đ©đŹ Red Flags All Over China
Happy Wednesday all,
In todayâs YouTube video, we discuss whether or not $100K / Year should make you âfeelâ rich or not. When I was in High School, making $100K per year was the ultimate benchmark for âmaking itâ. These days though, depending on where you live - $100K could feel like very little. Those in San Francisco, New York, Washington D.C., and other high cost of living areas have been vocal to point out that $100K simply doesnât go that far. However, those living in say, Memphis, Tennessee will find their money going a lot further. I encourage you guys to watch the YouTube video today and leave me a comment in the video, it will be linked down below.
Me and Rick have been thinking of taking a week or two off in July - we have been pretty consistent this entire year with not only uploads, but Hump Days editions as well. I find it hard to take a break sometimes - this job is âalways onâ, but I recognize its necessary to take some time away in order to recharge and innovate and make better content for you all. We have some really interesting video ideas coming up on the channel, and Hump Days will continue to improve and innovate on the Free & Paid side as well. I hope youâre having a great week.
- Humphrey, Rickie & Tim
The Weekly Brief
Xi Tells Blinken âVery Goodâ That Progress Made on U.S.-China Ties (Bloomberg)
The U.S. and China have made progress in steadying bilateral ties between the worldâs two largest economies following Secretary of State Anthony Blinkenâs trip to meet President Xi in Beijing. Blinken said it was in the âinterest of the worldâ to steady ties, and described the conversations he had with Chinese officials as candid and productive. Groundwork has been laid for the first in-person meeting between President Biden and Xi later this year.
Why Does It Matter?
Both sides discussed increasing flights between the two countries as well as agreeing to ecourage educational exchanges; a sign that more student visas could be on the way. Xi has incentive to cool relations after the U.S. blocked China's access to high-tech chips.
Vacant Offices Are Piling Up in Silicon Valley (WSJ)
The vacancy rate of Silicon Valleyâs commercial real estate space has more than tripled from 2019 to more than 25%. Tech leaders such as Google and Meta have since closed physical locations and reassessed their commitments to the workplace. Tenants looking for office space have more leverage than ever, and landlords are going as far as offering to cut rents, free months of rent, and other incentives to maintain occupancy.
Why Does It Matter?
This makes sense as we saw multiple waves of tech layoffs. Companies are trying to cut back on expenses and rent is another major expense.
Texas Requires State-Backed Charging Stations to Include Tesla Plug (Reuters)
Texas said it would require EV charging companies to include both Teslaâs standard as well as the nationally recognized CCS if they want to be a part of a state program to electrify highways using federal dollars. Texas - home to Teslaâs HQ and a new car factory complex - is the first state to mandate Teslaâs charging technology.
Why Does It Matter?
This gives investors hope that Tesla's charger will become the national charging standard. Texas's decision will put pressure on other states to adopt the same standard.
Hump Days Scoop
The Chinese economy is slowing down, causing Chinese officials to raise concerns about the nation's economic future. There are a lot of issues to address, so this week, we go over why China is worried about the future, what theyâre doing going forward, and what they may not be able to solve.
Whatâs going on with Chinaâs economy?
The Chinese Communist Party lifted Covid-19 restrictions in Q1 2023, which resulted in a wave of excitement and a sign that business activity would return to normal. Spending saw a huge increase as people returned to eating out and traveling. However, since then, that hype has died down, and new data is suggesting that the countryâs economic recovery is flickering out.
Below is a short list of some of the many issues that China is facing:
Pandemic-era debt weighing down local governments and households
Households, unsure of the future, have begun hoarding large amounts of cash
Harsh regulatory environments are discouraging risk-taking
Declining property market following a major bubble
Deteriorating relations with the West
Aging population/shrinking workforce
Decelerating GDP growth
What is China doing in response?
China unveiled major plans to revive the countryâs slowing economy including potentially billions of dollars in new infrastructure spending as well as looser rules to encourage more home sales. As part of this stimulus package, Beijing is considering issuing about $140B of bonds to help indebted local governments (addressing issue #1). These special bonds would be used for infrastructure projects, other initiatives to boost economic growth, and to help repay debt.
Addressing the property market, Beijing is considering scrapping restrictions that prohibit purchases of second homes in Chinaâs smaller cities.
The Peopleâs Bank of China also announced the first interest rate cut in 10 months with many experts expecting a further cut to the prime rate this week. These cuts will lower the cost of new loans and encourage investment.
As discussed earlier, progress is being made on the U.S.-China front with Secretary of State Anthony Blinken meeting with President Xi Jinping earlier this week. The geopolitical relations have seemed to have steadied, at least partially, following the meeting between the worldâs two largest economies. A meeting between President Joe Biden and Xi is in discussion for later this year.
What about Chinaâs youth unemployment problem?
What is arguably Chinaâs most pressing problem is the high level of youth unemployment that poses an existential crisis down the line requiring swift action in the present.
Central to the topic of youth unemployment is that China isnât creating enough of the high-wage, high-skilled jobs that are sought after by its educated young people. There is a shortage of knowledge work in the country, and rather than trade down for lower-wage (often physical labor) jobs, many young people are opting to wait for more opportunities. The government is trying to mandate state-owned companies to hire more graduates, but those opportunities remain in short supply. There are also measures in place to encourage more young people to take up blue-collar work, but very few have shown interest in that kind of work.
If youth unemployment remains elevated, it will put pressure on wage growth and reduce consumption - an area that Beijing wanted to grow its economy through.
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