China's Economic Slump: Stimulus Strategies and Market Reactions

China's massive stimulus may temporarily boost stock prices but raises concerns about long-term economic sustainability.

### China's Economic Slump and Stimulus: A Deep Dive into the Crisis and Rally
* 📉 China's economy has plunged into a **significant slump**, prompting the government to announce **extensive stimulus plans** aimed at revitalizing **stock prices**.
* 💰 Despite facing a multi-trillion dollar underwater housing market and rising unemployment, China's stock market has seen a remarkable **20% rally**, attributed to a new strategy dubbed the **"economic reset."**
* 🏠 The country has been grappling with a real estate bubble, where **70% of household wealth is tied up in property**, leading to a crisis that saw major developers like Evergrande file for bankruptcy.
* 🎓 Youth unemployment has surged to **18.8%**, with a significant number of college graduates unable to find jobs, resulting in **increased lottery ticket sales** as a desperate measure for financial freedom.
* 📉 Deflation poses another challenge, as **consumer reluctance to spend after years of COVID lockdowns** has led to **decreased demand and economic stagnation**.
* 💵 In response, the People's Bank of China has proposed **injecting $112 billion into the stock market** and reducing interest rates, while rumors suggest a massive **$1.4 trillion stimulus package** may be on the horizon.
* 🧐 Analysts remain skeptical about the sustainability of these measures, questioning whether they are a **long-term solution** or merely a **temporary fix** to delay inevitable economic issues.
* 🔍 Ultimately, while the stock market rally offers a **glimmer of hope**, fundamental problems persist, and the **long-term viability of China's economic recovery remains uncertain**.

China's economy has slipped into a deep slump. China is announcing stimulus plans. They are going to really push out a bazooka to get stock prices up. This is the broadest push so far year to date. You can call it a bazooka or not, but nothing seems to be working. What's be guys? It's Graham here, and you're not going to believe what just happened. Despite China being on the brink of an economic collapse, with a multi-trillion dollar underwater housing market, threats of being delisted from the US Stock Exchange, and weakening demand in the last 30 days, they've experienced one of the strongest stock market rallies in almost a decade. All thanks to a new strategy: the economic reset. That's right, apparently money can solve all of your problems. And even though some analysts believe that this only delays the inevitable, China's latest stimulus package is about to impact every financial market around the world, from real estate to lending to interest rates to even the value of the US dollar. So to

break this down. Let's discuss exactly what happened through the New Economic reset that's resulted in a 20% stock market rally, whether or not this massive stimulus is actually sustainable, and then finally what you could do about this to come out ahead. Although before we start, as usual, if you appreciate videos like this, all I ask for in return is that you hit the like button or subscribe. It helps out the channel tremendously, it's totally free, and as a thank you for doing that, I will do my best to reply to as many comments as I can, so thanks so much. And also, a big thank you to Rocket Money for sponsoring today's video, but more on that later. All right, so I've said this before, but as a bit of a background, up until recently, China's been on an unstoppable trajectory. That's because for the last 30 years, they've been at the forefront of production, international investment, and rapid productivity, all because of an exchange that occurred back in 1979, which gave China diplomatic relations with the United States and by extension

the rest of the world all of a sudden. China shared a common objective with the global economy, and as a result of that, money poured in. Countries from around the world invested in Chinese infrastructure, took advantage of low-cost labor, and helped them bring much-needed funding to areas that were previously closed off. At this time, growth was so impressive that in 2001, China became a member of the World Trade Organization as a way to further strengthen ties with the United States. But it didn't go exactly as planned for the United States. It quickly became apparent that demand for low-cost Chinese goods was increasing faster than expected. More and more products were being outsourced elsewhere, and corporations moved 6 million jobs overseas to allow for higher profit. Even though this did bring down the cost of everyday items that a lot of us still use to this day, for China, the benefits were monumental. With all the increased worldwide trade and foreign investment, 400 million people were lifted from poverty. In addition to that, their economy is now more than 11 times larger.

