Comments by "Peter Jacobsen" (@pjacobsen1000) on "CaspianReport"
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Well, we should first recognize that none of us can really predict the future, only speculate, so here it is:
I think China will continue with around 5% growth for 2 years or so, but then they will have to reduce their target to 4% or 3.5% or even 2% by the end of this decade.
The reason I think so is that much the growth today already comes from state investments, as much as half of growth. In the last few years we've seen the govt. pump several trillions of RMB into the economy, and it seems to increase. The Govt. is now issuing ultra-long-term bonds at rates around 1.8-2.0%. RMB 1.8 trillion have already been issued this year, about 1.3% of GDP. Chinese people are happy to put their savings into these bonds, because they are one of the few good and safe investments left.
The Govt. takes that money and invests in 'New Productive Forces': EVs, batteries, AI, Quantum computing, green energy, etc. Some of these may be very good investments, but we can't know for sure. Does AI make money? ChatGPT, Google Gemini, DeepSeek, do they make money? Will they make money in the future? It's not certain. And that goes for the other technologies, too. Certainly, EVs sell well in China, but it is at the expense of traditional cars, meaning no extra profits are being made, it's just moving money around.
China really needs to allocate much more money back to citizens/consumers. 1.4 billion people, if they get money to spend, China could continue to have high growth for a long time. But will it happen? I'm skeptical.
In the long term, I think China is at very high risk of ending up like Japan, a stagnant economy. And given China's size, it might even be worse.
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