It all began with a massive collapse in Chinese real estate.
It even prompted the bankruptcy of Evergrande, one of China’s largest real estate giants.
Currently, China's real estate market is BELOW 2008 levels, down over 80% from its recent all time highs. pic.twitter.com/Rgt6ftox1n
— The Kobeissi Letter (@KobeissiLetter) September 29, 2024
Ray Dalio recently described China’s situation as “more challenging than Japan in 1990."
He said the economy needs a restructuring, and we completely agree.
Consumers are concerned and simply holding money in cash and the business sector is suffering as a result. pic.twitter.com/heea4Rn2Eo
— The Kobeissi Letter (@KobeissiLetter) September 29, 2024
After the news of stimulus, stocks in China soared like it was the beginning of March 2020 stimulus all over again.
There are reports that brokerages in China in staying open 24/7 to accommodate a rush of new retail traders.
China's market posted its biggest jump since 2008. pic.twitter.com/VEXjQfuaVv
— The Kobeissi Letter (@KobeissiLetter) September 29, 2024
However, as many countries learned in the 2020 lockdowns, stimulus is not enough to revive an economy.
With China's real estate index down over 80%, a serious restructuring needs to take place.
Both people and businesses must regain confidence in the economy to end deflation.
— The Kobeissi Letter (@KobeissiLetter) September 29, 2024
Nominal GDP is expected to contract in China which would send them into a recession.
Furthermore, M1 money supply is dropping due to weak credit demand and central bank efforts.
It seems that China's stimulus measures may be too late to avoid a recession into 2026. pic.twitter.com/zE71EBmg9g
— The Kobeissi Letter (@KobeissiLetter) September 29, 2024
Notably, China’s real estate sector has been facing the issue of having 80 million apartments left empty or unfinished: https://t.co/uLzVxaeYrl
— Reef Insights (@ReefInsights) September 29, 2024