I just read a rather chilling article at Forbes on the probable contours of the real Chinese economy. Here’s a telling snippet:
Furthermore, although the China government may not have lots of foreign debt, Chinese companies have borrowed more than $1 trillion denominated in dollars. Now that debt is rising in terms of the yuan, just as imports and exports are plunging, it becomes difficult to service that debt. That’s what causes deep recessions or depressions.
China’s largest coal mining company, which has a labor force of 240,000, announced that it would cut 100,000 jobs or 40% of its entire 240,000-strong labor force.
It’s impossible to get your mind around China because the numbers are so large but cutting 40% of your labor force sounds like a lot to me. A trillion dollars of corporate debt isn’t negligible, either.
The question is no longer whether China will have a hard landing but what a hard landing for China will look like?