China’s Eurodollar Story Reaches Its Final Chapters

Imagine yourself as a rural Chinese farmer. Even the term “farmer” makes it sound better than it really is. This is a life out of the 19th century, subsistence at best the daily struggle just to survive. Flourishing is a dream.

Only, you can see just on the other side of the hill the bright reflective lights of one of China’s many glittering modern cities. Not only are you reminded of the stark difference between what must be the life of its denizens and yours, not too long ago your neighbor or distant relative was privileged enough to move out of the peasantry and into the light and city life of relative comfort and fortune.

You try not to be bitter because this transformation will someday be your transformation, biding your time until your number is called. You put up with a lot along the way, from clear restrictions to your personal freedom and human rights to ungodly pollution, but through it all, you keep reminding yourself that even if you don’t live long enough, for your one permitted child their future is assured.

And then one day the government says, “sorry, we are all full up over here in paradise.”

China isn’t quite there yet, but that day is coming maybe even rapidly approaching. What’s more, Chinese officials know it. While Economists in the West were suckered into globally synchronized growth, the Communists knew it was nothing more than a marketing slogan. Long before trade wars, China’s economy in 2017 had reached its reflationary plateau and frighteningly it was a shallow one.

…of the 300 to 500 million peasants slated to become middle class workers, what happens if only 200 million end up having been given the order to move into the fancy new cities? (In truth, it doesn’t work like that; it works the same as anywhere else where the relatively affluent already in cities move into the new stuff and the newly arrived rural farmers take over the old left behind). This is the real danger and the real task for the Chinese government. A no-growth world means there isn’t anything for those still on the outside to do, and therefore no need for them in the cities.

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Disclosure: This material has been distributed for informational purposes only. It is the opinion of the author and should not be considered as investment advice or a recommendation of any ...

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Gary Anderson 3 months ago Contributor's comment

This scenario could happen, but, China has bounced back before. It signs onto the Eurodollar, but it doesn't sign on to Basel. It can rope a dope for a long time, wearing out the West. Time will tell.