Andy Xie

[winston]

How property-hungry Chinese millennials and shadow banking could fuel a financial crisis

Millennials are borrowing heavily to invest in property, counting on the government to keep property prices buoyant.

However, the rise of shadow banking means the government lacks the levers it has historically pulled to prevent a debt crisis

by Andy Xie

China’s household debt has roughly quadrupled in the past five years to 62 trillion yuan (US$9.4 trillion).

Non-performing loans hit 40 per cent in 1998.

The 2015 stock market crash was largely prompted by shadow banking firms liquidating their positions.

The funds from such shadow lenders probably exceed 10 trillion yuan, much bigger than the subprime market that triggered the 2008 financial crisis.

The leverage-fuelled lending for stock market speculation in 2015 was one example.

The latest are the bankruptcies of residential rental operators. These entities rent properties from owners and re-lease them to end users, often at a loss. They keep cash flow positive by borrowing from shadow banks against the rental income.

Source: SCMP

https://www.scmp.com/comment/opinion/ar ... king-could

[winston]

Covid-19 market bubbles, a creation of the distorted global economy, cannot last

A global pandemic and the devastation it has wrought on the real economy hasn’t stopped stock and property markets reaching new heights

Despite the Fed’s best efforts, such asset bubbles cannot be sustained. Could political instability in the US be the shock that deflates the bubbles?

by Andy Xie

The pandemic is projected to have caused the global economy to decline by about 5 per cent in 2020.

Despite the combined loss of one-tenth of the global economy, global financial markets ended the year higher than before the pandemic.

A bubble usually ends with a shock, such as an accounting scandal or rising interest rates.

Source: SCMP

https://www.scmp.com/comment/opinion/ar ... omy-cannot

[winston]

Why the GameStop stock frenzy is likely to end in financial crisis

The drama unfolding around GameStop is a tale of the internet levelling the playing field between at-home retail investors and Wall Street. The US stock market may become as retail dominated, and as volatile, as the Chinese market

by Andy Xie

Source: SCMP

https://www.scmp.com/comment/opinion/ar ... ial-crisis

[winston]

Ukraine crisis could spell a drawn-out war that will hit financial speculators hard

With no swift resolution to the Ukraine war in sight and a risk of the conflict spreading, markets must wake up to the reality of massive energy and food supply shocks

The likelihood that financial bubbles will burst, triggering a global recession, is growing by the day

by Andy Xie

Russia and Ukraine together account for about 30 per cent of the global grain supply.

The price of wheat has risen around 30 per cent since the war began.

Source: SCMP

https://www.scmp.com/comment/opinion/ar ... e=homepage

[winston]

With US-China tensions rising over Taiwan, the global economy must brace for geopolitics trumping economics

The Taiwan crisis has deepened the divergence between China and the US-led West

While markets might believe that trade is the new mutually assured destruction, history tells another story

by Andy Xie

Source: SCMP

https://www.scmp.com/comment/opinion/ar ... e=homepage

[winston]

Why ending zero-Covid won’t revive China’s economy

Even before the pandemic, China faced a turning point in its growth model as investment returns began to shrink

As long as policymakers prolong the needed transition to a consumption-based economy, growth will remain low for years to come

by Andy Xie

Source: SCMP

https://www.scmp.com/comment/opinion/ar ... as-economy

[winston]

Without reforms, China can still afford the time to muddle through its economic problems

China won’t reach for harsh reforms, choosing instead to gently deflate its property bubble and absorb overcapacities, as it waits for demand to return

This could take a long time but China has the luxury to dither: its manufacturing continues to gain in competitiveness and there is no real substitute for it

by Andy Xie

Source: SCMP

https://www.scmp.com/comment/opinion/ar ... e=homepage

[winston]

The US dollar super bubble may finally be popped – by the Israel-Gaza war

The effects of war and inflation could send US financial markets into a tailspin, forcing China to completely ‘unpeg’ from the dollar – which could then collapse

by Andy Xie

The escalating war in the Middle East could be the straw that breaks the back of the US dollar super bubble.

As oil prices rise and the US budget deficit widens, bond yields will surge.

This is likely to pop the stock and property bubbles in the US, then everywhere else.

China’s surging trade surplus and wage inflation will only add pressure to its unofficial dollar peg. Once that “peg” breaks, the dollar will collapse.

Source: SCMP

https://www.scmp.com/comment/opinion/ar ... 053dbbd98a

[winston]

A booming US economy and a Chinese crash? Think again

China is using its downturn to deflate bubbles and raise productivity while the US is doing the opposite – feeding the Bernanke bubble and hoping for an AI cure for falling productivity

by Andy Xie

Source: SCMP

https://www.scmp.com/comment/opinion/ar ... hink-again

[winston]

A bright idea for China: jump-start the economy with solar power push

Beijing is right not to step in to rescue the ailing property sector, which would only reinflate the real estate bubble

If it must use stimulus, it should dedicate around 3 per cent of GDP a year to boosting solar energy, which could make the country energy and food independent

by Andy Xie

Source: SCMP

https://www.scmp.com/comment/opinion/ar ... e9e8cbdc9a