“After the lockdown, China's economy lost a third of its GDP.
After the injection of more than a trillion dollars - but, most likely, we are talking about a figure several times larger, it's just that a trillion is something that can be proved, these are the numbers that are on hand - the Chinese economy has recovered only ten percentage points, which means, that she recovered only 80%.
With all the desire, it is impossible to say that the V-shaped recovery of the Chinese economy has occurred.
Moreover, the recovery required colossal sacrifices in the Chinese financial system.
Given that the problems of the Chinese economy will worsen in connection with the possible re-election of Donald Trump and they will not be solved at once even if Biden comes to power, by March 2021, shocks will again occur in the Chinese economy.
Let's consider the simplest indicator - the profit of industrial enterprises. In the period from January to July, it fell by 8.1% in China.
If we are talking about public sector enterprises, the drop in profits was 23.5%. In the extractive industry, the drop in profits in China is 41.6%.
That is, the mining, raw materials industry of China, supplying industrial enterprises, which, in turn, provide the final demand, has lost such a percentage of profits, what kind of recovery can we talk about then?
And this is just the beginning.
In production, the drop in profits was 4.5%. In oil and gas production, profit fell by 72.1%, that is, almost doubled.
The Chinese Automobile Manufacturers Association for the eight months of 2020, in September, published its forecast for the next five years.
In five years, China's auto industry will grow by only 8%. The point is that the growth each year will be less than 2% of the point. And by 2025, car sales will be nearly 28 million.
That is, no visepe recovery - no V-shaped recovery occurs.
The best way to describe the Chinese economy is more or less stable stagnation.
This is what you really need to talk about. And there was no explosive growth following the results of several months of the so-called "recovery".
Moreover, the same China Automobile Manufacturers Association is planning a 10% drop in sales by the end of 2020. And the Association of Auto Dealers reports that, oddly enough, carmakers have large inventories.
And the question arises: how can stocks appear if there is a recovery and sales growth? And here we come across a very interesting moment, which is related to Chinese statistics.
The fact is that all the positive statistics - that is, such mild positive convulsions - when a patient in a coma began to twitch his fingers are presented as recovery, but they, in fact, are the arithmetic mean of the median value from the growth of large industrial corporations, which were massively subsidized and credited by the state, and a huge failure in the private sector, which employs 80% of China's population, and which is focused mainly on export sales.
For example, we see an increase in sales of commercial vehicles, special equipment, excavators and trucks, everything that is bought by infrastructure and construction corporations to work on facilities that are subsidized by the state, where it acts as an investor - there is a double-digit growth of 40, 50, 60%. And the median growth of private and state purchases is in the region of 4-5%.
How does it work? In the private sector, sales are falling, people do not buy cars, they save, they have unemployment - by the way, it is hidden in China, not overt, but it is huge.
So it turns out that ten people in the public sector are completely at work, and another hundred people are on the street, and on average, everything is more or less arranged and everything, more or less, is released and produced.
The median value of the private sector and the corporate sector on average for the hospital gives, let's say, a slight increase.
What's really going on? Let's take the same automotive industry. It seems to have restored its production, but the warehouses are overstocked.
The state subsidizes the automotive industry, and not only it, gives money to ensure that production does not stop, gives loans so that someone can buy products, gives subsidies to people who would go to work and would be listed in this enterprise.
But even if we believe the official statements at the China daily that in August retail growth was 9%, and online retail 16%, the question arises: where does the overstocking in auto warehouses come from?
The conclusion is unpleasant: just like during the Great Leap Forward under Mao Zedong, when for the sake of positive statistics, data was winding up, creating such negative phenomena for the economy, so now everything is being done for positive economic statistics, for the substitution of concepts.
This is very noticeable in the automotive industry. And the final demand is not working.
What is the recovery going on? For bank loans. They were issued in large numbers.
The Chinese prime minister has declared special bonds to control the coronavirus, this is one trillion yuan - approximately $ 115 billion. These are special investments in reducing the tax burden - also a trillion yuan, that is, again $ 115 billion. In addition, special bonds of the regions should be added here - approximately $ 200 billion by the end of 2020, and, possibly, this amount will expand. Loans for small and medium-sized businesses are another $ 200 billion.
By the way, we absolutely do not know how much the People's Bank of China has poured in to maintain the yuan exchange rate. Although, for example, in 2014 - 2015, such data were constantly published, and now they are not published.
But, most likely, we are talking about several hundred billion dollars.
And add to this the injection to save the stock market, which, I remind you, just went into a tailspin. And this is also several hundred billion dollars.
That is, we are talking about the fact that the Chinese banking system, the financial system injected into the economy an amount of at least one trillion dollars - from the end of February to July-August, that is, for a period of six months.
And by the end of this recovery period, neither deferred demand nor loans provided positive growth.
We see this in real estate, the automotive sector and many other industries. And this did not contribute to the growth of profits of industrial enterprises, which account for most of the Chinese economy.
The point is that a huge amount of bad debts is accumulating.
He is hiding. Officially, this figure is about 2% of all debts, and Americans estimate it at 20%.
There is a deadline for the repayment of debts of small and medium-sized enterprises in China - this is March 2021, when these enterprises, in theory, should earn money and begin to repay debts to the People's Bank of China. But given what is happening now in the Chinese economy, they are unlikely to work".
You can listen to Nikolai Vavilov's full commentary here.