How China Could Win the Trade War
In the ongoing trade war between the U.S. and China, it seems as though President Trump holds nearly all the cards. The American economy just posted healthy GDP growth numbers for Q1 2019, and month-after-month, we continue to see glowing jobs reports.
And while it’s true that American importers are certainly feeling some tariff-induced pain, the truth is that China has it far worse. President Xi Jinping is facing immense internal pressure, and his nation’s economy has been run ragged over the last year.
The Shanghai Composite Index (SHCOMP), despite rallying much like the American stock market in 2019, still sits well below the highs of 2015 and even 2007.
By and large, though, the Chinese aren’t big into equities.
So, a sagging market isn’t nearly as big of a deal as it would be in the U.S.
They prefer owning real estate by a wide margin, and as a result, both land and buildings have exploded in value – creating a massive bubble that’s just waiting to burst. Many homes in China sit completely vacant and un-rented, instead being used as money pits where investors shelter their savings.
In fact, it’s gotten so bad that there are now “ghost town” apartment buildings, where each unit is owned by someone, somewhere, but not a single soul lives inside.
And the whole “house of cards” could come crashing down if China doesn’t keep growing at a high rate. Sadly, for the Chinese (who are known for off-the-wall GDP statistics), even that hasn’t been going so well.
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