A JiangShi (僵尸) — also known as a Chinese “hopping” vampire, ghost, or zombie is a type of reanimated corpse of legends and folklore. And and in my view, a PERFECT analogy for the myopic policy makers who have absolutely no end game what so ever in today’s global FAKE economy.
Like zombies — JinagShi — all they do is stumble from one short term fiscal or monetary stimulus to the next.
So, here we human beings are with yet another source of these idiocracy policies now coming from China. In response to the global financial crisis, China embarked on a $4 trillion stimulus program. However, because they had engaged in massive infrastructure investment the previous 10 years, and that was the primary stimulus pipe they chose; this only aggravated the overcapacity in the investment side of their economy. Not surprisingly, this only provided a short term pop in nominal growth.
Since 2012 the Chinese banking sector has allowed credit to grow by the amount of the entire Brazilian GDP per year! Picture the entire Brazilian production in new houses and infrastructure. Incredibly, all this credit growth has been accompanied by a fall in nominal GDP growth from 15% to 5%. This is an extremely toxic cocktail for companies that have borrowed at 10% expecting 15% sales growth. Do you think one might just have a strong suspicion that a large part of this growth is just credit flowing to otherwise insolvent borrowers? I mean… How else to explain the lack of NPL problem in heavy industries hit by lower prices and sales growth?
Two years ago, some might have been hoping that China was ready to accept a slowdown in exchange for reform. Unfortunately, with the encouragement of the G-7, they opted for another investment focused fiscal stimulus. In the end, this can ONLY buy them some time but it will ultimately exacerbate their problem.
Dear Chinese people,
Like Americans, the LAST BLOODY THING YOU NEED… is more debt and more house! Oh… and did I mention Euro-Trash “luxury” products and “exotic” cars?