Don't Forget About China

I started the semester with financial problems in China, that could have macroeconomic consequences since China is one of the big two economies in the world. 

And while no one is paying attention, there's still all sorts of juicy stuff coming out, none of it good.

• COVID-19 on the rise, and new lockdowns enacted.
• Their stock market is off 60% since last year. Macroeconomically, stock markets are overrated ... but 60% is an awful lot for things not to be generally lousy.
  
• Their bond markets are also doing badly (and it's unusual to get both markets down at the same time). Higher rates and lower prices go together, and that either means people aren't buying (demand shifted left) or there's a lot more borrowing (the supply of bonds shifted to the right). Not so ...
  
• Property developers continue to go bankrupt, because ...
  
• Households aren't borrowing to buy new apartments.
• China practices floating exchange rates. Bad news with this policy shows up as the acceptable bands for exchange rates widen (and they have). Usually this means that a central bank is having trouble keeping the rates within narrower bands as people bail out of the currency.
• International investors adjust their liquidity by buying and selling government bonds. Developing markets like China's typically offer higher rates, which investors also like. Closing of markets in Russian debt have encouraged some investors to look towards other big markets where they can still sell out. Of course, the U.S. market is bigger still, but we're the market people buy into when they're worried; China is a market the sell out of.

Update: After class, news came out that creditors seized $2B in bank accounts from Evergrande. Suspicions are that the money was taken by a Chinese bank over unserviced loans. This is a weird situation. China doesn't usually let things like this happen. What does it mean for their macroeconomy if Beijing can't control things?