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THE GREAT FALL OF CHINA

GIANT TSUNAMI OF CHINESE DEBT COULD WIPE AUSTRALIA OUT

The world is staring at a giant pile of government debt worth $226 trillion.

It represents the biggest surge in borrowings since World War-II.

Japan’s situation is particularly alarming.  It has borrowed more than $9 trillion, around 230 per cent of its GDP.

For two years, poor countries worldwide have been encouraged to take on record amounts of debt, which is now throwing many into default.

With debt interest payments becoming more expensive, the World Bank and IMF say more than a dozen or so countries will go into default over the next 12 months.

Officials in countries like Sri Lanka, now face a stark choice – feed their hungry people or default on their debts.

The real sleeping giant in all this is China.

China’s debt is 290 percent of its GDP according to the Bank of International Settlements.

That’s higher than any other major economy in the world, including the US.

China’s debt-to-GDP ratio is growing at a rate of 11 percent per year – which means its debt is outpacing its GDP growth.

China’s state-owned banks, meanwhile, are sitting on mountains of bad debts and non-performing loans.

Bad loans alone hit $581 billion in 2021.

And that is just what’s visible.

Not included are $990.22 billion in non-performing loans carried by banks as “special mention loans”, which are in danger of default.

Over 70 percent of these non-performing-loans have been bundled up and resold to investors at inflated prices.

More murky debt can be found in China’s shadow banking sector, where $13 trillion lending is done through non-traditional financial institutions.

Then there is China’s local government debt which official figures put at $3.97 trillion, but which Goldman Sachs, says could be as high as $8.2 trillion, nearly half China’s GDP.

The list of Chinese property developers defaulting is now snowballing.

The sector has serious liquidity problems and $117 billion worth of debt maturing this year.

Banks won’t lend to them, new projects have ground to a halt and unfinished infrastructure projects are being demolished.

Global pension funds and institutional investors who have invested $2.1 trillion dollars in Chinese companies are all at risk.

Anyone who likes a good horror story, should read AFR’s article on “Why your super is making the long march to China”!

If China’s economy collapses, it will wipe Australia out, along with many of its people’s super nest eggs. 

And yet, hardly anyone is talking about this.

Financial ‘experts’ instead say ‘debt’ is a good thing and Australia needs more of it!

Seriously, in any normal, functioning meritocracy, these people would all be pushing trolleys at Coles, not steering our economy.

The fact they are, should keep every Australian up at night.

It does me.

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GLOBAL SUPPLY CHAIN COLLAPSE

BUCKLE UP AUSTRALIA, AND BRACE FOR IMPACT!

Social media images are showing an unprecedented traffic jam in the East China Sea as thousands of cargo ships have been brought to a standstill outside the port of Shanghai.

Ships can be seen standing all the way out to the open sea, several kilometres away.

Shanghai is one of China’s largest manufacturing centres and home to the largest container port in the world, with a major airport serving inbound and outbound air cargo.

Today, its factories and warehouses are closed, the roads are empty and the city’s port and airport have come to a complete halt.

It’s not just Shanghai either.

In Beijing, Shanghai and Shenzhen, tens of thousands of factories are either shut down or operating at reduced capacity.

Kunshan — a big production centre for electronics— is closed until late April. Part of Taicang, another manufacturing area in Jiangsu province, is also closed.

Volkswagen and Toyota shut down their manufacturing plants in Tianjin last week due to a lack of parts.

Manufacturing hubs in Vietnam and Cambodia are also running out of vital Chinese-made components for their manufacturing.

Pharmaceutical companies in India, who source 70% of their active ingredients from China, say they are running out of supplies.

Within 60 days, stock everywhere is going to run down and it won’t be replaced – not for some time.

Australia is probably one of the most China-dependent countries in the world.

Everything from our cars, agricultural machinery, iPhones, computers, medical equipment and pharmaceuticals, comes from China.

It provides 90% of our fertilisers, 100% of our manganese, 86% of our semi-conductor imports, 82% of porcelain toilets/basins, 75% of lighting, 72% of generators and 69% of computers.

The list is virtually endless …

Australia makes virtually NOTHING – nothing useful anyway, and definitely not at scale.

We lost our whole industrial commons to China decades ago, and with it went our collective R&D and our engineering/manufacturing capabilities.

We lost suppliers, skilled trades, and all the product/process design and engineering know-how built up over generations.

Instead, we became a ‘service’ economy.  ‘Services’ tied to the biggest and longest-running housing bubble in history.  All fuelled by debt.

Today, we are a net importer of processed fruit and vegetables.  A net importer of seafood and a net importer of steel.

That’s right.  We export iron ore and coal to China for processing into steel, then import it back for our construction industry.

Go figure.

It all happened under the watch of three key Prime Ministers – Bob Hawke, Paul Keating and John Howard

Bob Hawke is dead, but Keating and Howard are very much alive.

I’d say BOTH of them have a lot of explaining to do.

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