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How will China’s Economic troubles affect the Global Economy?

Posted on Jul 13, 2015 by in Observations about various subjects | 0 comments

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How will China’s Economic troubles affect the Global Economy?

These observations are strictly my views and I do not have an agenda from a political standpoint. Strictly I am trying to present a concern that I have as well as a solution.

Our News Media is so focused on Greece now days that no one has notice that China is imploding quietly without anyone even blinking an eye. China’s high flying Stock market has quietly dropped around 30 % from where it was a couple months ago. Let’s be real this is big news and should be in the front pages rather than a quiet footnote.

The Chinese Government, more specifically the Chinese Communist Government is trying to salvage their own economy, their real estate market and their stock market from totally collapsing. They are keeping insolvent developers afloat by forcing the lender to continue infusing cash and not call in the loans. There is a huge glut of unsold inventory so that will continue to be a dark cloud over them.

The Government Bank of China is planning on injecting funds into the brokerage firms. They are injecting funds i.e.: new money, which is like printing new money. This reminds me of what was happening in Europe specifically German after World War One…..

On a side note everyone is focused on Greece defaulting that might be a couple billion dollars that would be lost to us….on the other hand if China goes down then we are talking not a couple but probably 20 or more billions of dollars that we would lose. So there should be more interest in this information from a financial standpoint.

Not too long ago the Wall Street Journal wrote that there are manufacturing companies in China that have closed their operations down and are using their cash to gamble in the stock market. When more than 90% of their profit come for “stock market income” one must wonder what are they thinking? Manufacturers realize that they can make more money in the stock market rather than producing goods.

So how does that effect the US Real Estate Market? Well for starters the Chinese All Cash Buyers have dried up because it is difficult for the Chinese Nationals to move funds from China. This in turn slows down the foreign nationals buying in the US. At the same time it allows opportunities for US Investors to buy with less competition. Institutional investors can now make researched buying decisions without being outbid by the foreign money from China.

According to World Bank figures China accounts for 13%+ of the global gross domestic product. They basically are the biggest exporters around the world. Have you looked at things near you and turned them over and tell me where they are made. Coffee mugs, hammers, nails, and I could go on and on…everything is made in China for all practical purposes. So what will happen if the world supply dries up? This is a question one might consider and at the same time look at it as an opportunity to start some manufacturing operations. (Anyway I am just thinking out loud)

So my advice is to both the US as well as the Chinese people with large sums of money. Park your funds into Real Estate that has always been a safe haven for long term investment. The best investment you can put your money is in improving areas or existing Luxury areas. This will protect your assets from the volatility I anticipate in the stock market due to the Chinese Economic Meltdown. There are still ways to funnel funds out and protect it from further meltdown. There are fantastic buying opportunities in the 90210 market that I might suggest. So with that said please reach out to me directly for a confidential conversation.

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If you are considering buying or selling a home, a luxury home, luxury investment real estate, luxury vacation homes, or luxury beach properties in Southern California, Los Angeles, Century City, Westwood, West Hollywood, Beverly Hills, Marina Del Rey, Venice or Malibu, feel free to contact me at me at 310.486.1002 (m) or homes@endrebarath.com or visit one of my websites at http://www.endrebarath.com.  I am a pet friendly realtor and I contribute a portion of my commission to local animal rescue organizations.

 

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