Submitted by Taps Coogan on the 21st of August 2019 to The Sounding Line.

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Russell Clark of Horseman Capital recently spoke with Real Vision in a wide ranging interview about his belief that Chinese stimulus measures are failing, Yuan devaluation is likely, and that it may have very problematic effects for China and the world. The interview was filmed before China’s recent, brief devaluation of the Yuan.

 

Some excerpts from Russel Clark:

“What you can see is that the external environment, tariffs and trade barriers being erected by the Trump Administration, has slowed growth in China and at the same time Chinese authorities have responded to that with domestic stimulation. So you see steel production (in China) is at a very high levels and also housing prices have been very very strong. the problem you’ve got with that… is what you’re seeing in the Chinese steel market, and what you’re seeing globally, is that all of the profits of increasing steel production are going directly to Australian mining corporations. So the margin on cash (steel) production in China, even though they have gone to record levels (of production), has actually dropped to zero virtually. So the stimulus the Chinese authorities are applying to the economy to counteract slowing trade is not actually feeding through the the domestic economy. Likewise with property markets…, you can keep getting house prices up to create a wealth effect but at a certain point… people go ‘actually I have to save so much money to buy a house… and interest rates are so low’ it almost because a sort of pipe dream. (Rising home prices) actually become a negative for the economy… I think it’s a driver of the unrest we are seeing in Hong Kong at the moment. When you remove the prospect of home ownership from so many young people, it is actually a negative. I think we are really at the point in China where the traditional stimulus that they’ve used for the last ten to fifteen years doesn’t work…”

“Because we have so much credit around, whenever any government or central bank has looked to move away from credit stimulation, you always see a big slowdown and lower asset prices about six months to a year later… This has basically been the model of growth for the last 15 to 20 years, growth at any cost regardless of any long term consequences. The model of that is the Japanese experience and it just doesn’t work. There are differences in different countries, but it just doesn’t work in my experience.”

There is much more to the interview, so enjoy it above.

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