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B Y : W W W . P R O F I T A B L E I N V E S T I N G T I P S . C O M
Economic Problems in China
and Your Investments
https://profitableinvestingtips.com/profitable-
investing-tips/economic-problems-in-china-and-
your-investments
Ever since the then-leader of China, Deng Xiaoping
introduced economic reforms in the late 1970s
China has been an economic miracle. It is a middle
income economy today but because it has a
population of over 1.4 billion it is a superpower in
the economic realm. And, it aspires to be the
dominant superpower in military power and global
dominance.
https://profitableinvestingtips.com/profitable-
investing-tips/economic-problems-in-china-and-
your-investments
However, the Chinese Communist Party which runs
everything in China needs to keep people in China
satisfied with how they are doing things and that
may be more and more of an issue in China. Our
concerns are about economic problems in China
and your investments.
https://profitableinvestingtips.com/profitable-
investing-tips/economic-problems-in-china-and-
your-investments
Why Has the Chinese Economic Boom Lasted
So Long?
https://profitableinvestingtips.com/profitable-
investing-tips/economic-problems-in-china-and-
your-investments
When China opened up to the world and started to
reward people for their work and initiative in a
quasi-capitalistic manner it opened the door to the
country’s economic success. The country had a
virtually untapped pool of cheap labor and a huge
market that other nations wanted to get into.
Foreign investment poured into the country as
Western nations set up shop to produce products
cheaply in China and import across the globe for
less than they could do from their home nations.
https://profitableinvestingtips.com/profitable-
investing-tips/economic-problems-in-china-and-
your-investments
Favorable trade status achieved in the 1990s gave
China full access to nations across the globe. Along
the way China got into the habit of borrowing in
anticipation of greater growth which worked for
years. However, China has saturated global
markets and no longer has its unlimited pool of
cheap labor as the one couple one child policy has
left a demographic hole in their workforce and
people in China today expect to make more than
pennies a day.
https://profitableinvestingtips.com/profitable-
investing-tips/economic-problems-in-china-and-
your-investments
https://profitableinvestingtips.com/profitable-
investing-tips/economic-problems-in-china-and-
your-investments
Experts have been saying for years that China needs
to develop its domestic markets more, reduce its
debt, and open up its markets to foreign
companies. They have kept going despite not doing
these things and the answer to why their boom has
lasted seems to be the grandfather of all housing
bubbles.
https://profitableinvestingtips.com/profitable-
investing-tips/economic-problems-in-china-and-
your-investments
Why Does China Have a Housing Bubble?
https://profitableinvestingtips.com/profitable-
investing-tips/economic-problems-in-china-and-
your-investments
China does not have Social Security or a similar
social safety net. Traditionally, families had lots of
children so that the kids could support their
parents in old age. That went out the window when
China mandated that couples could only have one
child. Recently the law changed to allow two kids
and now three but it will take years for those
children to reach working age much less the age
where they can support their parents.
https://profitableinvestingtips.com/profitable-
investing-tips/economic-problems-in-china-and-
your-investments
Thus, Chinese save and save and save. One of the
preferred ways to save in a society that did not
allow property ownership within living memory is
to buy real estate. People buy apartments in vacant
cities as a way to hedge against the future. They
pay property developers like Evergrande money in
full up front before the first brick has been laid.
https://profitableinvestingtips.com/profitable-
investing-tips/economic-problems-in-china-and-
your-investments
We wrote about this in our article about Chinese real
estate and the next financial crisis. The problem
with the Evergrande situation is that they have
billions of dollars of debt that they cannot pay and
lots of apartment buildings for which they were
paid and have never started on!
https://profitableinvestingtips.com/profitable-
investing-tips/economic-problems-in-china-and-
your-investments
What Will the Communist Party Do to Stay in
Charge?
https://profitableinvestingtips.com/profitable-
investing-tips/economic-problems-in-china-and-
your-investments
The folks who are in charge in China are the Chinese
Communist Party and today that means Xi Jinping.
The Party stays in power not because they were
ever elected but, currently, because they have
delivered economic success to the people.
However, that success is waning as we noted in our
articles about the political dangers of investing in
China and Chairman Mao and investing in China.
https://profitableinvestingtips.com/profitable-
investing-tips/economic-problems-in-china-and-
your-investments
The recurring way that dictators like Xi stay in power
is to shift blame to “foreign enemies” when the
problem is that they mismanage the government. It
is a real worry that China keeps ramping up
pressure on Taiwan and threatening its neighbors
in the South China Sea as any of this posturing
could get out of hand and lead to a war with the
potential for global consequences including your
investments.
https://profitableinvestingtips.com/profitable-
investing-tips/economic-problems-in-china-and-
your-investments
In regard to Evergrande, the collapse of this
company may have significant effects on China’s
economy and may hurt those who supply them
with raw materials but will likely not have the same
effects globally as the collapse of Lehman Brothers
at the start of the Financial Crisis. Thus the way
that a housing market collapse in China would
affect your investments would be via a global
slowdown and not a financial collapse.
https://profitableinvestingtips.com/profitable-
investing-tips/economic-problems-in-china-and-
your-investments
To the degree that you are invested directly in China,
your investments could suffer substantially more.
The more China threatens Taiwan in order to
distract its unhappy population the more you may
wish to consider US defense stocks as part of your
portfolio.
https://profitableinvestingtips.com/profitable-
investing-tips/economic-problems-in-china-and-
your-investments
For more insights and useful information about
investments and investing, visit
www.ProfitableInvestingTips.com.

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Economic Problems in China and Your Investments