China’s Last-Ditch Effort: Can Xi Balance Reforms and Political Survival?

China’s recent tax cuts for real estate transactions failed to boost market confidence, as reflected in the negative reaction from A-share markets. Liu Shijin’s remarks emphasize the need for short-term stimulus to stabilize the economy, potentially buying time for reforms. However, these reforms face significant challenges, especially due to Xi Jinping’s leadership. Signs of reform may include shifts in Sino-U.S. relations, improving welfare for lower-income groups like migrant workers, and addressing the real estate sector’s impact on the economy. Despite these potential reforms, Xi’s ability to act decisively remains uncertain. The possibility of stabilizing relations with the U.S., alongside domestic reforms, could lead to a slow recovery for China, with Japan’s example providing some hope.
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[@diggingtochina]

Help me grow the channel by donating any amount through the link below-your support makes a difference! paypal.me/DonXiang

[@hiroshinagoya2469]

open a donation box Mr. Don; I do not like Paypal. Good luck increasing your channel when KZbin is heavily compromised by the CCP regime paid Minions employees.

[@kevinbyrne4538]

China would benefit greatly if it implemented your wise counsel.

[@kobolds638]

no use. too many greedy and stupid people

[@chriskenney4377]

Such a joy to hear well documented and insightful analysis. I’m always grateful.

[@vladimirgalovic6250]

Thank you Don for very competent a deep analysys you made for us! Great job!

[@djparn007]

Thank you, Don. 👍

[@Wvdoctorz68965]

This was an insightful and thorough analysis. Thank you!

[@stephenhenry1251]

Don, thank you for you deep, but rational insights into Chinese American relations. Xi is an enigma, but one can hope for a better relationship between these great powers.

[@raeward1605]

Thank you again, Don. Great explanation of possible actions Xi might take. For our friends in China, I hope he does something positive soon. ❤

[@philipopruesse4259]

I hope you are correct. Reform is difficult. The losers always fight hard to maintain the status quo. Raising taxes is inevitable.

[@seekthetruth1478]

Spot-on Don.

[@eranshadach-xs1bf]

Grate analysis. Keep on with this excellent podcast!

[@robertbraden4454]

As you said, the CCP will need to invest manufacturing directly in the US to avoid a trade war. At a time when China needs investment this will really hurt the Chinese economy.

[@FAFORednickincell]

