China's Economy and What Comes Next: The Micro View

Picking up where the previous post left off, here is the micro view. I wrote a draft, left it sitting for so long that I forgot what else I meant to say, and decided to publish what was there.

Every country capable of holding its place in the world has something unusual going for it. China's particular strength is resilience. Put bluntly, Chinese people are good at enduring, willing to endure, and not ashamed to endure. That national trait produces some peculiar economic consequences, because economic actors do not always behave like rational profit maximisers. Sometimes they do the opposite.

China's property market will split in different directions and see a mild recovery. Relaxed policies in first-tier cities will drain demand from second- and third-tier cities. Higher turnover in existing homes will move assets into new hands, but the recovery will rest on weak foundations and will not turn into another broad boom.

As the RMB's depreciation deepens, the economy will move from deflation toward inflation and prices will rise slowly.

The stock market may get a rebound.

The struggle between bricks-and-mortar business and e-commerce will continue. Physical businesses will keep shifting toward services, while livestream e-commerce may face heavy taxation.