A lot of people, including myself, often draw parallels between 2008 and today. However, what should really be compared are the first and second largest economies in the world.
Both #China and the #US have fueled enormous real estate bubbles that have since become #stocks market bubbles. The only difference between the two countries right now is that in the #US, people still have easy access to leverage, while in #China, everyone is in “capital preservation” mode. Or, from another perspective, in the US, people still have no fear of spending wildly, saving almost nothing, and piling up any form of debt available because they are galvanized by their 401Ks (paper) gains going up daily. On the other side of the world, everyone, no matter their income/wealth level, is penny-pinching because their parents and grandparents don’t stop reminding them about the major hardships of the Cultural Revolution (Covid-19 is nothing compared to 10 years of that).
As many of you know, I travel to #China weekly, both to large and small cities, and frankly speaking, the general population here is quite well off. To be totally honest, I have realized that those Chinese people struggling today in #China are mostly millennials and Gen Z who studied abroad, mainly in the US, and have embraced both the good and bad aspects of our Western culture. The “small” problem about going wild on your consumer loans in #China is that while in the US you can default on your debt and after a few years everyone will forget and resume lending to you, in #China going bust is a lifetime bad record that will impact not only yourself but your relatives too.
Wherever you travel in #China, you can see signs about “long-term prosperity,” “long-term wealth,” and so on. Historically, #China’s governments became famous for their ultra-long-term planning and for copying what’s good elsewhere to then start innovating after they’ve mastered their competitors’ secrets. This time isn’t different at all, the government simply realized the “American experiment” of extremely loose credit to fuel consumption and population wealth (on paper) is a recipe for short-term gains but massive long-term pain and social instability.
Debt is like drugs; you cannot just quit and go on with your life. Detoxing is a long and painful process where doctors also prescribe “drug substitutes” in lower and lower doses to help the person out of their dark hole. I realized this is exactly what #China is doing right now with its own economy. They are simply detoxing the body from years of debt and, like recovery from drug addiction, they still have to provide debt and a mix of supporting policies to the body because an abrupt cut would risk killing the patient.
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