China will have a 1 trillion dollar trade surplus this year even with the last 7 years of Tariffs on them They don’t want that FDI coming in because it will just overheat their real estate People keep thinking they are not doing enough when the goal is to deflate that real estate. Sure they will add measures in like cuts to bank reserve ratios But the trend will be down Why? In China in 2008 around 70% of the people in their real estate markets were buying their 1st homes in their cities By 2018 around 70% of the people in their real estate markets were buying their 2nd and 3rd homes in their cities That’s why you are hearing about problems with their property developers these days. Because back in 2010? Their Central Government started cutting of money flow to these developers. Thus why you heard about Shadow Banks and Underground Economy back then, that their Government had to come into to shutdown or regulate. Even then, It took them almost 14 years to get their overheated real estate under control Heck they were about to introduce a nation wide property tax, but then trump started the trade war in 2018 Why is their Central Government doing this? Because there are still a few hundred million poorer rural folk they still expect to move to the cities to join their more well off urban city folk countrymen. Problem is these property developers were building higher end homes, and not building the affordable homes these rural migrants will need In China Owning a home in the city you migrate to? Affects your employment, health, education and even marriage prospects don’t have a house you don’t get married Thus the common prosperity push and the crackdown on the overt displays of wealth in China Their Government probably figured out you disenfranchise the people at the bottom of your society they are the ones most likely to act out in protest 👇 Huge Price Cuts Rumored From Chinese Developers Due To Collapsing Demand Vincent Fernando, CFA May 29, 2010 Demand is falling since China's central government announced stricter regulations for property transactions during the middle of April. These involve higher down payments and mortgage rates for the purchase of second home, and act which is seen as potential speculation. Such tightening is reducing buying demand. Thus a moderately bearish view is that property prices need to come down, since demand is likely down yet supply is the same. This challenge isn't limited to Shanghai: China Vanke Co, the country's largest publicly listed developer, may cut apartment prices by 10 to 30 percent within three months, the Beijing News said yesterday, citing an unidentified sales agent. Local Vanke officials declined to comment yesterday. Yet Shanghai is where things could get the ugliest, the earliest. This is because the local Shanghai government is planning to clamp down on speculation even harder than China's central government already has: Chen Qiwei, a spokesman for the Shanghai municipal government, did not preclude the possibility of levying property tax when asked about this issue at a press conference on Friday. "Shanghai will take more strict measures in line with the central government policy," Chen said, adding that more efforts will be made in building economically affordable houses and cracking down on speculative house purchasing. Other cities such as Beijing, Chongqing, and Shenzen could have similar additional taxes, but Shanghai is the first to make an official comment such as above according to China Daily. Thing is, any action from Shanghai will likely need approval from the central government. BusinessInsider 👇 Business Economics China Increases Banks’ Reserve Ratios to Cool Prices By Bloomberg News December 10, 2010 at 4:08 AM PST 👇 China raises banks' reserve ratios again Reuters December 10, 20104:27 AM PSTUpdated 13 years ago Dec 10, 2010 - The 50 basis point increase, which takes effect on Dec 20, will leave required reserve ratios at 18.5 percent 👇 China Property Market ‘Bubble’ Set to Burst, Xie Says By Bloomberg News February 1, 2010 at 11:51 PM PST China’s property market “bubble” is set to burst as the government curbs credit growth and clamps down on speculation, according to independent economist Andy Xie. 👇 China cracks down on speculators to cool prices BY THE ASSOCIATED PRESS NOV. 23, 2010 The government has ordered banks twice in the past three weeks to raise the amount of money they hold in reserves to rein in lending growth. 👇 China cracks down on property speculation Source:Global Times Published: 2010 The Chinese government has raised the down payment for second-home buyers to a minimum 50 percent of the value from 40 percent, in a bid to curb property speculation. The decision was announced in a statement released Thursday after conclusion of an executive meeting of the State Council, the Cabinet, presided over by Premier Wen Jiabao, on Wednesday. First-home buyers must pay no less than 30 percent of the the property price if the area is above 90 square meters, the statement said. The government was stepping up the introduction of tax policies to influence purchases and adjust property investment returns, said the statement. Nationwide, land use for the construction of low-income housing, shanty town renovation and small and medium-sized homes (below 90 square meters) should account for at least 70 percent of the land approved for property development, the statement said. It also urged local authorities to accelerate housing construction approvals to ensure effective land supply, and crack down on land hoarding and speculatory behavior. 👇 China attempts to deflate its unstable property bubble China is to spend $200bn on low-cost homes as part of a series of measures to slow the rapidly rising prices of urban houses Tania Branigan in Beijing Wed 9 Mar 2011 19.24 GMT Chinese officials are blaming speculators for soaring property prices and are vowing to build 36m affordable homes over the next five years. There are already widespread concerns about China's booming property market and the threat it poses to the country's expanding economy. China would spend nearly $200bn (£123bn) on an affordable homes and social housing scheme, said deputy housing minister Qi Ji in Beijing . The pledge came a few days after premier Wen Jiabao promised to "resolutely" curb speculation to tackle excessively rapid price increases The authorities have taken various steps since spring last year to dampen the property market. These include raising interest rates, increasing the minimum downpayment required on second homes and restricting the rights of foreigners to buy property. Two Chinese cities are now imposing sales tax on property deals. While the measures have slowed growth, many fear it remains too high. In March 2010, urban housing prices shot up by 11.7% year-on-year, according to figures from the national bureau of statistics. December saw the lowest increase in more than a year, but it still stood at 6.4%. The Guardian

[@robertbraden4454]

@@FAFORednickincell China also has 30% unemployment...and growing

[@FAFORednickincell]

