#218 China’s Headed For an Economic Black Hole | Christopher Balding

China's economy is headed toward an economic black hole, and there's nothing the Chinese Communist Party can do to make it a soft landing. In this episode of China Unscripted, we discuss the comatose state of China's real estate market, whether China's green tech revolution can sustain itself, and how China could hack into your car. Joining us in this episode is Christopher Balding, a Senior Fellow at the Henry Jackson Society and founder of New Kite Data Labs.

You can follow Christopher on Twitter @Baldingsworld

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[ChinaUnscripted]

You can follow Christopher on Twitter @Baldingsworld

[peterkiviat]

Telling your best customer and greatest investor you are preparing for war with it is not a great economic strategy.

[vindobonaification]

The movie Chris is talking about is an adaption of a Stephen King novel called "Trucks". The movie's name is Maximum Overdrive.

[POWned]

You guys should be legally obliged to have Christopher on more frequently, ever since you did your first interview with him I've been following him since. His knowledge about China is amongst the best!

[markfischer]

I"ve been watching China's economy and much more about China for about 6 or 7 years when I first saw Anne Stevenson-Yang's presentation of China's economy in 2015 to CSIS. That's when I knew without doubt that it was not anything like the popular belief.

I'm of the opinion that China cannot avoid a total economic and social collapse. China has worshiped at the god of GDP and GDP growth and to compound its misunderstanding GDP adjusted for PPP. The number is virtually meaningless. It's an indication of total economic activity on a territory and what that number would buy locally compared to what it would buy in the United States. For example, if an apartment in a first tier city in China, say Shanghai or Beijing cost 1 million dollars then using 2018 World Bank data when China had a PPP of 3.5 a comparable apartment in a first tier city in the US say New York City or Chicago would cost 3.5 million dollars. GDP tells you nothing about who owns the profits, the intrinsic quality or utilitarian value of what is produced, or any other meaningful parameters. But MBAs who become economists and investment advisors use this single simplistic number to evaluate and compare economies. Here's an extreme example of the distortion this causes. A Chinese assembler in a Foxconn factory in China gets paid $5 for assembling an iphone. The phone owned and sold by Apple Computer company in Cupertino California retails for $1000. China's GDP increases by $1000 x 3.5 = $3500 for that $5 of US currency. GNI not adjusted for PPP tells you how much you can buy for that income on the world market for things like coal, oil, gas, iron ore priced in US dollars. In this case it's $5.

What is the GDP for a building that is never occupied, never used? Manufacturing overcapacity that never makes anything that is sold? Money losing SOEs? GDP adjusted for PPP is high. What about ROI using the net present value method of accounting and payback period. The answers are ZERO and NEVER. What if the buildings and manufactured products are made out of tofu dregs Chinesium? Worthless. According to Lei's Real Talk website (Lei is a former financial analyst in China and now is a blogger analyst in San Francisco, China built 600 million buildings over the last 45 years. There were 15 billion homes, nearly enough for every person in the world to have 2 homes for themselves.

This is just one of many delusions the world has about China. Behind the shiny impressive skylines like the one in Shanghai is nothing. China is the biggest fraud in the history of the world. Now all of its chickens are coming home to roost at the same time. The only thing that China could do to make things worse than they already are is to attack Taiwan. I don't think even they are that stupid.

[densem]

Amazing show on China
I loved it from start to finish
Explaining how communism works while killing humanity

[ezilyyi]

You Guys Are In Another Dimension When Shelley's Around !!! 💯%

[kalloh]

would love to see this professional guest on regularly

[Mark-impm]

Most impressive time i spent with you. You are treating your audience as intelligent people.

[scottmarquardt]

I worked in many of sheet metal fabrication shops and got to see one almost fully robotic, I'd of thought the CCP would have invested in all of them to be that way in the last 10 years, along with plastics, etc. Glad those skills and machines are going to Philippines and India.

[Marycelestial]

Australia got tired of buying your junk that half the time never arrived from eBay. So the China plate is broken. ❤

[ricktasker]

Informative answers to good questions. Christopher Balding is good at explaining things. Thanks.

[geraldvance]

The movie you were talking about from the '80s is called Maximum Overdrive.

[lynettecarter]

As always hail the 3 amigos ❤ and welcome back Christopher baldin 💯🍻

[auggieeast]

All I hear is bad news out of China, but I have to wonder, am I just watching channels that focus on all the negativity, or are things really that bad? How could they possibly still be growing at 5% amid the calamitous economic news?

[robertseptim]

Great guest! Love this show. Thank you for the breakdown

[dergons]

Fyi pretty much all modern cars are drive by wire EV or not doesnt matter. There was a frightening showcase were a research team drove a modern suv in the alps, hacking it from the netherlands and totally disconnected all controls

[whawha]

My first time listening to Chris Baldingsworld and I've got to say it seems like he's spot-on in everything he's saying.

[jasontram]

Well done guys. As a long time listener it's still been hard to find an episode to finally present to a resistant friend an insightful in depth dive into the state of affairs in China presented in grounded, reasonable and intellectually stimulating conversation amongst non-snarky-haters... and for 50 whole minutes I had huge hopes this would finally be the episode... STILL, of all my options I'm still going to run with this episode because if he can make it 50 minutes in of you guys holding it together, then I'll have accomplished my goal of getting him to open his mind just a wee bit... oh and apologies in advance for needing to "accidently" cut off the video showing at the 50 minute mark when it all starts to slowly unravel. 😂

[joeldeleon]

Couldnt happen to a more deserving regime.