Around the start of the year it looked as though China had pulled off the perfect crime. Infect the rest of the world then sit back and let the good times roll.
But within the last couple of weeks, the multi-pronged shitstorm of a debt supernova, trade war with Australia, international trade routes impacted by Covid lockdowns, a coal price surge and carbon target idiocy have hit them all at once.
And they seem to be demolishing skyscrapers for no reason.
Nothing to do with Evergrande:
A dramatic video filmed in the southwestern city of Kunming in August hints at the scale of China’s property bubble. Onlookers can be heard screaming in awe as 15 high-rise apartment blocks are demolished by 85,000 controlled explosions in less than a minute. The unfinished buildings, which formed a complex called Sunshine City II, had stood empty since 2013 after one developer ran out of money and another found defects in the construction work.
“This urban scar that stood for nearly 10 years has at last taken a key step toward restoration,” said an article in the official Kunming Daily after the demolition. Such “urban scars” are common all over China, where Evergrande – the world’s most heavily indebted property company – is suffering a liquidity crunch that could prove terminal.
The crisis at the company, which as recently as two years ago ranked as the world’s most valuable property stock, highlights both the speed at which corporate fortunes can unravel and the deep flaws in China’s growth model. Evergrande, for all of the high drama of its meltdown, is merely the symptom of a much bigger problem. China’s vast real estate sector, which contributes 29 per cent of the country’s gross domestic product, is so overbuilt that it threatens to relinquish its longstanding role as a prime driver of Chinese economic growth and, instead, become a drag on it.
They could really use some of our coal right now, too:
“Unprecedented” power outages in China have triggered factory shutdowns and hampered production for companies supplying Apple and Tesla.
Surging prices for coal and gas — as well as strict orders from Beijing to cut emissions — are being blamed for the power supply shock.
Aluminium smelters, textiles producers and soybean processing plants have been ordered to slow activity or shut altogether..
Many of China’s regions have missed energy consumption targets set by Beijing, including Jiangsu, Zhejiang and Guangdong.
And China’s thermal coal inventory – which is used to generate electricity – is at a record low.
China’s total coal inventory is at 11.31 million tonnes, according to South China Morning Post. That’s only enough to meet demand for only about two weeks…
At least 17 provinces and regions — accounting for 66 per cent of the country’s gross domestic product — have announced some form of power cuts in recent months, mainly targeting heavy industrial users, according to Bloomberg Intelligence.
Nearly 60 per cent of the Chinese economy is powered by coal, but supply has been disrupted by the pandemic, put under pressure by tough emissions targets and squeezed by a drop in coal imports amid a trade tiff with Australia.
You know who has lots of coal…
We have made this point before though. Australia doesn’t actually need China. We were told that trade with China would make us rich and China more liberal. Instead, our heavy industry got moved overseas and China became the industrial powerhouse of the world, while it has exported its useless crap, its social credit system and 2 million of its citizens to Australia.
We got the raw end of the deal. So I have no inclination to help out the Chinese Communist Party, and neither should Australian politicians, at least, if there are any of them left who aren’t selling us out.
Goldman Sachs estimated that as much as 44 per cent of China’s industrial activity had been impacted. It lowered its annual economic growth forecast for China, forecasting a 1-percentage-point decline in annualised GDP growth in the third quarter, and a 2-percentage-point drop from October to December.
Analysts at Nomura said on Monday a number of factories had been forced to cease operations due to either government mandates to meet carbon targets or surging prices and coal shortages.
I don’t buy the excuse that factories have been shut to meet carbon targets. That sounds like the CCP is covering up just how bad the situation really is.
It cut its annual GDP growth forecast to 7.7 per cent.
The power crunch comes amid reports Beijing has asked state-backed firms to pick up assets from the heavily-indebted Evergrande.
Beijing-backed state media Global Times called the power cuts “unexpected” and “unprecedented”.
The outages have sparked public anger, shut down traffic lights and cut phone reception in some areas.
“Power cuts eight times a day, four days in a row … I’m speechless,” a person from Liaoning wrote on Chinese microblogging site Weibo.
Another said shopping centres were closing early and a convenience store was using candlelight, Al Jazeera reported.
“It’s like living in North Korea,” they wrote.
Okay, that is genuinely funny. Even the Chinese make North Korea jokes.
I wouldn’t get to comfortable though. America is weak too right now, and there’s nothing like a little diversion.