@ yeah right even with their engineered slowdown (or else 70% of the people in their city real estate markets would probably be buying their 3rd 4th or 5th homes right about now…. ) While a few hundred million rural migrants can’t find an affordable home as they migrate to the cities And even though these last few years China has been investing a few trillion (hidden loans included) in their belt and road partner countries Even though we have had tariffs on them for the last 7 years China still averages about 820 billion plus dollar a year trade surplus with the world the last 2 years And will record a 1 trillion dollar trade surplus with the world for 2024 Even though their Central Government is cracking down into real estate speculation Slowing down the economy? The Chinese people still added 2.6 trillion to their savings in 2022 And 1.8 trillion to their savings for first 10 months of 2023. (An increase of 8.5%) But with no other viable investment options left these days The Chinese Government is actually pushing their people away from investing in real estate, and into investimg in technology/industries instead. (What’s the difference between buying a 4th house vs a 5th house) This is where China already leads the world in 57 of the 44 critical technologies of the future As they will pile even more money into these future technologies My prediction is the Chinese Government will have to step in and regulate yet another overheated sector (technology) in the future Where Blinken,Yellen & their successors will have to keep going to China to beg them not to dump their cheap high tech onto the rest of world Most people have no clue what’s coming, as they supercharge their exports with their new innovative high tech products We can hide our heads in the sand and pretend “it ain’t so”… like that will help us out in the long run 👇 Chinese Consumers Are Saving Rather Than Spending Amid Economic Downturn Dec 21, 2023 - Chinese households have added 13.8 trillion yuan ($1.89 trillion) The middle class is also prioritizing savings and seeking safe investment opportunities, according to the report. Chinese households have added 13.8 trillion yuan ($1.89 trillion) in savings in the first 10 months of the year, an 8.5% increase from the previous year. Pymnts

[@FAFORednickincell]

@@robertbraden4454 You do know during the 2008 subprime crisis that put 4 million Americans out of house and home it also crashed the world economy right??? In China 100 thousand factories were shuttered and 27 million people lost their jobs The Chinese Government freed up 587 billion in cash reserves from their banks. To loan out But like I said that caused a big ball of money and overheated markets for 14 years it went from real estate to shadow banks/underground economy, to commodities,, to bonds, to stocks, back to junk bonds/real estate this time around? they freed up 142 billion with there still being about 994 billion in cash reserves/7% cash reserve ratio….. with just their banks alone But like I said they are trying to deflate the real estate bubble Any cash injections would be like pumping the gas pedal adding a little gas … while riding the breaks down a hill Btw the solution is simple the vast majority of the people investing in these property developers, these last few years were well off Chinese or sophisticated foreign investors The people these property developers owe homes to in China? can be given a home that was built by these developers, the remaining can be sold at a discount to those around 300 million rural country folk still expected to migrate to the cities and join their more well off Chinese urban countrymen Although these homes, might not be in a city these people choose but it is the risk these people knowingly took even with the writing on the wall for the last 14 years (These people took a risk in real estate knowing their Government was cracking down, but hoping the CCP Government would bail them out) Win win for everyone people owed a home get a home, rural migrants get a more luxurious home at a discount 😉 And the well off Chinese/Sophisticated Foreign Investors get back a few more pennies on the dollar… Cut off from money flow by the Chinese Central Government for over 12 years starting in 2010 Chinese Property Developers “Junk Bonds” they were flogging, these last 2 years suddenly started to become a hot commodity by “Sophisticated Foreign Investors” Get a influx of Cash these Property Developers instead of shoring up their balance sheets Did what they do best and that was build more higher end homes The general consensus was the Chinese Central Government would backstop these junk bonds I actually had a few old colleagues reach out to me for advice from back in my investment banking days.. Since they knew I had been researching China investments since the late 1980s My reply to them was “Not when their Government has cut off the money flow to these companies for over a decade” They did not listen….🤷 👇 A 99% Bond Wipeout Hands Hedge Funds a Harsh Lesson on China Bloomberg) -- From afar, China Evergrande Group had all the makings of a killer distressed-debt trade: $19 billion in defaulted offshore bonds; $242 billion in assets; and a government that appeared determined to prop up the country’s faltering property market. So US and European hedge funds piled into the debt, envisioning big payouts to juice their returns. What they got instead over the course of the next two years is a harsh lesson in the dangers of trying to bargain with the Communist Party. The talks are now dead - a Hong Kong court has ordered Evergrande’s liquidation, and the bonds are nearly worthless, trading in secondary markets at just 1 cent on the dollar. Bloomberg

[@pierotorroni9197]

