Chinese markets are higher today as the country's economy is showing some signs of improvement last week third quarter GDP growth came in slightly above estimates but this morning the IMF cut its forecast for China's growth our next guest says there are major risks and challenges that remain Sean Ryan is founder and managing director of China market research group Sean always good to see you good to have you back on on a scale where one is flat and 10 is bubbly where is the Chinese economy right now I'd give it a one Tyler so as you
know I've been in China for 27 years there are only two times that I've been really scared about a systemic Financial Risk in the economy the first was in October of 2022 when we were dealing with the madness of zero covid Draconian laws in China at that time if you were considered a close contact of a close contact of someone with covid you'd be sent away to a a quarantine hospital for 15 days so people didn't go out to restaurants they didn't go out to shop because they were scared of having their family members taken
away the second time I've been very nervous was in August and September of this year the business sentiment consumer sentiment collapsed so companies stopped hiring that's why there's an 18.8% youth unemployment rate basically Chinese youth are facing a Lost Generation the second reason is it's very difficult to fire people in China if somebody's been working in your company for 9 years you have to give them 30 days notice plus 9 months of severance so so instead of just outly laying off workers what companies started to do was cut salaries they actually started clawing back bonuses
from previous years and they started demoting people so what ended up happening Tyler is in August September of this year a very toxic scared Workforce permeated throughout the entire country and that's why retail sales were only 2.2% growth in August and everything hit a standstill so the government had to launch a monetary policy and that's why what I call a mini stimulus but that's why you've seen the Chinese Equity markets boom in the last three to four weeks because the government realized what has caused Sean what has caused Sean this collapse if if I may
call it that uh in sort of the economic animal spirits of the Chinese consumer that's question number one and when you say something like this when you say that this economy is a one on a scale of 10 do you feel uh vulnerable to any you have any fear of Retribution or or that somebody's going to knock on your door when you say stuff like that well I think everybody knows I tell the truth and so I'm going to be very balanced and very objective on what the economy is so it's a very bad situation
which is why I'm calling for the government to launch more incremental targeted fiscal stimulus we need to get not just the equity markets booming but we have to get the unemployment Market back working we need to get jobs into people we need to have reforms to help small business owners be able to feel comfortable that they can invest because Chinese households have doubled their household savings more than that actually from 8 trillion to 20 trillion in the last eight years so there's still a lot of money in China but we have to get those Animal
Spirits back in order for the Chinese to go out and B purchase fix asset and investment for companies hire people or to go out and buy more Nikes and Adidas and iPhones again if I'm a US investor where if and and I am persuaded that there is a around that will come eventually where would you recommend I put my money today would it be in Chinese internet stocks or things that are more prosaic and and closer to the ground so to speak so the economy is bad but because of the targeted stimulus we start to
see a slight upkeep so in the long medium to long terms I'm actually quite bullish on China investors should be looking at the internet stocks companies like Matan companies like pendor do they should also be getting the cheap um consumption plays like M which is a household appliance company they should be buying catl which is a na an Nev battery maker and they should be looking at things like luck and coffee so the trade down is still a really good play for investors to be looking at because consumers are scared about the geopolitical overhang to
go back to your question from a few minutes ago why is the economy so bad in the run up to the presidential elections the Biden regime is increasing the number of sanctions and tariffs on China he slapped 100% tariff on Chinese nevs he's trying to ban all auto software coming from China into the United States so in August September in the runup to the presidential elections Chinese just got nervous and thought we're going to be dealing with 20 years of Oppression from America so we're not going to buy Big Ticket items the Chinese rather see
Trump in office then I think in many ways Tyler they would rather see Trump because I'll give an example Trump said you know I don't want to see Chinese automakers exporting to the United States I want them to build factories in America and hire American workers now Tyler that's fair that's what the Chinese did to America to Ford and GM when they first tried to enter the lucrative Chinese market so that's true reciprocity Trump has also said that he most likely won't defend Taiwan Biden on three occasions said he would defend Taiwan militarily I think
Trump is more likely to launch tariffs so basically I think Chinese would prefer to see Trump because they feel that he's transactional business in nature and a deal can be done it's not an ideological um fight between liberal democracies and communism which it is under Biden and which the Chinese fear would be under Harris and Waltz I mean har Waltz is a you know pro-democracy Zealot that the Chinese are scared of
