| Hi Taylor
- I'm reading about problems with China's economy. Do you know what
those are and what they mean for us?
Hi Miles - There are a lot of different factors in play over there.
Some of them will ripple through the global economy to an extent,
other issues might make room for the US and other countries to step
in and provide a missing supply or service. It's complicated, but
here's a layman's breakdown.
estate. There's been a developing real estate crisis in China
for about two years. First, a real estate juggernaut called Evergrande
defaulted on debts that funded a massive number of housing units
that Chinese workers had already paid for and were expecting to
live in. That kicked off the crisis, and more recently another
developer and a trust company have both missed interest payments.
People aren't getting the homes they bought, jobs are being lost,
and it isn't looking like there's a quick or easy solution to
2. Supply issues. Everyone was a little surprised to see how
quickly China recovered in the wake of the pandemic, and now it's
looking like they roared out of the gate too quickly. Trade issues
have caught up with Chinese industry and the yen recently dropped
to its lowest level in nearly two decades. As other countries
have gotten back on track, China has seen a big drop in exports.
When an economy cools off too quickly, it becomes really hard
to figure out international trade deals and how, when, and where
to move existing products. That stuff is complicated enough and
becomes extra confusing when things take an unexpected turn for
3. International effect. China's economy is enormous, so
it's always worth monitoring what's going on over there. If giant
Chinese firms can't pay debts, that means companies here and elsewhere
aren't getting the money they're owed. Nevertheless, our economy
isn't expressly dependent on theirs. The real estate problem over
there might be felt lightly outside of China, but not to a major
extent. Depending on how bad China's exporting woes get, it might
make room for other countries to create new commercial relationships
and experience a little bit of growth.
| I'm very interested
to see how the housing crisis plays out over there. Most Americans
remember how real estate and banking problems can cause an economic
disaster in a hurry, and China seems to be flirting with that kind
of problem. Stay informed on it, but there's no reason to panic right
now. Thanks for the question, Miles!
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