:

 

• Overall economy is very challenging, although some high end restaurants seem to be doing fine.
• real estate will be doomed for years to come according to a real estate company executive friend. Even rural areas have a lot of high rise apartments (around 30 stories). I suspect these will be very costly to maintain and most Chinese are known for their frugalness. Don't feel good about the value of these building in 20 years. and most people i know already have multiple apartments.
• world class infrastructure everywhere, ie high speed rail, subway, etc. some of those projects were built to increase land value. While they look great, I'm not sure about the economic soundness. They are also very costly to maintain.
• e-commerce is very active, many people do grocery online nowadays.
• It's hard to increase consumption. most wealth is concentrated in people born in 60s, 70s. They grew up frugal and most people don't feel the desire to consume. The biggest spending is on food, but you can only eat 3 meals a day. secondly, the income decease is very real. a few years ago, local government employees were making over RMB300k, now it's about half, sometime lower.
• most people are stressed except the retirees. rich people (some centimillionaires) are worried about their shrinking net worth. and poor people are working 10-hour days to make their mortgage payment.
• although national birth rate are low. people i know are still having kids. but it could be they are local in a small city that is more affordable.
• most of the wealthy people's kids are living/studying in US or Europe.
• some of my friends, who used to drive BMW, Audi, are now driving Chinese made EVs. 

 

[Joseywales]

2 hours ago, hillfronter83 said:

Just came back from my two-week trip to China. It's the first time seeing my family and friends in more than four years. Stayed in a small city near Shanghai and travel around in the region. Here are some observations:

 

• Overall economy is very challenging, although some high end restaurants seem to be doing fine.
• real estate will be doomed for years to come according to a real estate company executive friend. Even rural areas have a lot of high rise apartments (around 30 stories). I suspect these will be very costly to maintain and most Chinese are known for their frugalness. Don't feel good about the value of these building in 20 years. and most people i know already have multiple apartments.
• world class infrastructure everywhere, ie high speed rail, subway, etc. some of those projects were built to increase land value. While they look great, I'm not sure about the economic soundness. They are also very costly to maintain.
• e-commerce is very active, many people do grocery online nowadays.
• It's hard to increase consumption. most wealth is concentrated in people born in 60s, 70s. They grew up frugal and most people don't feel the desire to consume. The biggest spending is on food, but you can only eat 3 meals a day. secondly, the income decease is very real. a few years ago, local government employees were making over RMB300k, now it's about half, sometime lower.
• most people are stressed except the retirees. rich people (some centimillionaires) are worried about their shrinking net worth. and poor people are working 10-hour days to make their mortgage payment.
• although national birth rate are low. people i know are still having kids. but it could be they are local in a small city that is more affordable.
• most of the wealthy people's kids are living/studying in US or Europe.
• some of my friends, who used to drive BMW, Audi, are now driving Chinese made EVs. 

 

Thank you for your insight! Much appreciated  

[james22]

4 hours ago, hillfronter83 said:

 

although national birth rate are low. people i know are still having kids. but it could be they are local in a small city that is more affordable.

 

According to official figures released on Wednesday, Chinese women had fewer than half the births in 2023 than they did in 2016 — the year Beijing finally repealed that slow-rolling disaster known as the One-Child Policy.

 

https://pjmedia.com/vodkapundit/2024/01/17/chinese-women-are-voting-against-communism-with-their-uteri-n4925570

[Ulti]

2 hours ago, Joseywales said:

most people are stressed

Thank you for your personal insight..

I am curious; you did not touch base on local feeling on politics social media heavy handed government officials in the people’s business,etc…. What’s contributing to the stress besides the economy…And I’m curious as to how they feel about the west and US in particular….( regular folks are great gov and gov officials suck.. haha)

[Thrifty3000]

Regarding the China real estate crisis I’ve recently read/heard fun facts along the lines of:

 

- China has approximately 80 million vacant homes, which is MASSIVE relative to the country’s 450 million households.

- building 80 million excess homes is by far the biggest overallocation of resources in modern history.
- Over 90% of the Chinese population already owns one or more homes.

- Only 7% of the population has investments in securities/financial assets.

- 30% of China’s economy has been tied to real estate.

- The vast majority of household wealth is tied up in real estate.

- Due to fear of the consequences of housing price declines, the CCP has instituted price controls on vacant houses.

- Because prices aren’t allowed to decline, retirees and others are unable to sell the properties to fund their retirements, etc.

- When the prices eventually adjust, homes in key areas of China could be worth 70% less. (By comparison the GFC was a nothing burger). 

- Also, because prices are artificially high, hundreds of millions of people don't know how much life savings they have left.

- And, the major state-run banks are loaded up with real estate loans.
- Because of price controls and an imploding economy, a large and growing percentage of the population is increasingly disgruntled.

 

So, that sucks.

 

Edited January 18, 2024 by Thrifty3000