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Beijing, You Have A Big Problem - In Ten Charts
Back in September, when we observed that the "Chinese Commodity Crash Continues", we remarked that a full-blown deflationary episode is upon China as manifested by tumbling commodity prices (because with fixed investment accounting for well over 50% of Chinese GDP, the marginal price of the commodities that are used in capital investment tell us all we need to know about the true state of the Chinese economy), which would likely lead to a ripple effect on not only the prices of China's most demanded commodities, but on every hard asset around the globe.
With oil plunging roughly 50% since then, this modest forecast, which was obvious to anyone who didn't have voluntary blinders before their eyes, has now come true.
So where is China now?
Well, as we showed last Friday merely when looking at the recent dramatic capital outflows out of China driven to a great extend by the relentless surge in the dollar, a "QE In China Now Appears Inevitable." But it is not just rate differentials and capital flows that confirm that China's economy may be headed for a mini (in the words of Deutsche Bank) or a full blown hard-landing.
One thing that is far more disturbing than China's inability to create shadow debt at its historic pace (as a result of an unprecedented accumulation in non-performing loans) which to many is the primary culprit for the ongoing deterioration in China's outright economic growth, goalseeked as it may be by the Beijing politburo, was a statement by the Minister of Human Resources and Social Security Yin Weimin, reported by China Radio International, which paints a more dire picture for the world's largest (?) economy.
A top official says the Chinese government's employment goals will be difficult to meet because of the country's economic slowdown. Yin Weimin is the Minister of Human Resources and Social Security.
"I think we need to work hard to achieve the target of creating over 10 million jobs, as cited in Premier Li Keqiang's government work report. About 15 million young students need to find jobs this year. Half of them are college graduates, and the rest are those graduating from vocational, technical, or middle schools, as well as surplus labor force in the rural areas seeking employment in towns and cities."
The minister has also stated that the government will gradually raise the official retirement age, which is as low as 50 for some female workers, but stressed that any policy changes will be phased in over five years. As for China's state pension, Yin says finances are not dire, for the moment, but warned about challenges ahead.
"The pension fund faces tremendous pressure in terms of breaking even in the future. The balance not only involves some system factors like salary level but also factors beyond the system. For example, the aging population, urbanization, and economic development. And aging has a huge influence on the fund balance." By 2050, the number of Chinese over the age of 60 will rise to 39 percent of the population, from 15 percent now.
This is about as close to gloom and doom that China will ever come.
But one doesn't even have to dig hard to find proof just how bad the situation in China has become now that the credit creation machinery is sputtering and the government has to come outright and deny rumors of QE:
- CHINA MOF OFFICIAL SAYS NO SUCH THING AS CHINA QE: SEC. JOURNAL
We'll see about that in 6-12 months, but for now here is a quick and dirty visual summary why Beijing, you now have a very big problem:
First, the one everyone knows about: GDP.
Of course, GDP in China is whatever the Beijing politicians say it is (very much like in the US), so we dig deeper.
First, Consumer Sentiment:
Perhaps driven by, or resulting in, a collapse in retail sales:
... as well as stagnant and declining auto sales (watch out GM).
But it's not just the consumer though. The very heart of China's capital intensive economy - fixed asset investment - is now in V-Fib.

The chart above explains why demand for global commodities will continue to decline for the foreseeable future. The chart below, on the other hand, confirms Yin Weimin worries about a labor slow down: with Industrial Production slowing, there will be far less end-demand for manufacturing production and labor.
And all this leading us to the most important chart of all: home prices in China, which are crashing...
... at a pace faster than in what happened to US housing in the immediate aftermath of the Lehman collapse!
And the reason why this is such a problem for China is that unlike the US where the bulk of household wealth is in financial assets (i.e., the market), in China it is the reverse: nearly three quarters of all household assets are in real estate: real estate which is deflating, if not crashing, at an unprecedented pace.
Finally, here is a chart which leaves even us speechless. If indeed Chinese rail freight is indicative of underlying economic trends, then the hard landing is already here.
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china is SO FUCKED...working for a pittance, buying our debt, fake cities, Pollution. Plus our economy actually LOOKS transparent compared to theirs.
needs moar goal-seeking seasonal adjustments
Maybe they should start liquidating our debt and we'll see who's fucked?
