WTF Just Happened To China's Economy?

China's economy has slipped into a deep slump China is announcing stimulus plans they are going to really push out a bazooka to get stock prices up this is the broadest push so far year to date you can call it a bazooka or not but nothing seems to be working what's be guys it's Graham here and you're not going to believe what just happened despite China being on the brink of an economic collapse with a multi-trillion dollar underwater housing market threats of being delisted from the US Stock Exchange and weakening demand in the last 30 days they've experienced one of the strongest stock market rallies in almost a decade all thanks to a new strategy the economic reset that's right apparently money can solve all of your problems and even though some analysts believe that this only delays the inevitable China's latest stimulus package is about to impact every Financial market around the world from Real Estate to lending to interest rates to even the value of the US dollar so to break this down let's discuss exactly what happened through New Economic reset that's resulted in a 20% stock market rally whether or not this massive stimulus is actually sustainable and then finally what you could do about this to come out ahead although before we start as usual if you appreciate videos like this all I ask for in return is that you hit the like button or subscribe it helps out the channel tremendously it's totally free and as a thank you for doing that I will do my best to reply to as many comments as I can so thanks so much and also big thank you to Rocket money for sponsoring today's video but more on that later all right so I've said this before but as is a bit of a background up until recently China's been on an Unstoppable trajectory that's because for the last 30 years they've been at the Forefront to production International Investment and Rapid productivity all because of an exchange that occurred back in 1979 which gave China diplomatic relations with the United States and by extension the rest of the world all of a sudden China shared a common objective with the global economy and as a result of that money poured in countries from around the world invested in Chinese infrastructure took advantage of lowcost Labor and helped them bring much needed funding to areas that were previously closed off at this time growth was so impressive that in 2001 China became a member of the World Trade Organization as a way to further strengthen ties with the United States but it didn't go exactly as planned for the United States it quickly became apparent that demand for lowcost Chinese Goods was increasing faster than expected more and more products were being outsourced elsewhere and corporations moved 6 million jobs overseas to allow for higher profit even though this did bring down the cost of everyday items that a lot of us still use to this day for China the benefits were Monumental with all the increased worldwide trade and foreign investment 400 million people were lifted from poverty in addition to that their economy is now more than 11 times larger today than it was in 2001 they became the world's largest exporting nation in 2009 and they were even touted as the world's economic Miracle while they grew at a faster Pace than any other Nation however not everything appeared exactly as it was on the surface because the more China grew the more powerful they became in relation to Every Other Nation the more leverage they had to maintain tight control over their businesses the more they could regulate as they deem necessary and as a result of all that the more difficult they've been to join forces with in fact members of the World Trade Organization alleged that China's been providing illegal State subsidies to businesses who export their products discriminating against companies who don't buy from Chinese manufacturers and controlling Supply chains through taxing raw materials even worse it said that they've been purposely devaluing their own currency by as much as 40% as an incentive for other countries to buy their goods at a discount leading of course to fake economic growth that was largely unsustainable as we've recently begun to see so in terms of the three major road blocks for China and how they're now dealing with it let's begin with the first real estate see up until recently China experienced what many would call a real estate property bubble as Citizens preferred to put their money in housing as a safety net causing real estate prices to increase double digits year after year in fact China was building five times as many homes as America and Europe combined and Supply was still so limited that they used a lottery system to allocate them some with odds as low as 160 this led to 70% of the country's wealth being tied up to the real estate market which is more than twice as high as it is here in the United States at that point property values were Rising so quickly that developers would pre-sell units and buyers would begin making payments on something before it even existed with the expectation that once it's done it's going to be worth a lot more since the market just kept moving higher it didn't matter how much it cost either with some buyers spending as much as 23 times their annual income to say they own a property often times with the morgage making up more than half of their gross take-home pay yeah if you thought the housing market was competitive here in the US you haven't seen anything compared to that anyway China's real estate market was growing so quickly that prices increased 700% from 2001 to 2 17 so in an effort to curb some of this appreciation the government stepped in with imposed regulations on who is able to purchase a house and they said that home should be for living not for speculation but it was too little too late with their