China's ENTIRE Economy Will Collapse In 34 Days

China's ENTIRE Economy Will Collapse In 34 Days

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- Social unrest has erupted in China after  almost $6 billion worth of deposits froze up.   Thousands of police were deployed to shut down  the protest. Following the protest, hundreds of   thousands of Chinese homebuyers refused to  pay up to $300 billion worth of mortgages.   Mortgage payments have reportedly  stopped on 301 projects in 91 cities.   China is experiencing a repeat of the 2008  recession, but on a whole new level. An entire  

social revolt is growing as the CCCP desperately  tries to censor the growing uneasiness.   Internal government meetings have revealed  substantial stress within the CCP, and the signs   are showing that it's only going to get worse.  China's social unrest has revealed a multitude   of flaws within the country and the implications  will ultimately affect the rest of the world.   Over 400,000 Chinese citizens witnessed  their bank deposits freeze recently.   When depositors went to the ATM to withdraw their  money, their withdrawals were simply declined.  

Panic ensued after people couldn't even withdraw  their own money. The bank freeze was a result of   a massive fraudulent scheme that played out for  over a decade. Protests about the bank freeze have   gone viral on Chinese social platforms, despite  repeated attempts from the CCP to censor them.   While the bank freeze only occurred within  five different banks, according to the Chinese   government, hundreds of other Chinese banks are  at risk. After the bank protests went viral,  

the social unrest spread to almost every part of  the country. A recent internal government property   meeting leaked several major concerns. 300 million  square footage of property construction has been   halted. Local governments can no longer withstand  the pain. A 200 to 300 billion yuan property fund   has been rumored to not be enough. Property sales  are down 20%. Construction starts are down 30%.   Perhaps the worst of them all is China's recent  mortgage revolts. Because Chinese homebuyers are   not paying their mortgages, financial regulators  have created a proposal to allow citizens to pause   their mortgage payments. The amount of unpaid  mortgage payments equals to 2 trillion yuan  

or $300 billion. The problem with both the  mortgage boycott and the bank freeze is that   a domino effect is about to occur. Five banks  went bankrupt, which will spread into 20 banks,   then 100, and eventually, the entire banking  system. This is because like almost every  

country's financial infrastructure, the Chinese  banking system relies on fractional reserves.   When someone deposits $1,000 in the bank,  the bank does not hold onto that $1,000.   The bank will instead keep $100 as reserves  and loan out $900 so that they can receive   income through interest. The lender of that $900  will then spend $900 on products and services.  

Because one man's spending is another man's  income, someone else will receive that $900   as income and deposit it into the bank. The bank  will now loan out $810 and keep $90 in reserves.   The lender of that $810 will then spend $810.  Someone will receive $810 as income and deposit   it into the bank. This will cause the bank to loan  out $729 and keep $81 in reserves. This cycle will   keep going on over and over again causing the  bank to be leveraged up by up to 10 times. This   is called the monetary multiplier effect because  the lending is multiplied over and over again.  

In the example that we looked at the money supply  started at $1,000 and eventually increased to   $10,000. $9,000 was created out of thin air purely  from the multiplier effect. When citizens all try   to withdraw their money at once they will quickly  realize that the banks don't actually have the   money they deposited. This is because the banks  simply created money out of thin air. Economists   worldwide know that China's recent social unrest  is a signal of a complete disintegration of the   Chinese economy. The mortgage boycott did not come  out of nowhere. It took years of mismanagement and   greed to build up all of the frustration that came  in the form of a boycott. Because housing prices   kept going up year after year, Chinese citizens  were eager to purchase any property on the market.   Similar to the buildup of the US's 2008  recession, citizens could not even imagine   that housing prices would ever crash. As a result  of increasing housing prices, people would save up  

for years just to get their hands on real estate.  An estimated 70 to 80% of Chinese household assets   are tied to real estate. Imagine saving up  for decades just to finally purchase a single   property. This type of behavior was incentivized  by Chinese culture where newer generations would   prioritize purchasing a home. Such a huge buying  frenzy filled up the booming property market that  

continued on for decades. Property developers saw  this greed as an opportunity to expand faster.   This is where the pre-sale model came into play.  The property pre-sale model was when buyers   put down a deposit to start paying mortgages on  unfinished houses. That's right. Home buyers were   paying for mortgages for houses that weren't even  built yet. Anyone in their right mind would know   not to do that but in the frenzy of the housing  bubble, it made a lot of sense for citizens to buy   pre-sale houses. Prospective home buyers thought  that housing prices would continue increasing.  

