edition.cnn.com/2019/01/03/perspectives/apple-china-warning/index.html
China’s economic vulnerability is based on its very unbalanced growth model. In other advanced economies such as the United States, spending by consumers contributes as much as two-thirds or more of overall GDP. In China, consumption has risen from 35% 10 years ago, but it is still not near 60% of GDP, indicating an unbalanced economy that places emphasis on exports and investment, both of which, in the long run, are not sustainable.
Investment in infrastructure and heavy construction (around the world) turbo-boosted China’s economy in 2008 and for the next five years, but it issued a tremendous amount of debt to support such growth. Currently, the debt-to-GDP ratio for China stands at an alarming 250% of GDP, an unsustainable number and one that presents formidable challenge to China’s economic policymakers.
In the months ahead, be prepared to witness continued deterioration of the Chinese economy. This will be reflected in declining asset values such as real estate and equity markets, distressed corporate balance sheets and corporate assets, increased capital flight as a result of a declining Yuan relative to the US dollar, and growing stress within China’s financial sector as non-performing loans accelerate within the banking sector.