today than it was in 2001. They became the world's largest exporting nation in 2009, and they were even touted as the world's economic miracle while they grew at a faster pace than any other nation. However, not everything appeared exactly as it was on the surface because the more China grew, the more powerful they became in relation to every other nation, the more leverage they had to maintain tight control over their businesses, the more they could regulate as they deemed necessary, and as a result of all that, the more difficult they've been to join forces with. In fact, members of the World Trade Organization alleged that China has been providing illegal state subsidies to businesses that export their products, discriminating against companies that don't buy from Chinese manufacturers, and controlling supply chains through taxing raw materials. Even worse, it was said that they've been purposely devaluing their own currency by as much as 40% as an incentive for other countries to buy their goods at a discount, leading of course to fake economic growth that was largely unsustainable as we've recently

begun to see so in terms of the three major roadblocks for China and how they're now dealing with it. Let's begin with the first real estate. Up until recently, China experienced what many would call a real estate property bubble, as citizens preferred to put their money in housing as a safety net, causing real estate prices to increase double digits year after year. In fact, China was building five times as many homes as America and Europe combined, and supply was still so limited that they used a lottery system to allocate them, some with odds as low as 1 in 160. This led to 70% of the country's wealth being tied up in the real estate market, which is more than twice as high as it is here in the United States. At that point, property values were rising so quickly that developers would pre-sell units, and buyers would begin making payments on something before it even existed, with the expectation that once it's done, it's going to be worth a lot more since the market just kept moving higher. It didn't

matter how much it cost, either with some buyers spending as much as 23 times their annual income to say they own a property, oftentimes with the mortgage making up more than half of their gross take-home pay. Yeah, if you thought the housing market was competitive here in the US, you haven't seen anything compared to that. Anyway, China's real estate market was growing so quickly that prices increased 700% from 2001 to 2017. So, in an effort to curb some of this appreciation, the government stepped in with imposed regulations on who is able to purchase a house, and they said that homes should be for living, not for speculation. But it was too little, too late. With their economy now beginning to slow down, property developers had a harder time raising money in order to stay afloat. They couldn't afford to finish their preconstruction units, and even though this originally started with Evergrande, within four weeks, more than 320 projects in about 100 cities were facing protests, roiling markets, and forcing

authorities to corral banks and developers to diffuse the unrest. This led to Evergrande, their second-largest property developer, filing for bankruptcy in mid-2023 after owing more than $300 billion to its investors. An estimated 233 other property developers filed for bankruptcy shortly afterwards, and in response to this, China began lowering interest rates as a way to help spark some more economic growth. But there was also a second Boogeyman that the entire economy had to deal with, and you're going to want to hear this. Although before we go into that, I think it's really important to mention that there's always going to be some sort of economic uncertainty out there, and even though it seems scary, it's precisely why you should take matters into your own hands and focus on what you can directly control. Like, did you know that most Americans have absolutely no idea how much money they spend? Or even worse, 84% are spending beyond their means. So if you'd like to find a way to save more money than you ever thought was possible.

then our sponsor, Rocket Money, is there to help. For those unaware, Pocket Money is the personal finance app that lets you lower your bills, cancel subscriptions, and manage your money better, all in one place. Like, without exaggeration, I've been using them on a daily basis to keep track of my finances, balance budgets, and track my net worth. And it's also been really helpful to get a high-level overview of my spending, expenses by category, and payment reminders. In addition to that, my favorite feature is that they allow you to safely and securely identify recurring charges and then cancel unwanted subscriptions. All you got to do is connect your accounts, and from there, Rocket Money allows you to cancel them from within the app with just a couple taps. In fact, Rocket Money saves its customers up to $740 a year when you use all of the app's features. And I've used this on numerous occasions to cancel subscriptions that I've just forgot about. Even more impressive, but they also allow you to lower your bills just by uploading a photo and tapping a button.