They were concerned that by the time the property  would be finished, the price would've already   increased substantially. To purchase properties at  a lower price home buyers would take on the risk   of buying in the pre-sale round. According to the  Chinese National Bureau of Statistics 34.5% of the   property development income came from pre-sales.  Property developers would then take the income   from the pre-sale round and use it to sell even  more pre-sale homes. Just like a Ponzi scheme,  

this model worked incredibly well while  house prices kept increasing. However, the   moment that buyers became skeptical, the entire  pre-sale model collapsed. The property developers   would usually give a timeframe that detailed  exactly when the property would be finished.   When the developers began failing to deliver  on the timeline home buyers lost trust in the   developers. Because property developers would  usually use the money from the pre-sale round to  

sell more pre-sale homes, they didn't actually  have the money to buy the houses. In the past,   they would simply just use the money from  newer pre-sales to fund the construction of   older pre-sales. This is similar to a Ponzi scheme  where fund managers use new investments to pay off   previous investors. A Ponzi scheme only works when  the sponsor can constantly attract new capital.   Once a Ponzi scheme can no longer bring in new  investors, the older investors cannot get paid   anymore. This is similar to what happened to the  Chinese housing market. New home buyers already   paid for the pre-sold houses but the developers  don't have the money to finish building them.   Even before the boycott happened, it was already  common practice for property developers to fail on   delivering pre-sold homes. According to Japanese  financial service company, Nomura Holdings,  

only 60% of pre-sold homes between 2013 and 2020  were actually built. Despite the obvious signs   of a Ponzi scheme, the bubble continued to grow  until recently. In late June of 2022, a petition   on social media was signed by 900 buyers. The  petition was in relation to the property developer   Evergrande, which was the biggest property  developer at the time. According to Fortune China   500, Evergrande is pulling in 500 billion yuan  or $74 billion in annual revenue. That's right,   $74 billion. The petition was a plea to the local  government by pre-sale home buyers. If Evergrande  

would not resume construction within three months,  the home buyer's petitioned to stop paying the   mortgage payments. At the time, the petition  seemed like nothing to the massive property   giants. Unbeknownst to Evergrande at the time, the  movement would continue growing to 301 projects   in 91 cities. The boycott first began in the  Henan province before spreading to Hunan, Hubei,   Shaanxi, Hebei, and several other provinces.  Even though the three months are not over yet,   banks are already reporting missing mortgage  payments. China has been desperately trying to  

censor the movement but doing so has only made  it grow even more. Because videos like this are   constantly shut down or shadow banned by YouTube  and the CCP, please take a moment to hit that like   button. It helps more people know about the truth  by boosting this video in the YouTube algorithm.   Also, please hit the subscribe button as well for  more videos like this. I really appreciate your  

support because without people like yourself, the  CCP will shut these videos down. The protest is   actually quite surprising because Chinese citizens  have historically paid off most of the mortgages.   Not only that, but banks are legally  entitled to ask and receive the full payment.  

Despite the cultural traditions and illegality,  the government has allowed citizens to pause   their payments temporarily. China has also cut the  mortgage interest rate several times this year.   In May of 2022, the government cut the five  year loan prime rate from 4.6% to 4.45%.   The CCP has also removed lending restrictions on  property developers. Such a move is like printing   more money to solve inflation. By removing lending  restrictions, developers will only continue to   loan even more money to pay off previous loans.  It's safe to say that with this type of management  

the unfinished properties are never going to  see the light at the end of the tunnel. Imagine   properties across China being stopped halfway  through construction. If every home buyer were   to default on unfinished properties $58 billion  in loans would disappear. Economists expect   this fear to spread within the property sector and  affect trillions of dollars worth of mortgages. An   executive at a property developer anonymously told  Reuters, "After repaying bank loans with the money   left, if there is any, it's almost impossible  also to repay the onshore and offshore bonds."  

With the Ponzi scheme exposed, property developers  don't have the money to pay back their debt. This   could be manageable in normal circumstances but  the Chinese government is being hit with several   swords at once. During the bank scam in the Henan  province, the Chinese government was exposed step   by step. Every manipulative move by the CCP  was in the pursuit of restricting social panic,   but instead of doing so, they only exacerbated the  tension. In order to demonstrate how frightening   the CCP is, I'm going to go over what happened to  Ye Mijian. On June 16th, 2022, Mr. Ye arrived at   the city of Zhengzhou where several local banks  froze his and his friends' deposits. The plan was  

simple. Mr. Ye and his friends would protest  outside of the banks to try and get a refund.   The problem was that Mr. Ye did not foresee  the ruthlessness of the Chinese government.   Upon exiting from the train station, his health  code suddenly switched from green to red.  

