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--:-- John Bickley: Good morning, I'm John Bickley, Editor-in-Chief of the Daily Wire, and this is an extra edition of Morning Wire. Joining me is Georgia Howe.
--:-- Georgia Howe: Good morning, John.
--:-- John Bickley: Today, we're discussing China's economic challenges and its impact on the global economy. Our guest is David Goldman, a senior editor at Asia Times. David, thanks for joining us.
--:-- David Goldman: Thanks for having me, John.
--:-- John Bickley: Let's dive right in. There have been a number of stories over the last month about China's economy facing a significant downturn. Just how serious do you think this slump is?
--:-- David Goldman: They're certainly having a speed bump, but the economy is still growing. It's not like the European economy, which is shrinking. They're in an enormous transition. One of the great retoolings they're trying to move away from the old countryside to city migration model with low-skilled heavy industry to a high-tech industry economy.
--:-- Georgia Howe: That's a lot to unpack. Can you elaborate on the property sector in China?
--:-- David Goldman: Well, for the past two years, Beijing has been squeezing the property market by cutting off credit from the state banks and imposing restrictions on homebuyers, higher down payments and similar measures. And finally, a year ago, that began cracking the property market. The Chinese have 70% of their household assets in property.
--:-- John Bickley: That's staggering. What are the implications of this for the Chinese economy?
--:-- David Goldman: The transition is necessary, and because it's been such an enormous part of household investment, it's necessarily going to be painful and disruptive. But there is no financial crisis in China. Chinese financial stocks are trading higher than they were at the beginning of the year. The money markets are completely calm.
--:-- Georgia Howe: That's reassuring, but what about the real estate market? Is it getting worse before it gets better?
--:-- David Goldman: That is entirely a political question. The moment that the Communist Party signals that it's a good time to buy by lifting restrictions and encouraging the banks to put more credit into it and bailing out some of the flailing local governments, Chinese homebuyers will go back in the market.
--:-- John Bickley: You mentioned the government's long-term concern is to shift investment away from low-tech, low-productivity real estate investment to high-tech, highly productive investment. Can you elaborate on that?
--:-- David Goldman: The government's long-term concern is to shift investment away from low-tech, low-productivity real estate investment to high-tech, highly productive investment. That's the only way they can deal with a declining workforce over time.
--:-- Georgia Howe: That makes sense. What about China's trade impact? We've seen a concerted effort from Western nations to portray a desire to cut imports and business with China.
--:-- David Goldman: Well, if that's entirely up to us, we would have to invest a great deal in industrial capacity to replace Chinese imports, whether it's direct or indirect imports. We are not making those investments. Apart from the very large marquee investments in chip fabrication, capital spending by American industry has been pretty anemic.
--:-- John Bickley: That's a sobering assessment. What countries stand to benefit if China does start to lose sway in global exports?
--:-- David Goldman: India has been exporting more to the United States, for example. But India gets one third of its non-oil imports in China. As imports from China have surged, India would not be able to export as much as it does without importing intermediate and capital goods from China.
--:-- Georgia Howe: That's fascinating. Finally, let's talk about the G20 summit. China's President Xi Jinping has indicated that he'll skip out on the meetings this weekend. What do you make of that decision?
--:-- David Goldman: My guess is there are a number of political issues that he doesn't want to deal with directly. And in Chinese imperial style, he's sending his deputy, Li Chang, the premier, to meet with other countries by way of saying, until you're ready to come on our terms, you don't get to talk to the emperor.
--:-- John Bickley: David, this has been a fascinating conversation. Thanks for sharing your insights with us.
--:-- David Goldman: Thanks for having me, John.
--:-- Georgia Howe: And that's it for today's extra edition of Morning Wire. Thanks for listening.
--:-- John Bickley: If you want to stay up-to-date on the latest news and analysis, be sure to follow us on social media and subscribe to our newsletter.
--:-- Georgia Howe: And don't forget to check out our website for more in-depth coverage of the stories that matter most.
--:-- John Bickley: Thanks again for listening, and we'll see you tomorrow.
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