[Fed Rate Hike! Shrapnel on the Other Side of the Globe? — The Washington Post]
[China’s Economy Reels; Fears from Three Years Ago Become Reality! — The Wall Street Journal]
[America Has Waged Economic Terror! China’s Stock Market on Emergency Alert! — The Economist]
[Side Effects of High Interest Rates... Will a China-Originated Economic Crisis Sweep the World Once Again? — Le Monde]
Breaking news.
As Li Xiong, the director of China’s National Bureau of Statistics, was arrested on anti-corruption charges, today the Chinese government effectively admitted to the bankruptcies of its three major construction companies.
It has officially recognized that Fengda, Vanke, Bigui Group, and others failed to meet their loan maturities and have fallen into capital impairment. Consequently, trading of shares in the three major groups was immediately suspended, and it has been reported that they are currently undergoing bankruptcy proceedings.
The problem is the shockwaves these three major groups will send through China’s stock market.
The three major construction companies have taken out massive project financing loans from numerous commercial banks. As these groups enter bankruptcy proceedings, massive bad debt is anticipated. In response, many experts have pointed out that “amid the aftermath of high interest rates originating from the United States, the People’s Bank of China is unlikely to loosen monetary policy,” and stated that “the first thing that must be done is to reveal the scale of the bad loans.”
Nevertheless, despite these pointed remarks, the Chinese government’s response has been lukewarm.
The Chinese financial authorities, who announced the bankruptcy of the three major groups, merely repeated that it was “fully controllable” in response to questions from foreign media.
Foreign correspondents asked specific questions such as “how much in PF loans the three major construction companies received,” “how the People’s Bank of China will respond,” “what the capital status of other construction companies is,” and “what the status of unsold inventory in local governments is,” but the Chinese authorities evaded all of them.
However, forecasts indicate that the statistics will remain in the dark for some time.
Li Xiong, the director indicted on anti-corruption charges two days ago, is currently missing.
Authorities revealed that Director Li Xiong had received massive bribes from construction companies, passed state secrets to a lover with whom he was having an affair, and forged official documents for personal gain. As this is similar to the anti-corruption investigation methods the Chinese authorities have shown in the past, various concerns are emerging both inside and outside the country.
More details to come...
*
“Yes... yes... yes... Understood.”
Beijing Hilton Hotel.
Director Oh, who had been clinging to the phone for five hours straight, slumped onto the sofa with an exhausted face.
At present, calls from all quarters were pelting his mobile phone.
With the bankruptcy of China’s three major construction companies becoming reality, not only the financial authorities but even the Blue House was bellowing demands for reports on the losses of the National Pension Service.
The problem was that the construction companies’ bankruptcy didn’t end with whether apartments were built or not. They had to calculate the adverse effects this would have on the Chinese economy as well... but now that the Chinese authorities had effectively declared war on statistics (?), everything could only be guessed at through speculation and prediction.
“Hoo...”
Director Oh caught his breath and spoke to me.
“There is good news and bad news. Which do you want to hear first?”
“...The good news?”
“Thanks to you, we stanched it on the cheap. Before the defaults hit, we cleared out all the bonds, and sold off half the stocks, apparently.”
I heaved a sigh of relief.
An institution the size of the National Pension Service could not keep its investment capital completely intact under the current circumstances. Substantial investment funds from American institutions were also in Chinese construction companies; hadn’t they all been hit in the back of the head overnight? In such a situation, saving half the bonds and stocks was nothing short of a heaven-sent miracle.
But...
“...Then we’ve lost half? Is that good news?”
“Yes. Compared to the bad news, it is incomparably good.”
“What on earth is the bad news that...”
“That for the time being, we’ll have to work like blind men touching an elephant. It’s not like the three bankrupt construction companies are the only ones; the others won’t be safe either. And that’s not all? Construction is one of the three major pillars of the Chinese economy, and now that it’s collapsing, no other industry will remain unscathed.”
“Yes...”
“But it seems China has already begun censoring statistics. Everywhere I called, their information lines are blown to bits. It’s pitch black.”
Director Oh let out a long sigh.
The future is a bigger problem than the present.
The IMF ordeal, which was a catastrophe for the Korean economy, also began with the bankruptcy of the Hanbo Group. Of course, that group wasn’t solely to blame, but when Hanbo Group collapsed, a chain of defaults began. That soon led to a Cretaceous-scale mass extinction, in which some 7,000 companies went bankrupt.
In fact, most of the major global economic crises that have erupted in the 21st century have originated from the construction industry.
That was precisely why it was so frightening. What chain reaction would the bankruptcies of Fengda, Vanke, and Bigui Group trigger in the Chinese economy?
“Team Leader Lee, what do you think? Can the Chinese government stop the dominoes?”
“...Sir?”
“To stop a chain of defaults, the authorities have no choice but to intervene in the market. Unless they knock down a few dominoes, they won’t be able to contain this fire. At a glance, it looks like the U.S. stopped the dominoes with just one SB, but will China stop them too?”
I smiled bitterly.
“I think it’s impossible. If this were a fire that could be easily put out, they wouldn’t have purged the statistics bureau.”
“Purge?”
“Kicking out the bureau chiefs is a very resolute declaration of intent by the authorities to censor all statistical content. Even now the scale of the damage is immeasurable; from now on, only even more unreliable announcements will come out.”
If my memory serves me right, real estate news will disappear from CCTV from now on. Nationwide unsold inventory becomes a metric that even locals in China don’t know, and strangely, all the indicators released by the statistics bureau are positive, yet the market continues to suffer an inexplicable slump with ongoing deflation.
