china poses the most serious long-term challenge to the internet after more than two months of a brutal city-wide lockdown real estate sector has been the subject the chinese property market has been shaken in recent months it's no secret that china's economy is collapsing as i speak china is implementing the strictest coveted lockdown in history but that's just the tip of the iceberg housing sales are crashing the stock market is tumbling the chinese iran is being devalued social unrest is erupting and the credit market is falling apart china's economic failure isn't just a typical recession it's the biggest property downturn in history and a serious threat to the global economy every economy relies on the consumer to drive economic growth china's consumers are in the worst position in history and i'm not exaggerating when i say that china's consumer confidence index is currently the lowest it's been in the history of the index which dates all the way back to 1991. the reason why this is extremely concerning is because it creates a terrifying feedback loop one-man spending is another man's income if consumers are not spending money on goods then consumers are not going to receive income for instance an employee working for didi spending less money on alibaba.com will lead to less profits for alibaba this causes employees of alibaba to be laid off or see their salaries be cut the result of that is less money spent on another company's products which only lowers income even more if you're a chinese citizen this is a frightening situation to be in the worst part about it is that the government is responsible for the country's failing economy china's zero coveted policy which involves trying to keep covert cases at zero has crashed the economy into pieces the chinese government has a goal of literally reaching zero covert cases that's right zero coveted cases we all know that's not possible when china has a population size of 1.4 billion people this is why authoritarian governments can make terrible decisions when the government has an unreasonable target like zero coveted cases the government will enact any regulations you help reach that target in order to do almost anything citizens are forced to have a negative test within the past 72 hours we're talking about riding a train going shopping eating at a restaurant all of this will require a negative covet test this would be fine if getting a test was easy but when you have 16 million people in one city trying to get tested it's no surprise that testing lines are packed so as a result of covet testing regulations people can't go shopping they can't go see their family some can't even go to work this is already horrifying but forced lockdowns are even worse the entire city of shanghai which has a population of 26 million people was forced to lock down for 70 days after a coveted breakout occurred some might think that the lockdown has subsided now but the coveted regulations aren't over one single coveted case in the city of shenzhen forced large portions of the city to undergo mass testing imagine neighborhoods of people being forced to test just because one person got coveted such a strict protocol is ridiculous perhaps one of the most serious implications of the cobit lockdowns includes a further downfall in china's housing market the chinese housing market is one of the biggest bubbles in history it's so massive that some might wonder how it came to be in the first place allocating capital to investments is extremely important for any citizen nobody wants to look at their cash right away to inflation over time as a result a typical person might take a look at the stock market but chinese stocks are notoriously risky companies like didi the largest ride-hailing company in china have seen their valuations tank by 75 to 90 percent just because of the chinese communist party the entire one trillion dollar education sector went to zero overnight as the government turned the originally private industry into a public one the chinese superstar entrepreneur jack ma was torn apart after mysteriously disappearing for three months and to make matters even worse the chinese government has scared away international investors by keeping the risk of a de-listing on the u.s market these delisting risks are only continuing to grow as time goes on so stocks aren't really an option for chinese citizens to invest in but what about other assets the vast majority of other assets are not even available to invest in just take a look at bitcoin which experienced a nationwide ban in 2021 the only place for chinese citizens to invest in is the property market the problem with this is that there is too much capital looking for too little opportunities to invest in because chinese citizens have nowhere to invest their money a bubble has formed in the real estate market property developers have taken out billions of dollars of debt to quickly expand their real estate portfolios from their perspective taking out debt seems logical chinese real estate prices have been increasing year after year with little to no downturns the debt pile has bubbled up for so long and the government supported it the whole time and as long as the government supported the increase of leverage the size of the bubble only continued to grow 65 million empty homes can be found across china in what's known as ghost cities these cities contain houses that are there purely for investment gains nobody lives in them because the ghost houses are literally just there for future capital gains investors were going to pass down the ghost houses generation by generation until what happens recently the government can decide to crash the market at any time that it wants and that's exactly what the ccp has done presidency has recently been talking down on real estate as investments as if he didn't support it over the past decade to crack down on the property market z has been implementing what is known as the three red lines the three red lines put a cap on the amount of debt that property developers can have if a property developer crosses three red lines zero percent debt growth is permitted this is a serious issue for a significant amount of property developers because they need to pay their interest payments somehow companies like evergren used to simply take out more debt to pay off their interest but that's not possible anymore evergrand has already crossed all three red lines which means that they cannot take out any more debt the only possibility left is to sell properties to pay off the debt but who's going to buy the properties property developers certainly can't as they're all trying to scramble to the three red lines not only that but nobody wants to buy properties in a sector where the ccp is purposely crashing the market an increasing number of chinese property developers are now on the brink of default in the 2009 asian financial crisis the bonds of three chinese property developers were deemed as risky by moody's research that number is now increased to 24. the housing bubble didn't just appear out of nowhere it was built over decades of growing liabilities debt levels in the property sector increased from 100 billion dollars to over 1 trillion from 2010 to 2019. that is a 10x increase in debt in just 9 years which is certainly not sustainable the central chinese bank has tried to support the housing market by cutting mortgage rates but that clearly hasn't been very effective so far lowering interest rates in an over leveraged market is like giving cigarettes to someone with lung cancer it's already a serious problem and the government's recent actions only worsen the problem sales of residential buildings are down over 41 percent year over year such a frightening drop is unprecedented and exceeds out of 2008 and 2014.

