TRUMP IS RIGHT! China Is In Terrible Economic Condition; Cannot Afford to Lose the US Market
President Trump yesterday announced that the US will increase tariffs on China and then ordered all US firms to begin seeking alternatives to doing business with China!
The Chinese regime is in a lethal position and has only two choices.
The regime can either give the US what it wants or perish.
President Trump recognizes that China is in an all out war with the US in regards to information and economics. For years Western leaders have done nothing but negotiate into weak positions, never standing up to the Communist regime. Former US Presidents treated China like they did Russia 50 years ago, as their superior always giving them what they wanted and never standing up to their abuse and criminal acts.
It is different with President Trump. The President knows he has the authority and ability to inflict a fatal blow to the Chinese economy. The US is arguably in its best economic period in history while China’s economy is its weakest in 30 years.
The President knows that now is the time. China cannot handle the US tariffs while their economy implodes. They are on the brink of a massive economic collapse, so colossal that the regime is in danger of being dethroned!
A perfect storm is building in China. The excessive and extravagant construction projects, cash-flow challenges and lack of demand in China all could combine for a major financial disaster. Trump is right – now is the time to make a deal with China.
Over the past few decades, China opened its borders and corporations around the world fled to China due to its cheap capital and meager payroll costs. As a result, China’s economy exploded.
The Chinese were relentless in their efforts to obtain Western technology and grow their economy. They set up trade barriers and manipulated their currency in ways that helped China. The US was at a disadvantage in trade resulting in massive deficits in the billions.
Along comes the Trump Administration, the first administration to address China’s unfair trade advantage. The timing of Trump’s tariffs is not good for China as there are more pressing issues that must be addressed. President Trump is a shrewd negotiator and he obviously believes now is the time to encourage China to make changes to their trade barriers with the US. China may have no choice but to go with what the US offers to keep its economy afloat.
The more pressing issues for China surround real estate, in a manner similar to the US in 2008. As China grew, it invested in its infrastructure and in addition, it invested in large housing projects throughout the country. These efforts helped bolster China’s already fast growing economy.
The problem is that China over invested in these random properties all over China and these properties today remain empty.
(See below picture of real estate projects the middle of China (Hubei Province) – massive but mostly empty.)
There simply are not enough people in the area where these massive complexes were built that make enough money to afford living in these communities. It appears that the Chinese communists misunderstanding of supply and demand economics may be their downfall.
Some say, no problem, China will just move all the peasants to these massive complexes. This will be devastating. First of all China needs to feed them. Secondly, as we have learned in the US, people on the dole with no work tend to get involved in drugs and crime.
The human spirit needs a purpose – idle hands are the devil’s workshop!
These many properties throughout China sit unoccupied, and there is a cost to this. The amount of debt related to China’s over development is massive. The total amount is unknown with S & P estimating the amount not reported by local communities and banks being over $6 trillion.
China’s financial crash may make the 2008 crash in the US look small. The implications will no doubt impact the entire world. This is why China can’t afford to mess around with President Trump and must put together a treaty as soon as possible.
As China falls the US economy will be the one the world runs to and so the impact to the US will be a massive inflow of money resulting in rising markets due to capital infusions.