China’s economy and its challenges are complex. Let me jot down some notes:

Overall Trends

Xi Jinping assumes office 2013
Economic reform started 2014-15, but Chinese equity markets crash Aug 2015, so reforms stop

-harsh capital controls: strict control of foreign exchange transfers, especially for purchase of int’l shares, real estate
-provincial, city gov’ts borrowed huge amounts, now deleveraging campaign
-anti-corruption campaign, increased importance of CCP -> slowed growth
-stock market down 30%
-real estate bubble
-trade war and tariffs with US
-aging of labour force
-pharmaceutical scandals
-XJP wants total allegiance to CPP for all people, companies
-yuan devalues 9% to just over 7:1 US

Small, Medium Sized SME private Businesses

-high tax, just had a tax hike
-economy slowing
-trade war and tariff, for exporters means front loading of orders in 4Q 2018, but few in 1Q 2019
-deleveraging starves bank loans
-P2P financing clampdown means no access to unregulated capital
-dearth of capital forces SMEs to look to SOEs for buyout
-private companies pledged shares to banks as collateral. Stock market down 30%, collateral covers less of loans
-employes 80% of people

State Owned Enterprises SOEs

-still have access to state owned bank capital
-still has priority of gov’t
-gov’t supported

People

-education still very expensive
-health care still very expensive
-economy slowing, especially for export companies
-possible unemployment increase
-concern about immunizations, food quality

Links

Kevin Rudd, Aussie ex-PM’s view on China economics and reform

2018 Dec 29 China is not the economic superpower people think. That’s why it’s important to wait it out.: Constraining China
-wait it out
Strategy:
1. bargain hard on trade: remove those barriers to fair trade
2. act multi-country, united: bring all countries together
3. increase economic pressure, this divert some of their power to the fight, draining what is left

2019 Jan 07 Don’t count on China to toss the global economy a stimulus lifeline in 2019