one of the biggest japanese financial companies nimura holdings called this the worst property downturn on record which isn't even an exaggeration the number of rating cuts on chinese developers is also at an all-time high with rating cuts still continuing to happen right now property developers are stuck with the overwhelming problem of debt and they have no way to pay it off even the ones below the three red lines are still doomed to fail inside in environments like this so why is this all important as mentioned previously real estate is the only asset class that chinese citizens can invest in economists value the chinese real estate sector at 55 trillion dollars almost three times more than the entire us gdp real estate and related sectors account for roughly 28 of china's total gdp a 50 drop in chinese real estate could easily cause a global recession china accounts for over 18 percent of the global gdp so an economic slowdown in china could cause global weakness some might think that china's crash is a short-term issue but that's not quite true china's economic collapse isn't just in real estate some economists marvel at china's astonishingly quick gdp growth but they failed to see the underlying issues that were created all of china's economic growth was fueled by a disproportionate increase in debt china was once a country with relatively low debt levels but the country's total debt has quickly grown to almost four times the entire country's gdp the credit market is already faltering as a result of china's overextended debt levels lenders don't want to lend out money in an economy that is struggling to stay afloat china's new loans have plunged to the lowest level in 5 years the chinese central bank is desperately trying to encourage lenders to boost loans but the economic outlook is simply too grim to increase lending the result of all these economic issues is the downfall of the chinese ren spurred by internal economic struggles the chinese rent is currently undergoing the worst devaluation in history while the u.s federal reserve is sharply raising interest rates china's central bank is cutting interest rates as fast as possible this is because unlike the u.s economy that appreciated in 2021 due to quantitative easing the chinese economy is no leeway to raise interest rates the chinese run to us dollar exchange rate has recently increased by a drastic amount this graph shows a yuan per dollar conversion rate this means that for every dollar this graph shows the amount of grand you would receive you can see how recently the chinese rent has suddenly been devalued the rent per dollar has increased from 6.4 to 6.6 within an extremely short period of time this means that for every dollar you would get 0.2 more rand than before that might not seem like much but is the iran's worst month in history the last time a quake grand evaluation like this has happened was in 2015. this came as many doubted china's free market commitment as the iran's currency rate was purposely manipulated to prop up the chinese economy the 2015 panic led to one trillion dollars flowing out of the iran with the iran currently dropping even more than 2015 we could see two or even three trillion dollars in capital outflows out of the iran the reason why the chinese government has allowed if not encouraged the granted crash is because it theoretically supports the economy in the short term as the iran becomes devalued chinese goods become cheaper after all if the u.s dollar can be exchanged for more iran then more americans will purchase chinese goods the issue with a currency devaluation is that export-driven economies will suffer because india had to compete with china for exports in 2015 the indian currency plunged to a two-year low china's grand evaluation could bring down the entire emerging market with it since they rely heavily on exports so just like the u.s federal reserve printing money in 2021 china's currency devaluation is setting the stage for a massive economic collapse china's government knows this too well but just like an addictive drug they can't stop stimulating the economy china recently released a package that contains 33 new stimulus measures the total stimulus amount has now increased to 5.3 trillion dollars which is even more than that of 2021. a breakdown of this stimulus will show you that most of the budget comes from 26.7 trillion grand in general budget expenditures china will tell you that this spending is for a temporary coveted breakout but they're just trying to cover much more serious issues those of you who don't live in china might think that you're protected from china's collapse the device you're using to watch this video on was probably made in china china is a manufacturing superpower that accounts for roughly 28 of manufacturing globally a sudden crash in china's economy will put substantial strain on manufacturing worldwide with a lower supply of goods countries worldwide will experience much higher prices all across the board the continent that will face the worst impact of them all is europe the european union depends on china for almost all of its metal china accounts for roughly 75 to 100 of the eu's total metal supply out of the 30 critical raw materials 19 of them mainly come from china one instance of this is magnesium china supplies 98 of the eu's magnesium supply imagine what's going to happen when 70 to 90 percent of the metal supply suddenly fades away commodity prices will skyrocket causing even more strain on the eu as well as other economies let me know what you think about china's economic collapse are you concerned at all if you enjoyed this video please hit the like button and subscribe and i'll see you in the next one.