Actually I think they have been trying over the years, what with buying up U.S. realestate and the purchase of compainies like Smithfield foods, but i dont think they can spend 2-3 trillion U.S. dollars anytime soon...stupid fuckers..
but, on the surface I do understand your logic..
still funny to note China has net sold $71 billion in US Treasury debt since July 2011 while running record trade surplus' with the US...and if counting the secondary locations China typically utilizes to make additonal Treasury purchases of UK and HK, they have net sold over $200 billion now over 3.5 year period...while taking in over $1 trillion new dollars...and what are they doing with the dollars? Looks like they are buying an awful lot of gold with those dollars.
http://econimica.blogspot.com/2015/02/fundamentally-flawed-chapter-6-debt.html
I'm honestly not sure who's in deeper trouble? Below is my guess what China's done...
http://econimica.blogspot.com/2015/02/fundamentally-flawed-chapter-8-10000.html
If they started dumping, the Fed would buy up everything they dumped and more (perfect excuse for stealth QE). They would have no choice- our Feral Government couldn't sustain very long if interest rates jumped a couple hundred basis points. Makes slowly rolling 18T in debt an increasingly painful experience to longer it goes on. And I gotta tell you, painful ain't anything that anybody in DC or the Marriner Eccles building has any stomach for. They'd print up that $2T faster than you could say 'collapsing ponzi scheme' and lay another trill on top for good measure.
Food for thought;
Public debt as % of GDP ranking by country of 161 and amount owed per person of population
#36 USA $46,000 per person debt
#134 China $1,300
#151 Russia $1,500
I would say the US taxpayer looks to be the most thoroughly fucked.
Not to be cavalier but didnt you get the memo? Taxes are so passe, we roll our own.....unless youre in Greece and Im on vacation.
I am not fucked .....yet
The rest of you guys are totally screwed however ! ;-)
hey, didn't you get the memo you should always lump corporate/household/government debt together so you can pretend China has a worse problem because they have high corporate debt but very low household or government debt(comparative to the rest of world)
what kind of doom&gloomer are you, making distinctions between public and private debt? all the uneducated people know all debts are the same.
It's so comforting to read about a country that is so much f.cked up than ours.
Wake the f.ck up!
We spend more than we produce.
Then the Federal Reserve just covers it up by printing US dollars out of their a.s!
Are we so stupid to believe that this sh.t can go on forever!
You know, a war here, a war there and there go a few Trillion $'s.
An entitlement here and there and there go another few Trillion $'s.
Is this what an EXCEPTIONAL people do???
"wake the fuck up"?
uh, ok....let me reduce this to a micro level for us two gurls.
If I live in a mansion totally isolated by a rather large moat with a HUGE technologically sophisticated supply of weapons. And you happen
to live in a shanty next door and produce shoes and shit for my kingdom, PLUS youre dumb enough to buy the "money" I just happen to print
into existence. TEll me who is "wide awake" and who is fucked?
Caveat" Im willing to learn
Yeah, a 7% GDP growth is terrible. Especially for an economy that actually produces stuff. Compare that with a 1% GDP growth in US, for an economy which produces mostly financialized crap. Much more bullish on our side, indeed...
Maybe my eyes need checking, but all those graphs are YoY CHANGE, and the only one showing negative was rail transport. Seems to me most of the others are as expected - economy grows from a low base, incremental growth slows over time as a % change.
Yeah, rail transport is a concern. House prices down to +5% YoY, surprised its still positive, and expecting negative some time soon.
But the overall picture is hardly of collapse as described by the article.
Am I stupid, or is this a goal-seeked analysis of the data?
The US spends roughly 200 dollars for every 100 dollars of income.
India spends roughly 150 rupees for every 100 rupees of income.
Anybody know what the corresponding figures are for China, Russia and the UK ?
So goes China's housing driven credit bubble...so goes the global driver of credit and debt since '07...depression in 3...2...1...with insane CB and government attempts to disguise reality
http://econimica.blogspot.com/2015/03/are-seeds-of-depression-sprouting.html
Beijings problem is now the worlds problem...from '07-'14, China on it's own (and non-governmentally) created more credit and debt ($21 T) than all advanced economies government debt and stimulus ($19 T) combined. China on it's own created over 1/3rd of all credit / debt since '07
are those real estates owned by chinese people at home? or maybe in US or in other countries as well?
Anyelse see the French flag on the article preview?
Their biggest problem is most of their wealth is in the UST. Faith, credit, and whatnot.
I understand that China has about 1.2 Trillion in USTs. I could be wrong. They certainly have other wealth that would dwarf that figure no?
