2023

A document released after the conference set the agenda for China’s economy — the second-largest economy in the world — for the next year. Strikingly, this year’s readout acknowledged that China needed to prioritize economic development.

“Next year, we must persist in seeking progress while maintaining stability, promote stability through growth, and establish the new before breaking the old,” the meeting’s official readout said.

Rory Green, the chief China economist at GlobalData.TS Lombard, wrote in a note on Wednesday that the wording in this document suggested “hints of remorse at overzealous growth-negative policy implementation.”

“The emphasis on the economy was followed by ‘prioritizing development before addressing problems,’ alongside rhetoric that linked national security to maintaining a stable growth rate,” Green wrote. He added that this suggested official recognition of the difficulties facing the country.

The only feasible solution to China’s financial trouble seems to be the central bank’s printing money. Suppose China’s central bank prints ¥10 trillion CNY ($1.41 trillion USD) of base money annually to assist local governments with debt repayment. With only a 4× money multiplier, this would result in over ¥40 trillion CNY ($5.63 trillion USD) of circulating money.

As of the end of September 2023, China’s total money supply, M2, stood at only ¥290 trillion CNY ($40.75 trillion USD). Injecting more than ¥40 trillion CNY into this money pool within a year would have big consequences. Within less than two years, the renminbi could face destruction by the central bank itself due to rampant inflation caused by reckless money-printing.

Through meticulous calculations by Lao Man, the conclusion is that without urban investment bonds, China might struggle through the next three years. It would be a bare survival level, though, with China limping along on money printed from thin air. This situation could potentially last until 2030, which is viewed as the ultimate deadline for collapse.

‘No Hope of Rescue’ However, the dilemma posed by urban investment bonds is like a noose around the Chinese economy’s neck, capable of asphyxiating the system at any moment. No matter what the central bank does, 2024 looms as the most probable year for collapse.

Lao Man suggests some solutions.

Elevating private enterprises to the same status as state-owned enterprises is one. He also suggests empowering the public to participate in and oversee government actions. But neither of these scenarios is likely to occur. If the Chinese Communist Party were to open the door to either capitalist innovation or public accountability, its very reason for existence would evaporate. All that remains, it would seem, therefore, is to quietly await the inevitable.

Lao Man’s final conclusion was stark: “Fortunately, the wait won’t be long. Local government debt will definitely explode within the next year, with no hope of rescue.”