China Is Racking Up Doubters

Even Vladimir Putin couldn't resist calling Xi Jinping a liar...

Earlier this month, the Russian president granted the West a rare interview. He sat down with Tucker Carlson to discuss Russia's invasion of Ukraine and the possibility of a negotiated settlement to end the war.

He also mentioned the BRICS – the economic bloc headed by Russia to counterbalance Western influence – and the potential threat they pose to the United States. Yet he couldn't resist a jab at China's leader, Xi Jinping...

China and Russia are trying to grow trade between their nations. They aimed to hit $200 billion last year. And Putin said his government recorded $230 billion in trade with China... while China's government says it's $240 billion.

Of course, Putin has his own agenda. So we can't trust his statements any more than Xi Jinping's. The point is... it seems even China's allies aren't keen on trusting its data.

And while China is trying to position itself as the next economic giant, soon to overtake the U.S... we have our doubts.

China may be messing with more numbers than its trade data with Russia...

Official government statistics say China grew 5.2% last year. However, research organizations like Rhodium cite quiet cities, empty shops, and a drop in property prices.

The International Monetary Fund even said China's post-pandemic recovery was weak in 2023... an impressive feat, considering it only had to beat terrible 2022 numbers. By its own calculations, Rhodium thinks China only grew 1.5% last year.

Regular readers are also familiar with China's serious real estate issues. Chinese developers are running about $8.5 trillion short of meeting their obligations. And as of last summer, China had 7 billion square feet worth of unsold homes.

The Chinese central bank is trying to make it easier to buy real estate. Unfortunately, there just aren't enough people to sell to.

Experts have pointed out that China's population may be 100 million people less than official statistics claim. And it's becoming clear that the Chinese population is actually in decline... Its own government admitted the country's population fell by 2 million people last year.

If China's population is falling, it's going to become even harder for it to overtake the world's No. 1 economy... the U.S.

And the race isn't even particularly close to begin with. U.S. GDP surpassed $27 trillion in 2023. According to China's data, its GDP reached $18.5 trillion.

Many research organizations suggest it's even lower... Oxford Economics says China's figure could be as much as 20% higher than the real number.

If investors stop trusting China's numbers, its market is going to suffer…

Fears of China overtaking the U.S. are irrational. The U.S. isn't in any danger of losing its top spot on the world stage.

And China's data integrity issues alone are reason enough to keep away. Chinese companies like Luckin Coffee (LKNCY) and Kangmei Pharmaceutical have gotten into trouble for overstating numbers... So it's not just an issue with the government.

It's best for investors to stay away from China. The more the world starts questioning its data, the closer we get to a serious fallout of global trust.

Wishing you love, joy, and peace,

Joel
February 23, 2024