If you have a 70 Square Meters house it is an easy task to clean It. If you decided to have a 420 Square meters on 3 floors it is a very hard job to keep It clean,warm and in order. My neighbours( the 420 Square meters on 3 floors) decided to occupy the underground level only ,because it is easier to keep It warm and you can tollerate a less clean ambiance. China Is like that house of my neighbours. By the way , I am living in 72 Square meters house on one level. My life Is much better than that of my neighbour's. As to the forecast about a 78 years old and demented man,being myself a retired doctor, they are as reliable as playing the lottery. He Is the puppet whose threads are kept by the rich oligarch class. And Musk Is so stupid to put his face in It. Musk Is an little smarter but not more intelligent than Epstein. Thanks Don. Keep on.

[@philipopruesse4259]

@@pierotorroni9197 I have a 420sqm house and I am going to sell it for the very reason that you said. Less is more. 😉

[@CyrusandAurelius]

The only reform needed is clean up corruption though thats next to impossible as its deeply entrenched into their culture of doing business.

[@keesdevos4816]

Great news!!!!

[@chuckley99]

Thanks Don

[@SONMINHTRAN1]

GREAT ANALYSIS

[@artmcteagle]

Excellent analysis. Trump's vindictiveness vs Xi's historical grievances.

[@thomasearlfranklin584]

This was a surprising episode. I didn't know that China was acting defensively and, for example, offering visa-free travel to so many countries. I thought it was still threatening war as much as ever. You have more hope for a good future than most China commentators. I thought war between the United States and China was almost inevitable.

[@danielb7253]

China would be fighting against many countries not a 1-1 fight. nor would they fight 1-1. they need Iran, NKOrea, and Russias help.

[@carlflaherty2215]

​@@danielb7253Russia is unavailable. Ukraine has absorbed all their resources.

[@danielb7253]

@@carlflaherty2215 spent conventional Resources ...ur right.

[@colgategilbert8067]

Thanks Don. Too much to comment on and too many variables to give a decent projection. We're in for an interesting ride.

[@kayrosis5523]

I want so much to be optimistic. I just wish I could be.

[@azahariawang9155]

During the time of crisis and calamity, the highest priority for the government is to ensure that the poor will have food on the table, the rest is secondary... Then work on slowly to improve the situation based on best strategic actions..

[@WhiskerSupremacy]

Very cool I'm watching your channel more now

[@donaldjoseph3903]

Ģreat analysis

[@cyberslim7955]

This free visa thing carries no risk, because foreigners cannot pay for anything in China.

[@jimanders6750]

thanks don, good idea

[@nunobartolo2908]

What’s wrong with letting people who overpaid for houses and got into debt over their capacity get wipeout ??

[@midimusicforever]

Oops, forgot to drop a like!

[@luckymann9630]

At this point in Xi's tenure does he have four years?

[@stone-hand]

I doubt that Trump learned anything from these eight years in politics, and why would he? Being aggressively, vehemently himself he got back in charge and his main takeaway, if he has any, from the past seems to be that allowing his subordinates to tone down his Trumpness was a great mistake.

[@philippayne8901]

Hi Don, you've changed your stance from your previous video when you suggested Xi would confront Trumps sanctions head on?

[@ChuckNorrizzed]

Were you a backup dancer in Shen Yun?

[@bestofsatish]

China is growing at less than 3%. To invest at 50% of GDP and growing at 3% means NPL of over 35%. China has to devalue the currency to continue the current system. Else China can stop the current model by making deposits go to zero and collapse all investment led growth. The third way which they are trying is almost impossible to achieve. Just let real estate loan account for 25% of GDP and take the money to fund investments in economy. But if property prices are falling or stagnant, why should anyone buy properties. They cannot revive property altogether as the dollar peg will not allow china to expand money supply greater than that of US

[@localguy8]

China would need to really get out of any warrior mode to a give me love 💝 I don’t have kids, business n the imagination to come up with some invention to stimulate the market.