I don't believe they have that much anymore. I think they have dumped and spent most, and made a deal with the US saying we won't tell everyone we have largely gotten out of the UST so there is not a frenetic dump, and you will continue to do what we like....like buy our shit and sell us your interior.
your direct source from the treasury, as of Dec 2014
(have not found the Jan-mar 2015 figures yet, either they are not yet published, or my research skills are failing)
1244bil at dec2014, even at steady drawdown they should still have 1.2+ tril right now
http://www.treasury.gov/ticdata/Publish/mfh.txt
$1.2 trillion is correct.
They have $3.7 trillion I believe in reserve currencies.
One wonders how much gold they really have , as well.
+1. Ding, ding, ding, ding, ding.
The currency volatility we are seeing are exactly what you'd expect, given the late stage cancer that is the USD and EUR.
The BRICS have NO choice but to get off that train, before it reaches the Station at full speed. If I were them, I'd do it THIS SUMMER, while DC, Kerry, Obama and Wall St are on vacation.
July 4th would look real look for Chinese Fireworks.
I hear the demand for Chinese formaldehyde flooring has been booming lately.
well, keeping the yuan (loosely) pegged to King Dollar might not be helping ...
Charts like this make me nervous about back channel conversations about the future between colluding government officials about how to globally screw everyone.
And China is supposed to save Gold bugs asses when they reset the world by hitching their Gold holdings to the Yuan in some respect? Not saying it can't happen, but deflation of credit money and bringing sanity to monetary affairs doesn't seem eminent in that part of the world.
As ZH states: "We'll see about that".
the recent McKinsey report had china QUADRUPLING debt from $7 trillion in 2007 to $28 trillion last year.
the words of scotty come to mind:
"Capt'n, i don't know how much more debt the planet can take!"
http://www.mckinsey.com/insights/economic_studies/debt_and_not_much_dele...
Beam me up Scotty its getting hot down here !
a "good" war to kill off millions of able bodied wannabe workers might help ...
Each war manages to thin the worker herd to enable something approaching full employement in the aftermath. Given our current workplace participation rate and growth of automation, it would seem we will need a particularly deadly war this time.
I don't buy the "A good war to kill of millions" model any more.
Too damn inefficient and materially destructive. You can get rid of billions with Bio-warfare. It's what TPTB will do in the end, instead of using nukes. Nukes are so "1960s".
Two positions should be taken: cash and fetal.
Things will get worse and worse and worse and worse absolutely everywhere until the world economy is reset (ie: taken off the USD)
Did the dinosaurs consider it a "reset" upon their extinction?
When you have an economy that is entirely based upon pillaging the manufacturing of every other country on the planet, and taking every single decent paying job from those countries in the process, leaving behind hundreds of millions scrambling for jobs that barely pay enough to afford food and shelter, just what the hell did they expect would happen? Hey, guess what, China! Nobody here has any money left to buy your junk!
Guess it's long past time for you to develop your internal markets, since your citizens are the only ones who have jobs now. What's that you say? They don't make enough to buy your stuff either?
Well, I guess we've arrived at the end-game of capitalism, thanks to the magic of unlimited "free trade." Billions of people around the world slaving for a pittance, while a few party leaders and oligarchs fight amongst themselves for the wealth of the planet. Too damn bad about having to eviscerate the middle-class in the process of looting all of the wealth of the world, but it just couldn't be helped, could it; people just had to have their $50 VCR's...
you've pretty much covered it ... papering over crap wages with subprime credit will only work for so long
Revolution in China. The factions in the CCP are busy purging each other at the moment.
Waiting on the D.C. revolution to start.
Free trade and real capitalism would have forced wages to parity around the world in a matter of a few years. Instead we have had policies that allowed debt to be used to offset lack of productivity, digging us into a hole of hell. If free trade and its effects had been allowed to present themselves as they really were, we would have seen protectionist barriers erected in weeks. Instead we tax the crap out of our businesses and citizens while allowing foreign goods and workers to stream across our borders unrestricted OR taxed. They have created a false economy in the name of capitalism knowing it would fail, all while blaming capitalism and anything that even smells like a free market.
It is so odd that so many will believe that human caused climate change is occurring due to 1/10th of a percentage of change in carbon in our environment, yet are oblivious to massive manipulations in our economy, which is as organic and natural as any climate, and not expect to see significant and potentially disastrous results. We have created huge imbalances that have been masked by debt and redistribution. We are taking firecrackers and stuffing thousands of them into a drum. They may seem safe in there but if and when they do go off, it will be something not seen before.
