Why “Everyone” Wants to Leave China, by Al Fin.
A year ago, only a few manufacturers in China were thinking about leaving. Now the strategic picture has changed [Forbes]:
In December, I had one company getting ready to source elsewhere,” he says. “Then I went back in May. They are all thinking about it now,” he says about the Chinese manufacturers targeting new hubs in southeast Asia. Mexico is also on the radar screen.
“You’re going to see more companies exploring outside of China,” Scannapieco says. “Unless you’re in China to sell to China, why be there? It’s becoming too much of a risk.”
It is not just US companies that are trying to reduce their risk exposure in China. European companies are doing the same thing.
Around 25% of credit in China is “rotten debt,” essentially dead meat. And another 25% is embodied in “dying meat.” Other than foreign investment which has been largely based upon foreign market demand, domestic investment in China is based upon political considerations — which tends to be economically misplaced, and often gets out of control. And as we have seen, foreign investments have been falling away recently, and more of China’s economy is tied up in Potemkin-style artificial stimulus. …
90% of China’s millionaires are close relatives of party officials. The spice must flow, as they say, and spice does not flow from companies that have been allowed to die — even if that is what should have happened.
Like the Soviet Union, it was a “one off” event in its economy:
China’s rapid growth of the past few decades was based upon foreign investment and technology transfer, plus a few historic trends and events which will never happen again:
China’s growth in the last three decades received an impetus from several events that were “one-offs”—by their nature, they can’t happen again. Bringing previously unproductive peasants by the hundreds of millions to work in urban factories, that’s over. Joining the World Trade Organization, that’s over. Enjoying a huge working-age population with few children to raise thanks to the One-Child Policy—not only is that over, it has left a demographic hangover in the form of a gender-skewed citizenry whose median age is rising rapidly, straining the nation’s minimal social security system. __ Decline and Fall
China received a rare series of minor miracles to become as “faux rich” as it has become. Those miracles will never return. And as Chairman Xi’s China grows more rigid and authoritarian in the belief that the Chinese economy and Chinese people will continue to support it no matter how badly it misbehaves — the underlying fundamentals are eroding from under the feet of the dictatorship.