The best indication of where the Chinese economy is headed is what the Chinese people are doing. China’s enterprises and individuals are on foreign buying sprees, gobbling up companies and properties with abandon. “Many, many people are selling their house in China and buying elsewhere, maybe in Australia, maybe in the United States,” said Wang Peng of Chinese property developer Hanya Federal to Fairfax Media.
As a result, Mandarin is spoken in real-estate agencies around the world, in hot markets and poor ones, and Detroit is becoming China’s newest city. Of course, there could be an element of bargain hunting in the buying frenzy, but we have to view this activity in context. Survey after survey tell us that the Chinese are losing confidence, not only in their own economy, but also in their own homeland. A Barclays study released in the middle of September reveals that a stunning 47 percent of China’s rich plan to leave the country within five years.
And they are already exporting cash in anticipation of leaving. In the just-completed quarter, hot money outflows helped produce the biggest fall in China’s foreign-exchange reserves since 1996, a cool $100 billion drop.
The Chinese economy never made sense, but it kept on expanding because people, both
domestic and foreign, believed the China’s central government would continually guide the economy upward. Now, people are losing that faith—and for good reason. China is growing too slowly and accumulating debt too quickly. Its leaders have rejected fundamental reform. They still have the power to delay a reckoning, but seem helpless to change the direction of events. They are marking time until the crash comes—a crash that all of us, and generations to come, will remember.
Gordon G. Chang is the author of The Coming Collapse of China. Follow him on Twitter @GordonGChang.
Image: Flickr/Matt_Weibo/CC by-sa 2.0