from there, Rocket Money will negotiate them down on your behalf for everything from internet cable phone bill and more. You could also create a budget that works with your income and set thresholds on categories like dining out or entertainment, and Rocket Money will alert you anytime you get close to exceeding them. So, to try it out and give it a shot, and then unlock even more features with premium, go to RocketMoney.com or use the link down below in the description. Thank you so much, and now let's get back to the video. All right, now in terms of the second economic boogeyman that China has to deal with, it's none other than youth unemployment. All of this began in 1998 when China created an expansion on higher education. This provided much-needed funding to build schools, hire professors, and give students an education that couldn't otherwise afford it. The goal here was to develop a knowledge-based economy, satisfy demand for higher-educated workers, and then grow their economy to eventually compete with the rest of the world. As a result,

of that, it said that Chinese universities accepted about 1.59 million students in 1999, up more than 47% from the previous year. And in a way, it made higher education almost like mass education to anyone who is interested, even if they lived in rural areas with a low-income background. As we could see today, there was a bit of a problem in that higher education expanded faster than there was market demand, meaning there were a lot more college graduates than there were jobs to pay them. And as a result, youth unemployment increased. As it stands right now, the jobless rate of 16 to 24-year-olds is currently 18.8%, and that's been steadily rising since the surveys were started in 2018. In fact, unemployment has gotten so bad in this category that lottery sales increased more than 50% because young people see hitting the jackpot as their only solution to achieving financial freedom. In addition to that, it's said that many companies are refusing to hire recent college graduates now because they worry about the cost and legal

difficulties if they have to let someone go a year down the line if the economy remains in the doldrums. In terms of how much this costs, apparently companies have to pay quite the severance, or in this case, if someone works for 2 years, they have to give 30 days' notice plus 2 months' salary. This is expensive, so no one wants to fire anyone now or hire anyone new. On top of that, youth unemployment actually got so bad that the government stopped publishing data for several months in 2023 and only resumed doing so once it changed its methodology. Because of that, the third problem seems that much more obvious: deflation. Now, for those unaware, deflation is pretty much the opposite of inflation, where instead of prices going up, they're going down. And even though this might sound like a good thing, it's not. See, when prices come down, it's a sign of less demand, and when your money becomes more valuable the longer you hold on to it, the less likely you are to spend it, which means prices

fall even further. Companies scale back; they produce less. The cycle repeats itself until eventually the entire economy weakens and falls into the abyss. In China's case, though, consumers are very reluctant to spend money after 3 years of covid lockdowns, with recent CPI only increasing 4% year-over-year. Companies are also taking note of this and reducing their workforce, resulting in even more deflation as less money is available to be spent. Essentially, even though household income growth is outpacing that of spending and disposable income per capita rose 5.4% in the first half of the year, China's citizens are afraid to spend more money because of strong economic uncertainty, especially everything that's happened with falling real estate prices, bank runs, and high unemployment. This, of course, means that China is falling short of their 5% GDP growth goal, unless of course their latest strategy is going to work, and that would be their economic reset. Otherwise, what's known as the Bazooka stimulus, essentially China's solution to a slowing economy, is the

tried Andrew's method of printing a lot of money, and in terms of how they're planning to do this. Let's begin with the banks. A few days ago, the People's Bank of China moved forward with two funding proposals that would inject about $112 billion into the stock market. In terms of specifics, it said that they were lower interest rates to make borrowing money cheaper, lower mortgage rates for homeowners benefiting 50 million households, and lower the requirements for how much money banks need to keep on reserve, freeing up $140 billion. It also set aside $28 billion for local government investment projects. This also includes lowering down payments for buying second homes, often purchased in China as investments, which would be cut to 15% of the apartment's value from 25%. Now, by the way, side tangent here, but do you remember a few years ago when they said that second homes were for living, not for speculation? Well, it seems like they've completely reversed course on that now that their economy depends on it. The second rumors have been swirling

that Beijing plans to release $284 billion in sovereign bonds later this year to provide funding to pay down local government debt and boost China's social safety net. Third, government officials are pushing for a much bigger stimulus package, potentially as high as $1.4 trillion; otherwise, the economy may fall off a cliff. However, in terms of how all of this is being perceived from an investment standpoint, they're wildly optimistic, with the stock market having increased over 20% in the last month. Although one economist was quoted as saying the move comes a bit too late, but it's better late than never. But in terms of what I think and the expectations going forward, I have some doubts, as right now, yes, it is true that China's stock market has seen some rather impressive returns over these last 30 days. But it's important to acknowledge that a large portion of this rally is due to the optimism that China will enact even more stimulus in the future rather than from existing policies already in place, like a part of their recent price surge.

