Hello and welcome. You are listening to Patrick Boyle on Finance, a podcast exploring ideas from quantitative finance, examining events occurring in markets right now and financial history to see what lessons can be taken away, including interviews with some of the most interesting people in the world of finance. To learn more about the podcast, visit onfinance.org.

The Chinese economy is experiencing a severe slowdown with its true state obscured by reported

GDP growth. The government's response to economic challenges involves increased investment spending

whether the investment is productive or not, along with directed lending to favoured industries.

These measures will boost GDP statistics, as GDP doesn't distinguish between activity that increases a country's wealth,

an activity that doesn't.

But achieving growth that's beyond the real growth capacity of the economy through malinvestment

causes debt to grow faster than GDP.

If the investment was productive, you would instead see GDP

growing faster than debt. It might surprise some viewers to learn that despite all of this

growth that's occurred in China, the Hangseng Index is today at a level it first reached

27 years ago in 1997, long before China joined the WTO.

China's real estate sector, which until recently contributed about 20% of the country's economic

growth, has now become a drag on the economy.

The property collapse, which began

in 2021, killed off construction activity in the country, cut into household wealth and dampened

consumer confidence. China is currently battling deflation with consumer prices experiencing

their sharpest decline in 15 years this

January, marking the fourth consecutive month of decrease. To revive growth, Chinese policymakers

are pushing money into manufacturing and exporting instead of real estate and infrastructure

this time, which risks igniting a new wave of trade

tensions, not just with developed economies, but with emerging markets too who are struggling

...