economy now beginning to slow down property developers had a harder time raising money in order to stay afloat they couldn't afford to finish their preconstruction units and even though this originally started with evergrand within 4 weeks more than 320 projects in about 100 cities were facing protests roiling markets and forcing authorities to Corral Banks and developers to diffuse the unrest this led to evergrand their second largest property developer filing for bankruptcy in mid 2023 after owing more than $300 billion to its investors an estimated 233 other property developers filed for bankruptcy shortly afterwards and in response to this China began lowering interest rates as a way to help spark some more economic growth but there was also a second Boogeyman that the entire economy had to deal with and you're going to want to hear this although before we go into that I think it's really important to mention that there's always going to be some sort of economic uncertainty out there and even though it seems scary it's precisely why you should take matters into your own hands and focus on what you can 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on higher education this provided much needed funding to build schools hire professors and give students in education That Couldn't otherwise afford it the goal here was to develop a knowledge-based economy satisfi demand for higher educated workers and then grow their economy to eventually compete with the rest of the world as a result of that it said that Chinese universities accepted about 1. 59 million students in 1999 up more than 47% from the previous year and in a way it made higher education almost like Mass education to anyone who is interested even if they lived in rural areas with a low-income background as we could see today there was a bit of a problem in that higher education expanded faster than there was market demand meaning there were a lot more college graduates than there were jobs to pay them and as a result youth unemployment increased as it stands right now the jobless rate of 16 to 24 year olds is currently 18.

8% and that's been steadily Rising since the surveys were started in 2018 in fact unemployment has gotten so bad in this category that lottery sales increased more than 50% because young people see hitting the jackpot as their only solution to achieving Financial Freedom in addition to that it's said that many companies are refusing to hire recent college graduates now because they worry about the cost and legal difficulties if they have to let someone go a year down the line if the economy remains in the dold drums in terms of how much this costs apparently companies have to pay quite the severance or in this case if someone works for 2 years they have to give 30 days notice plus 2 month salary this is expensive so no one wants to fire anyone now or hire anyone new on top of that youth unemployment actually got so bad that the government stopped publishing data for several months in 2023 and only resumed doing so once it changed its methodology because of that the third problem seems that much more obvious deflation now for those unaware deflation is pretty much the opposite of inflation where instead of prices going up they're going down and even though this might sound like a good thing it's not see when prices come down it's a sign of less demand and when your money becomes more valuable the longer you hold on to it the less likely you are to spend it which means prices fall even further companies scale back they produce less the cycle repeats itself until eventually the entire economy weakens and falls into the abyss in China's case though consumers are very reluctant to spend money after 3 years of covid lockdowns with recent CPI only increasing 4% year-over-year companies are also taking note of this and reducing their Workforce resulting in even more deflation as less money is available to be spent essentially even even though household income growth is outpacing that of spending and disposable income per capita Rose 5. 4% in the first half of the Year China's citizens are afraid to spend more money because of strong economic uncertainty especially everything that's happened with falling real estate prices Bank runs and high unemployment this of course means that China is falling short of their 5% GDP growth goal unless of course their latest strategy is going to work and that would be their economic reset otherwise what's known as the Bazooka stimulus essentially China's solution to a slowing economy is the tried andrue method of printing a lot of money and in terms of how they're planning to do this let's begin with the banks a few days ago the People's Bank of China moved forward with two funding proposals that would inject about $112 billion into the stock market in terms of specifics it said that they were lower interest rates to make borrowing money cheaper lower mortgage rates for homeowners benefiting 50 million households and lower the requirements for how much money Banks need to keep on reserve freeing up $140 billion it also set aside $28 billion for local government investment projects this also includes lowering down payments for buying second homes often purchased in China as Investments which would be cut to 15% of the apartment's value from 25% now by the way side tangent here but do you remember a few years ago when they said that second homes were for living not for speculation well it seems like they've completely reversed course on that now that their economy depends on it the second rumors have been swirling that Beijing plans to release $284 billion in Sovereign bonds later this year to provide funding to pay down local government debt and boost China's social safety net and third government officials are pushing for a much bigger stimulus package potentially as high as $1.