is based on promises that may or may not happen in the future. And even though they did cut interest rates and reduce mortgage down payments, one could argue whether or not this is an actual long-term solution or a quick fix just designed to get them going a little bit longer until eventually they have to step back in again. For example, one of the ways that they were able to free up some more money was by reducing bank reserve requirements. Now, banks don't have to keep as much cash on hand, allowing them to lend even more. But is this a good idea if they face a liquidity crisis and customers all come demanding their money at the same time? Perhaps this is a lot riskier than it seems initially. It's also said that in the coming months, the central bank was ready to make another reserve cut, potentially doubling the extra money available for lending. To me, this is really no different than the economy slowing down, printing more money to get the economy going again, and then kicking the can a little bit further down the

road until eventually they're going to have to start the process over again. This is why we've seen reports that China's economy is collapsing for such a long time. Even though everything on the surface seems like a disaster, there's nothing that says they can't just print more money indefinitely. And as long as investors keep buying in for a quick profit, this could last for a very, very long time. Overall, though, I would be cautious about such a rally, and I'd question whether or not the stimulus is a sustainable path to growth long-term, or if it's just enough to shore up interest for a temporary improvement. There's still a lot of fundamental issues that will need to be addressed, but as long as they could just throw money at the problem, there's really no telling how long this could go on for. So, with that said, thank you so much for watching. Let me know what you think down below in the comments section. As always, hit the like button, subscribe if you haven't done that already. Thank you so much, and until next time.

WTF Just Happened To China's Economy?

As a 30 year old real estate agent and investor who started working in real estate shortly after turning 18, with over $120,000,000 in residential real estate sales since 2008, I've created this channel to share my successes, failures, and experiences in the real estate industry and to support others who are thinking of getting into the business. Oh, and I'm also obsessed with cars. A lot. So expect to see some cars uploaded to my channel. A lot. And Subscribe. Because all the cool kids are doing it.  

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Graham Stephan

China's Economic Slump and Stock Market Rally

China's economy is in a deep slump, but a new stimulus plan has led to one of the strongest stock market rallies in nearly a decade.

The country's economic reset strategy, aimed at addressing a multi-trillion dollar underwater housing market and weakening demand, is impacting financial markets worldwide.

Despite the rally, analysts question the sustainability of the stimulus package and its ability to delay the inevitable economic challenges.

China's rapid economic growth since 2001 led to its status as the world's largest exporting nation by 2009, but this growth also resulted in tight control over businesses and controversial practices.

The country's real estate market experienced a bubble, with 70% of wealth tied up in property, leading to unsustainable growth and rising prices.

Government intervention to regulate the housing market came too late, resulting in financial struggles for property developers and widespread protests over unfinished projects.

China's Economic Challenges: Real Estate and Youth Unemployment

China's property developer Evergrande filed for bankruptcy in mid-2023, leading to a wave of 233 other developers following suit.

In response, China lowered interest rates to stimulate economic growth.

The country's youth unemployment crisis, driven by an expansion in higher education since 1998, has also posed significant challenges to the economy.

The Impact of Rapid Higher Education Expansion in China

Chinese universities saw a 47% increase in student enrollment from 1998 to 1999, making higher education more accessible, even for those from low-income backgrounds.

However, the rapid expansion of higher education has led to a surplus of graduates, resulting in a rising youth unemployment rate of 18.

This has caused companies to hesitate in hiring recent graduates, contributing to deflation and economic uncertainty, ultimately hindering China's GDP growth.

China's Aggressive Money Injection Strategy

The People's Bank of China is injecting $112 billion into the stock market through lower interest rates, mortgage rate cuts, and reduced reserve requirements for banks.

The government is also planning to release $284 billion in sovereign bonds and is pushing for a $1.

4 trillion stimulus package to boost the economy.

Despite a recent 20% increase in the stock market, there are doubts about the effectiveness of these measures, with the rally largely driven by optimism for future stimulus.

The Central Bank's Strategies and Their Risks

The central bank's measures, like cutting interest rates and reducing mortgage down payments, raise questions about their long-term effectiveness.

Reducing bank reserve requirements allows for more lending but poses a risk during a liquidity crisis.

The potential for another reserve cut could double the extra money for lending, but the sustainability of this approach to economic growth is uncertain.