Many people both love and hate China because the Chinese government decides exactly what the economy and political system will do.
The Chinese government can stop the stock market if the stock prices fall too much, adjust the value of the currency at any rate, and seize any company at any time.
At the Chinese National People’s Congress, an offer was made to lift the two-term presidential limit in March this year; this limit was lifted by a historic decision and the current Chinese President Xi Jinping, 2023’den may remain at the beginning of the government.
In China, there are significant changes in governance, law enforcement, the military and the intelligence bureau with the change of governance, usually every ten years.
But in recent years, Xi has put its own ideology in the Chinese Constitution in such a way that it is very difficult for Xi to quit.
The constitution of China’s source of power; The power of the Chinese government is due to the philosophical structure of the constitution and its constitution to bind everyone within the territory of China.
It is useful to follow China closely, because both Chinese companies have a direct or indirect impact on our portfolios, and because of the size of the Chinese economy, it can affect all economies in the world.
Let’s look at the effects of the Chinese government on the Chinese economy.
Companies Receiving Warning Due to Debt Levels
Authorities have been reducing Anbang Insurance Group’s cash flow since last June and sending teams to review the company’s operations.
This company was seized in recent months and the company’s manager was arrested for fraud.
The government’s reason for this was that China’s debts made the headaches of the company and that the company’s predominance reached astronomical figures.
China’s debt-to-GDP ratio currently stands at 47 percent. So China borrows more than it earns.
In fact, this problem exists in many economies of the world; the debt-to-GDP ratio worldwide is quite high. It is having the world’s largest economy, the US debt-to-GDP ratio of 105 per cent rate of 86 percent in the Eurozone, while the 28 percent in Turkey.
But the Chinese government is very relentless in collapsing on top of companies that make high domestic debt and invest outside China.
Let’s make a little note here. In 2014, the confiscated Anbang Insurance Group bought New York’s famous Waldorf Astoria hotel for $ 2 billion.
More broadly, the Chinese government has serious limitations on the issue of making money from inside and outside, and they see foreign investments as opposed to these restrictions.
According to the law, each citizen of the People’s Republic of China can only take out $ 50,000 a year.
This is one of the reasons why the Chinese government intervened very hard in crypto currencies. because crypto currencies allow unlimited transactions.
Chinese Government has a say on the stock market
In recent months, while the sale of stocks all over the world was on the trend, nearly one-tenth of the companies on the Chinese stock exchange were allowed to stop selling shares, thus preventing the depreciation of the shares.
Government interventions are commonplace in Chinese markets where large volume sales orders are limited by law and shadow banking is blocked.
Shadow banking is the name given to borrowing from institutions that are not subject to the regulations of banks.
The government also manually adjusts the value of the country’s currency, Renminbi, according to the position of the dollar each day and allows the exchange of a special version of the currency for ten different currencies.
These two currencies are called domestic yuan and foreign yuan.
As the currency gets cheaper, Chinese goods become cheaper, and so the world is pouring hopelessly billions into cheap toasters, electronic devices and clothes.
However, the impact of the Chinese economy is perhaps most marked by commodity prices; fluctuations in these prices have a great impact on many countries.
With its huge population, China is the world’s largest consumer of metals, coal, pork.
The iron needed by the country’s gigantic construction projects was so high that, for example, Australia’s economy, which was agreed to meet this demand, has survived the iron decade for the last ten years.
Speaking of iron; The Xi government is also implementing strict regulations to combat air pollution, one of the country’s biggest problems; all iron and steel plants that do not meet the new environmental standards are being shut down.
According to experts, China’s economic practices are shifting from an export-oriented economy to a consumption-oriented economy. Although China has a friendly attitude to trade, the enormous power of President Xi Jinping makes China an interesting country to do business with.