China is Already Close to a RecessionThat's why metal prices have sunk. This isn't about retail consumer confidence. Last week's value of 6.7% GDP growth for China is likely false. It's probably closer to 1% based on primary energy use. The problem with dictatorship is that government must never appear weak. They enjoy near absolute control over both mainstream and social media. They can project any image desired through fudged statistics. Who is going to tell the king GDP growth it's not 6.7%? Not if you value your life.
It's all a lie. Chinese debt, including shadow banking, is now estimated at 400% GDP and growing. It's growing faster than GDP. And it keeps growing because government continues to throw money, in the form of more debt, at unprofitable businesses. That is the cardinal sin of capitalism. You must at a minimum preserve capital. They can't keep it up forever.
Tariffs will put incredible pressure on China. They need those USD to prop up the yuan. A trillion dollars in US treasuries may sound like a lot, but it's not nearly enough when you have this kind of debt level. Yet tariffs are not the primary issue. It's the growing mountain of Chinese bad debt. Tariffs may accelerate the process, but a day of reckoning must arrive regardless. I hope Chinese leadership comes to realize their position is untenable, and implement the necessary reforms.