As we discussed several times over the last few months, China is going from bad to worse! This was unavoidable. This is by far the largest bubble ever and the chance of a soft landing was always going to be slim. Historically, bubbles more or less always end the same way. (One of the best and most comprehensive book written on the subject is probably: "Manias, Panics, and Crashes" by Robert Aliber)
Many economists expected China to be able to manage such a crisis better than Western countries but in retrospect it is difficult to understand why. The political system is corrupt, blind and deaf as proven by the Covid crisis. How on earth was it going to be able to fix such an intractable problem?
But now what? China is like the proverbial cornered rat. It is still weaker militarily than the US, but sanctions plus external and internal pressure may be enough to tip the coin if the Politbureau sees no other options.
The West has proved with Russia that it will chose a fight to the finish, although by proxy. China may not have heard the plight of its own people but it certainly hasn't missed the menaces from the US. Folding at this stage with the looming real estate bubble ready to burst would be tantamount to accepting defeat. This is very unlikely to happen. Prepare for the worst!
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