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Something is brewed in China

In today’s money morning … RBA is clearly worried about China … China needs to lower commodity prices … China’s volatile financial high-wire law accelerates digital yuan … and more …

Editor’s Note: In the latest Money Morning Podcast episode, I have a fascinating chat with the CEO of Humm Group Ltd [ASX:HUM], Rebecca James. Humm is a fast-growing fintech and talks about a variety of topics, including the new markets the company is entering. Finally, I’ll explain why it’s behind the Afterpay-Square contract. Please check it!

Dear reader,

After yesterday’s work About Central Banker’s Cryptographic Trash Talk, Our attention will soon focus on the events currently taking place in China.

Oddly enough, what comes out of China will eventually return to cryptocurrencies.

Finally, let’s talk about that, but for now, the context is …

First, a huge Chinese real estate developer called China Evergrande is at stake.

Evergrande holds the title of the world’s most debt-rich real estate developer.

Here’s how Australian Financial Review Assemble it:

Evergrande’s Hong Kong-listed stock fell 63% this year, but the price of bonds issued by the company hit a record low last week after reports of creditor proceedings against the company being centralized in Guangzhou courts. It fell until …

Beijing remains resolutely silent about whether it intends to support a perplexed group, and investors are worried about Real Estate Titan’s ability to repay its $ 300 billion ($ 480 billion) debt burden …

Behind the iron ore trade, Australia’s record trade surplus It is still under threat.

Will Beijing intervene to save Evergrande, and thus Rio, FMG, BHP, and Australian mining cattle?

This is a problem that will have a serious impact on Australian investors after iron ore prices have fallen by nearly 30% since the peak in May.

Given that China’s construction industry occupies more, the collapse of Evergrande, which shakes the Chinese real estate market and makes it more difficult and expensive for Chinese real estate developers to raise debt, demands iron ore There is a concern that it may be further reduced. More than half of the steel used in the country.

Given that Evergrande cannot sell its assets fast enough to pay off its debt, the central issue in China has surprised investors this morning.

At the time of writing this, ASX will be down.

This comes to mind for Philip Lowe, the chief of Money-Printer in Australia.

RBA is clearly worried about China

This is the RBA Governor Philip Rowe had to talk about China’s issues in the context of the Evergrande:

In the steel market, we see Chinese authorities trying to curb emissions by effectively limiting steel production … that is, COVID, common prosperity, financial system stress, and climate goals. There is an effort … Currently there are many moving parts. We continue to monitor all these moving parts very carefully.

It’s usually very straightforward from a cautious and opaque governor.

It means that one of three things can happen.

This is a real threat to iron ore, the backbone of Australia’s mining industry.

Beijing rescues the Evergrande Group, and the iron ore bull roars back …

Or a third option (which I think is most likely) — China will do Evergrande’s “soft bailout”.

That’s why I think the third option is most likely …

China needs to lower commodity prices

When commodity prices soar, Chinese manufacturing monsters feel a pinch in the form of lower profit margins.

In this case, China needs to lower commodity prices, which could be the case for Evergrande’s controlled decline.

Restructuring, several corporate managers roll, but no implosion.

China has a lot of debt, so we need to walk a tightrope here.

If it collapses too quickly, Card’s house will collapse violently.

If the bailout is too easy, the price of goods will rise and the manufacturing department will be hit.

That would be the case in the middle of the state economy.

This, strangely, shows a more restrained bullishness in short- to medium-term commodity prices.

But this is where things get really interesting when it comes to cryptography …

China’s unstable financial high-wire law accelerates digital yuan

check out China’s debt burden:

Non-financial companies in China are very leveraged.

in short, The development of digital yuan should accelerate (CBDC recently launched by China)).

You printed a lot of cash to support GDP growth, so don’t you like the money rules?

‘Change the day.

I think this is China’s play over the next few years.

It also launches a series of cascading events that will probably force the Democratic West to take into account the effects of the CBDC.

Do we really want super-centralized money?

Our answer will tell us more about Western ideals than any other monetary and political decision in the last 100 years.

Whatever the answer, there is one thing that is clear.

You need to wrap your head in the changing concept of money.

There are opportunities in this environment.

If you want to navigate this new world of money well, be sure to check out Ryan Dinse and Greg Canavan. New money investor service.

nice to meet you,

Lachlann Tierney,
for Money morning


Fat Tail Investment Research

Something is brewed in China

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