Hate to break the news to you Elliot, but the world no longer revolves around the U.S. consumer.
China has made business arrangements and currency swaps around the globe. They've not only invested abroad and are funnelling resources & products back to China, they also have those others very much interested in buying their Chinese products. Most of the world can't afford hi end Apple or Tesla products. Chinese products hit the sweet spot for many.
Bottom line is that the U.S. is no longer indispensable as either producer or consumer.
I don't mean to be cruel and I know there's all sorts of injustices in the prevailing systems.
But do recognize one thing .... the world has changed. A Chinese landlord or boss might very well be in your future.
Yes, rail against that, down vote me... that won't change a thing.
It happened because the U.S. consumed more than it produced.
QE in China now seems inevitable !? China has been pumping their own QE so hard it makes
all the other currency devaluations look miniscule. I only have one Krugerand to my name,
could be time to stack a few more ! Those charts dont inspire confidence.
Beastie the French flag is the other way round, sorry.
China is fine and dandy, folks. China is gonna kick some ass real soon.
Sum ting wong
Don't worry, it's just too many railways.
If Beijing has a problem, we have a fucking catastrophic nightmare on our hands if my experience has owt to do with it.
Ingerland has started to wake up, and if we have, you lot cant be far behind. Very nearly everyone I speak to daily doesnt just understand that they have been robbed, but lied to for is known as their collective lives. I see and feel something brewing under the surface. Dog help you when these fuckers kick off.
And its all down to the fact that everything you have ever known is a complete and fabricated lie, from pre-school right up to working life. Working for who? The grinding machine?
Resentment is in the air folks, they did this, the men who were born to rule, so lets see the cunts sort it owt.
Oh fucking dear......
;-)
And we are watching as their lies become ever more blatant and obvious. This is a sign of their arrogance but also our numbness. We are to the point where we not only believe their lies but do so knowing and understanding they are lies. This is eroding our dignity and when the time comes, when the denial can carry us no further, when we DEMAND accountability, IT WILL BE WAR. It will make the French revolution look like a tea party...with tea and crackers...not crackers like white dude crackers but saltines...oh never mind. It will be fucked.
A few years ago oldwood i would have agreed with you, but not now.
Look at the polling figures of UKIP, just for starters. If people cannot change the situation at the polls, whats left eh?
It will start here, just like I always said it would, best of luck mate, we are all going to need it.
And on that note, as I have said for some time, there are no political solutions to our problems, none.
This will end in violence, like it always does. This time though, we have the interweb as our collective friend, I fucking hope.
;-)
I agree with you, but not yet. The knife hasn't reached the bone yet, it will after the markets hit the fan by year end and everyone's 401K/IRAs get wiped out. Then we shall have our violence, when any semblance of hope for the future is exterminated.
I will add just for posterity,
You have fucking no idea what you have unleashed you cunts. The reckoning is on its way, and by Dog himself, you lot are fucked.
Dust to dust and all that jazz, eh?
Cunts
;-)
China will do fine.
Sure they will have a sharp recession, that's what makes long term economic stability, weeding out the excesses. The US in the 19th century had many of them; short term disatrous but long term growth.
The US is in the last phase of an Empire, financilization, China is America in the 19th century in the first phase of Empire.
Bejing has a problem, Japan has a problem, Europe has a problem, but luckily, everything is fine and dandy in the US... Wait. 95 T unfunded liabilities on top of 18T debt... Nope, it's all roger, nothing to see here... Now carry on ya'll...
No problem in China. Eveyting Ok in China. Just ask 50 cent blogga.
Probably not true because the 5 cents "blogga" doesn't think so...
Excellent China chart porn.
This article seems to miss the main point - the American people used to have most of their wealth in real estate until IT WAS STOLEN FROM THEM IN THE HOUSING FIASCO! The fact that most of it is now in financial assets is because the top 10% now own all the wealth, AND shows right where the present bubble is. and yeah, it is a real disaster for them that China's GDP growth is slowing down to like 5x that of the U.S. We should be so lucky. They have one advantage - a gubment that will do what it takes to keep them on top. I like their chances better than ours. Our political whores will just bleed us dry, wrap themselves in the flag and start a war to cover their crimes. Same as it ever was. They are trying the same shit with Russia as they did with Japan in the 30s. Fortunately the Russians know their history and aren't falling for it. They will just sit their and laugh while we destroy ourselves. Uh-oh, my off-topic-rant alarm just went off. Cheers.