“So it collapses all at once?”
“No, it won’t collapse all at once. It has too much technological capacity for that. I believe the growth rate slowdown will persist for quite a while...”
If my memory is correct, China’s economic growth rate will settle into the 3% range due to the aftermath of the construction industry collapse. It will barely recover to the 5% range later, but it will never return to its golden age again.
From this point on, China’s GDP will fall into a firm second place, forever unable to catch up to US GDP.
But that doesn’t mean it became the village idiot. On the contrary, it became the alley boss, the thug of Northeast Asia.
If my memory serves, Korea lost the hegemony of the Fourth Industrial Revolution, overtaken by Chinese technology snapping at its heels. Semiconductor technology was easily caught up to; Korea couldn’t even challenge AI supremacy; and in the electric vehicle era, Asan Automobile was eventually merged into BYD, riding on the back of cheap manufacturing.
Just as we, whose per capita GDP had been less than half of Japan’s twenty years ago, stole Japan’s lunch bowls in semiconductors and electronics and lived this well, in the end we too were overtaken.
That day when I watched the drone show with Meilin at Haigang.
What I had felt fear of might not have been war, but technology.
“But why’s this kid so down, unlike himself? Back when you were telling me to sell 2-trillion-won bonds and stocks, you had fire in your eyes!”
“Haha...”
Director Oh rose from his seat.
“Let’s stop chatting. We have a long road ahead. I heard the division chief is holding an emergency response meeting on Friday.”
“...Will we be attending too?”
“If the ones who foresaw Fengda’s bankruptcy don’t attend, who will? And we’re the reason we saved half the investment capital. Pack quickly. We have a lot of material to present there.”
I cautiously spoke to Director Oh, who was rummaging around for his passport.
“Director, could I stay behind for just one week?”
“What?”
“There’s something I need to look into... I don’t think it will be possible unless I do it now. Time is a bit urgent.”
Director Oh raised one eyebrow.
“What scheme are you cooking up now?”
*
“Jun! Over here, over here!”
When I arrived at the appointed place, Meilin whistled to catch my attention.
I strode up to her.
“Nice to see you, Meilin! How have you been?”
“How long has it been since we last met? Hoho.”
“I’m sorry for contacting you out of the blue. And thank you so much for coming out!”
“Honestly, I didn’t think you’d reach out twice. I’m rather glad you did.”
She giggled heartily, as if delighted by something.
Unlike her modest attire at our first meeting, today she was sporting full makeup. It seemed she had a date with her boyfriend or something.
“By the way, why did you contact me separately today?”
“I wanted to treat you to a meal before I went back to Korea. You showed me the state of China’s macroeconomy and real estate all at once, after all.”
“Hmm... I just showed you one abandoned building with its construction halted. Hoho.”
“That really helped me a lot. Shall we?”
I went into the hotel restaurant I had reserved, chatting pleasantly with her.
In fact, the more I talked with her, the more Meilin struck me as an amazing woman. Even without using lofty economic jargon, I could talk to her about macroeconomics and she understood. Perhaps she had inherited her innate eloquence and entrepreneurial spirit straight from her father; she exuded confidence in everything she did.
“Okay. I’ll stop here~”
“Yes?”
“Would Sejun, who doesn’t even know celebrity names, be interested in dramas? Hoho. Thanks for listening to my chatter. Now, tell me what you want to talk about.”
Her perceptiveness was extraordinary. She was definitely a woman destined for great things.
“Meilin... the thing is, I understand your father also does supply business for military units.”
“Ah, the clothing supply? Yes, it’s one of the businesses my father runs. But that’s a business we run at a loss to build ties with military officers. It’s not our main business. Why do you ask?”
“I’m looking for someone... Could you ask around about this person for me?”
I handed her a profile of a man I had pieced together from memory.
“If you can arrange a meeting with him, I will compensate you generously—”
“Huh? Uncle Zhang Yifang?”
“...You know him?”
“Of course. If you want to supply the Rocket Force, you can’t get around this uncle. He was so close with my dad that they used to have family meals together. I’ve known him since I was very young, so I call him Uncle Zhang.”
“As expected, your father’s business acumen is exceptional—”
“It’s not that—he just has an uncanny eye for spotting people who love money.”
“...Excuse me?”
“As far as I know, his connection with this uncle started with money too. But is this really the person you’re looking for?”
Meilin tilted her head, holding the paper.
“The Uncle Zhang I know retired with the rank of lieutenant colonel (zhongxiao), right? I don’t know the exact circumstances, but he was kicked out three years ago on anti-corruption charges. It seems like you’re looking for a military insider, Mr. Sejun. Is it really Uncle Zhang?”
Her introduction prodded the fragments of my scattered memories, bringing them into sharper focus.
“That’s right... it’s him.”
“Huh... I think you’ve got the wrong idea? Whatever your business is, in the end it’s about money, right? But Uncle Zhang has been out of uniform and out of connections for a long time. There’s no hole for money to come out of, so to speak? I heard this straight from my father, so I’m sure of it. Hmm... could it be someone with the same name?”
“...The reason he needed a lot of money was his debauched lifestyle, wasn’t it?”
“Huh?”
“He frequently received entertainment and hospitality from suppliers, and constantly frequented nightlife establishments. Eventually, military procurement fraud was discovered, and he was disciplined. But originally it was something that could have been overlooked; then the atmosphere inside the Rocket Force suddenly turned strange, and didn’t he end up getting discharged?”
Meilin dropped the papers.
“...So you really are looking for Uncle Zhang. But why him?”