Eight years ago, almost to the day, the average Chinese person on the street decided to start investing in the sharemarket. It didn’t end well. The Shanghai Index went from 2000 points up to over 5000 points a year later, followed by a spectacular crash where the market index basically halved in double-quick time. The reason this happened was the lack of any experience in investing by the people of China.
In the West we have been investing money for centuries – sometimes it works, sometimes it doesn’t. But everyone has parents, grandparents, crazy uncle or next-door neighbour who have a lot of experience playing the sharemarket, buying rental properties or whatever. It’s part of the culture and the anecdotal mentoring from family or friends often pays huge dividends.
The Chinese were peasants for millennia. Having starved under communism, they didn’t have such guidance – hence the mind-boggling stuff-up that occurred. They were not prepared to accept they’d made a huge mistake, so the Communist Government decided to bail everybody out. All losses by investors were ‘made good’ to the tune of (at least) $5 trillion US dollars (not a misprint, that was a t for trillion).
Except they didn’t have the money. Who has an amount of money equal to three times the Australian economy sitting around? If they did have the money (which I doubt), then China basically blew all the wealth accumulated since freeing up their economy. Since then, it’s my view they have been playing a game of Keeping Up Appearances; accordingly, I have been waiting for various economic disasters to befall China – nature taking its course – since 2015, and it is now happening.
The Chinese economy is in freefall: the property market is imploding due to foolish lending and development projects – also due to not having generations of people buying rental properties or ‘spec’ building, as in the West. Various economic indicators in China are sending them quickly broke. It’s reminiscent of Japan in 1990 when their party ended.
My point in mentioning all this is to suggest that recent actions by the Chinese Government are all a bluff – trying to pretend they are still the ‘coming nation’, when in fact the game is well and truly up.
The bellicose talk, alone, gives them away. As any half-decent military consultant can tell you, the Chinese navy is a joke (hint: their aircraft carrier isn’t even capable of landing any planes on it). Add to that the videos and movies they make about their army’s prowess and possessing weapons that almost certainly don’t work (just ask the weapons manufacturers; they’ll tell you they haven’t included the bits that do work).
Then there are the grand plans that never eventuate, such as rebuilding the Silk Road or certain nonsense projects in Africa; even this business with Pacific Island nations in recent days aren’t the actions of a major power but more like someone trying to pretend to be so. Keeping up appearances.
China blew its wealth saving face after the sharemarket crash. The rest is quickly going down the gurgler with a property crash, and their economic indicators – without exception – are disastrous and getting worse. For several years I’ve been expecting all this to occur, as you can’t just wish away sharemarket losses as they tried to do. So sit back and watch the fun now they’ve arrived at the edge of the cliff.