[@thomasrogers9146]

AS AN AMERICAN BUSINESS MAN AND HOME BUILDER, IF THEIR IS ANY NATION THAT NEEDS ECONOMIC REFORM IS AMERICA NOT CHINA. 20% OF THE AMERICAN POPULATION NOW OWNS 84% OF OUR NATIONS WEALTH.. GOOGLE..1% OWNS OVER 50% OF ALL STOCKS..THIS LEAVES 80% OF AMERICANS FIGHTING FOR ONLY 16% OF OUR NATIONS WEALTH.THESE NUMBERS ARE NOT SUSTAINABLE. INCOME INEQUALITY IS AT THE HIGHEST IT HAS EVER BEEN IN OUR NATIONS HISTORY. OUR CONSUMER DEBT IS OVER 1 TRILLION DOLLARS AND CLIMBING AND OUR GOVERNMENT DEBT IS OVER 35 TRILLION AND COUNTING. POVERTY EXPANSION IS NOW COMMON PLACE AS AMERICAN CHILDREN GO TO BED HUNGRY.. AMERICANS CAN NOT AFFORD HOUSING, EDUCATION, FOOD , HEALTH CARE AS INFLATION CAUSES MORE POVERTY AND ECONOMIC SUFFERING. AMERICANS ARE SLEEPING IN CARS VANS MOTELS AS INFLATION CAUSES MORE POVERTY..OUR INFRASTRUCTURE IS OLD AND FALLING APART AS OUR LEADERS REFUSE TO INVEST IN AMERICA. LAY OFFS ARE HAPPENING ALL OVER THIS NATION AS ECONOMIC INSECURITY HOLD AMERICAN FAMILIES HOSTAGE. OUR ECONOMY HAS BEEN STAGNATING AS WE SPEND TRILLIONS OF DOLLARS ON ENDLESS WARS. IT TIME TO LOOK INWARDS AS AMERICANS AND FOCUS ON SOLVING OUR DOMESTIC PROBLEMS.

[@Aussie-Mocha]

Your “American” problems are the same as my Australian problems which are the same as … well… the global problem. You’re allowed to want to put Americans first. And so you should. But… keep in mind what the rival power nations have been doing to cause as much division and chaos within our own countries for over a century now. And they are succeeding! As a citizen of a nation that is allied to America, I don’t want to live in a world run or dominated by China/Russia/Iran. American “hegemony” as they like to call it, is the best option of a bad bunch. A isolationist America is the beginning of a new global takeover that will be catastrophic for billions of people.

[@ric6074]

This guy don't know what he is talking, a simpleton 😂

[@georgelim5006]

It seems that you are talking everything’s so easy and it is all about Xi. Give you the benefit of the doubt ,let see how good is your analysis. You said reforms,what reforms?

[@louisgiokas2206]

You strike a hopeful tone. I hope you are right, but I cannot share your optimism. Basically, I base my pessimism on three issues. The first is the whole structure of the Chinese economy. As long as the government remains in control of large swaths of the economy China will fail. Basically, the CCP and its dreams of socialism have to go. There are no half measures. There is an article in the Wall Street Journal this weekend about India and the problems they are having industrializing. It is the same type of issue. Government interference in the economy. This is left over from their socialist period. Even in a place like Israel the problem existed. They started out very socialist. It was actually Netanyahu who freed the economy from its socialism and the results have been tremendous. Socialism doesn't work, cannot work and cannot be reformed by tweaking a policy here and there. The second is the IP theft, counterfeiting and fraud aspects of Chinese society. I am pessimistic about changes in this aspect. While there is some government directed action in these activities, there is a lot that is not government directed. The fact is that these behaviors actually predate the CCP. They are also endemic. The third is the rampant corruption at all levels of society. I harp on this all the time, but it key and underlies the previous two and the many, many other ills of mainland China. So, don't gets your hopes up too much.

[@andrewlankford9634]

TLTL

[@denisdufresne5338]

You seem to me a little bit too optimistic for USA facing China.

[@azahariawang9155]

Agreed.. trump is slowly destroying the US economy, assisted by its people, hahahahaha

[@lloydsmith5679]

You have.no idea how stupid Trump is.

[@glenngrowe7105]

Trump is coming back in a strong position. It is interesting to learn that China will acquiesce to Trump's initiatives and not confront the US. Excellent analysis.

[@rondewitt6238]

I hope you are right

[@danielb7253]

and the CCP did not honor the DEAL. Trump will make them pay.

[@johnnolan2557]

Why should lei give out free money to the populace? Citizens need to labor- workers of the world unite!

[@paulmaher3358]

Thanks Don