The health code is a system that is supposed to  indicate whether or not you have COVID. The green   health code is given to those who have tested  negative for COVID within the past 72 hours.   The red health code is given to citizens who  tested positive for COVID and need to be isolated.  

Mr. Ye never tested positive for COVID but he  still received a red code. Despite the obvious   manipulation, local officials prompted Mr. Ye  to leave the region for isolation. Two days   after being isolated in a hotel, Mr. Ye's health  code code suddenly flipped from red to green. The  

typical COVID isolation period lasts for about  seven days, but Mr. Ye's code flipped from red   to green after only two. Mr. Ye's health code  was clearly manipulated to shut down his protest.   Although he may only be one person, Mr. Ye's  experience is representative of over a thousand   bank depositors that tried to protest. The  frightening part about this was that it wasn't the  

first time that it happened. In May of 2022, Mr.  Ye was confined in the same hotel after protesting   outside of the bank's local headquarters. Mr. Ye  explained how, "last time we were taken here after   we managed to stage a street protest. This time,  I couldn't move an inch." While the strategy of   changing the health code worked at first, people  eventually caught on to the blatant manipulation.  

Five Chinese officials were eventually fired.  This was a major loss for the Chinese government   because the bank depositors  would eventually protest again.   On July 10th, protesters grouped up at four rural  banks that held $5.9 billion in frozen deposits.   The protest understandably garnered national  attention on social media platforms. In response  

to the protest, the government has decided to  pay back citizens who lost up to 50,000 yuan,   which is about $7,500. Most citizens deposited  their life savings due to a false perception   of safety. Bank deposits up to 500,000 yuan  are supposed to be insured by the government   but that insurance doesn't cover fraudulent  schemes. In the case of the banks in the Henan   province, depositors were defrauded by the owner  of Henan New Fortune. Henan New Fortune allegedly  

defrauded the banks by illegally transferring  funds and falsifying loans. Instead of lending   out money to citizens, Henan New Fortune  would just take the money for themselves.   Because the activity was fraudulent, the deposits  didn't qualify for government insurance. But this   begs the question, how were citizens supposed  to know that the banks were involved in fraud?   Some might claim that the depositors  should have done their own due diligence   but how are they supposed to spot the scam  when the fraudsters are literally hiding it?   The bank protest has caused depositor's nationwide  to be skeptical of all banks, and rightfully so.  

When it comes to international investors nobody  wants to invest in the Chinese economy anymore.   From the month of June to July, the  number of Chinese junk dollar bonds   trading below 20 cents doubled.  If you watched my previous video,   you would know that China is trying to get its  COVID cases down to zero. That's right. Zero.  

China's strict COVID target of zero COVID  cases is still continuing to take place.   After finding four asymptomatic COVID cases  in Wuhan recently, 1 million residents were   locked down for shelter in place. The CCP has  gone completely hysterical about their goals.   Venture capitalist, David Sacks, believes that  this hysteria is coming from President Xi himself. - On zero COVID, I think this  is coming directly from Xi.   This is his policy. And I think that earlier in  the pandemic, they were hailing their response,   which they saw as orderly and effective at  controlling COVID, and they were contrasting that   with the chaotic Western response. And  so, I think that the credibility of the  

CCP and Xi himself got tied up in this idea of  stopping COVID entirely, of zero COVID. And so,   I think this is coming directly from the top and  it's having a huge impact on their economy. And   I think this is one of the dangerous aspects of  an autocratic system is you got one guy at the   top making the decisions, and if he's wrong,  there's not really a great feedback loop- - And nobody can question him. Yeah.

