YOU WILL BE WITNESS TO THE END OF CHINA AS WE KNOW IT SOONTo those who think China will keep getting bigger and stronger, think again. Evergrande, formerly China’s largest property developer, has just declared bankruptcy and the fallout is going to be massive. Let’s look at how we got to this point and some potential paths forward.
The collapse of Evergrande is a consequence of the Chinese government’s hyper-financialization policy that floods the economy with citizens’ savings to ensure stability… it didn’t work. However, years of this policy have contributed to a massive overbuild of real estate, which is where many Chinese citizens have parked their private life savings.
So, the potential for economic turmoil to ensue is quite high. How can China prevent this from happening? They can follow a Western-style bankruptcy procedure, which could stir up a whole slew of problems, or the government could intervene and circumvent the court ruling, which could spark concern internationally and diminish the legal autonomy of Hong Kong.
Regardless of which path is chosen, there will be dire economic consequences and a myriad of issues for China’s social stability. Look for more turmoil shortly. Xi has concentrated power in one person...himself. No one person can manage an entire nation without a team of thinkers.
Enjoy the show.
Sherritt is $0.29 and going nowhere especially with China's demise.