The GDP numbers for Q2 were released this week, and they indicated a year-on-year increase of 6.3% compared to the awful quarter in the middle of the Covid disaster last year. The likelihood is, however, that the numbers are pretty meaningless, and anecdotal impressions are probably more useful right now, in terms of getting a sense of what is going on. And the anecdotal is pretty gloomy all round.
In related news, the massive property group Evergrande finally got around to issuing its results for 2021 and 2022, indicating just how awful its situation is, how much money it owes and how desperate its financial status. And of course this is just one of many property companies across China which are in trouble due to the turn in the market which increasingly feels like it is long-term. That is, the shift from a belief that it is a sure one-way bet to a belief that there is no way it can come back anytime soon. It really is a fundamental part of China’s economy and more than 80% of the wealth of Chinese people is tied up in the property market. And Evergrande is the most visible element of it in the market, and presumably a bellwether for all the rest of it, the messy pile of local government debt, local banks’ non-performing loans, half-built property compounds and consumers trying to figure out what to do.
We were talking to a professor about the differing nature of the US economy and the Chinese economy, the advantages and disadvantages of each, and the conclusion was that there are three basic elements at the heart of an economy that is reasonably healthy in the longer term—transparency, trust and diversity. If that is true, then the US, whatever its problems, would appear to be in pretty good shape. And speaking of transparency there is the question of a certain minister. We’re still waiting to find out where he is and how he is.
Bah humbug. Have a great weekend.
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