- Yeah, exactly. So- - There's no questioning the God king. - Sacks got interrupted at the end, but he  was still able to lay out the clear issue   with authoritarian governments. Nobody has the  power to stop the stupidity of the government  

when the dictator has all the power. Perhaps  the CCP success over the past few decades has   made President Xi delusional. This isn't the  first time that dictators have made terrible   unilateral decisions. Sacks recalls a Chinese  emperor who banned ship building 500 years ago,   which caused Chinese progress to  lag in comparison to the West. - I think this was about 500 years ago. There was  a Chinese emperor who banned ship building and  

banning having a Navy. And because of that, China  shut itself off from global trade and it fell   well behind the West, which then  explored and captured the New World.   There's this question about, you know, Chinese  culture and civilization was much more advanced   than the West or than Europe a thousand years  ago but basically it fell behind and a big reason   is because this unilateral decision by one  emperor to basically close themselves off   from the rest of the world. So you have  to wonder, does this autocratic move by Xi  

basically doom their economy to a recession?  It seems like they're not learning from our   experience. These lockdowns didn't work.  I mean, you can't stop the virus. It's   eventually gonna get out. Even I saw Biden  got the virus this week. I mean, it's out. - As if President Xi couldn't get even more  hysterical, his recent meeting with Biden   threatened control over Taiwan. Xi told Biden that  China will safeguard its "national sovereignty and  

territorial integrity" over Taiwan. This  is a signal that China is trying to block   out foreign companies from its territory. We're  already seeing the effects of this. Jeep recently   closed its single factory in China after the CCP  kept interfering with its business. The CEO of   Stellantis, which is an auto conglomerate that  owns Jeep, explained how "we have been seeing   over the last few years more and more political  interference in the world of business in China.  

We have two big competitors, Volkswagen and GM,  who are very present in China. I wouldn't want   to be in their place." Even Chinese citizens are  beginning to rethink their citizenship in China.   The former founder and CEO of Alibaba, Jack Ma,  recently gave up his control of Ant Group to gain   back his freedom. Instead of being trapped in  China, Jack Ma has recently been touring Europe.   But Jack Ma isn't the only one. An estimated  10,000 wealthy Chinese citizens worth $48 billion   are planning to leave China this year. This means  that when it comes to losing their most wealthy   individuals, China is almost on the same level  as Russia. Russia has roughly 15,000 high net  

worth individuals that are looking to migrate out.  This migration is occurring despite the numerous   institutional barriers that exist when it comes  to leaving China. These barriers include receiving   government approval, getting a Visa from the  other country, and securing the paperwork. It's  

not a surprise that people want to leave China.  The property market is sinking to new lows as   the economy is weakening. Remember Evergrande,  the world's most indebted property developer?   Evergrande recently missed its deadline for its  $300 billion debt restructuring plan. Despite  

the many months that Evergrande had to prepare,  sources close to Evergrande bond holders say that   the company hasn't even started. There is simply  no way for Evergrande to restructure its debt.   They can continue selling more properties -  but who is going to buy them? If they try to   raise money, nobody's going to invest. But more  importantly, nobody's going to buy their new   pre-sale houses. Not only does China have too  many empty houses but their population is also   shrinking at a rapid rate. The population decline  is a result of China implementing restrictions on   the number of children that people could have.  In 1979, the One-Child Policy came into effect,  

which limited Chinese families to one child each.  When the government realized that their population   would shrink dramatically, the Two-Child Policy  was enacted in 2016. The One-Child Policy still   haunts citizens to this day, and as a result,  China is set to face a serious population decline.

- The birth rate or the fertility rate in China  slipped to just 1.15 in 2021, so last year.   It takes 2.1 just to maintain your  population or replacement level,   and this is lower than even Japan, which is also  shrinking. Japan's up to 1.3. The US and Australia  

are at 1.6, but we get above 2.1 because  of immigration and China doesn't have that.   So, they've got a huge demographic problem. To  Chamath's point, it's gonna be something like...   Well, the population is shrinking by 40% with  every generation. That's what these numbers imply. - Insane.

- The numbers are it's gonna be under 600 million  by the year 2100, but I don't understand how it   wouldn't even be less than that if it keeps going  at this rate. The commentator, Peter Zeihan,   I don't know if that's the right way to pronounce  the name, Peter Zeihan or something. Anyway,   he's pointed out that China is facing  demographic collapse in the next decade or so. - China is dealing with several major issues  right now, but all of them would eventually   resolve over the long term if the government  played their cards correctly. It doesn't seem   like that will be the case because the government  is moving back towards a more socialist structure,   which is historically terrible for economic  growth. There's no way for the Chinese economy   to be saved at this point. China's economy is set  to enter one of the worst downfalls in history.  

The social unrest may continue to grow, and if  that's the case, citizens may revolt against the   CCP. This video is just one of many videos on my  channel that uncover China's incoming downfall.   So hit that subscribe button so that you  don't miss out on my next video covering   the latest updates on China. If you enjoyed  this video, please hit the like button as well.   Thank you for all of your support  and I'll see you in the next one.

2022-08-09 16:45

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