|China's trying to track where all its yuan went, or rather where it disappeared|
The Chinese government had hoped that average citizens would mop up the overcapacity by finally stop saving money and start spending; but with the lack of a solid social welfare system in place, particularly health care, the public hardly budged.
|Li Keqiang recently ordered an audit of the country's debt|
The government has also ordered more than 1,400 companies in 19 industries to cut capacity, and some of these firms will have to shut down. The sectors include steel, copper smelting, cement and paper.
So that is where we are at now... it's a basic sketch of the situation and it looks pretty bleak. And it's going to severely impact Hong Kong very soon since it depends so much on the mainland market for its economic growth.
Already we are seeing property prices fall here, particularly for luxury flats, though moderately-priced ones will probably remain steady since there is a strong demand as young people want to enter the real estate market.
So it will be interesting to see how the rest of the year pans out. The first sign will probably come from Macau's casino profits, followed by luxury market sales figures. Perhaps the rich really are pulling out in droves, or they are stashing their cash elsewhere.
In the meantime we are curious to see what kind of debt figures China will come up with and how its leaders are going to deal with what we expect to be a staggering number...