This is Only the Beginning…Don’t Sleep on China

The US government began selling land to the people in 1800. Ever since, land-price booms and busts have occurred. The first real estate bust in the US occurred in 1819, followed by another one roughly 18 years later.

Australia, on the other hand, didn’t witness its first real property boom until the late 1880s, when loads of imported capital drove the Aussie property market higher. The bust part, in which property prices collapsed, began in 1891.

To outsiders, the boom and bust phase of the property market seems unpredictable. However, Phil Anderson, of Cycles, Trends and Forecasts, says that once you analyse the data, the frequency of the cycle is easy to predict.

It’s worth noting that after every property bust in the US in the last 217 years, the stock market has recovered. Often, this recovery has been helped along by new technology. And each rebound has seen the market move past its previous high.

Yet there’s more than technology driving this bull market. And that’s China’s rise from being a third-world producer to becoming a global economic superpower.

China’s continued economic growth baffles analysts. The country’s meteoric rise has largely been driven by debt and endless building to grow the economy.

Take a look at this:


Source: The Daily Shot
[Click to enlarge]

In the past 14 years, the Middle Kingdom has pumped more money into the economy than ever before. In fact, since 2009, issuance of credit has been nearly three times the official government budget.

It is this capital/debt imbalance that has led calls for the country to collapse.

But the Chinese economic behemoth shows no signs of slowing down soon.

A key driver of the Chinese market right now isn’t its manufacturing-hub status. What is pushing the Middle Kingdom is that it could become a global leader in technology.

The US has long dominated the world when it comes to technology breakthroughs. And the past decade has seen the dominance of the ‘FAANG’ stocks grow. That’s the acronym for the biggest tech players in the US: Facebook, Inc. [NASDAQ:FB], Apple Inc. [NASDAQ:AAPL],, Inc. [NASDAQ:AMZN], Netflix, Inc. [NASDAQ:NFLX] and Alphabet Inc. [NASDAQ:GOOGL], the parent company of Google.

But what about the rise of Chinese tech stocks? Chinese tech giants are often referred to as the BATs: Baidu Inc. [NASDAQ:BIDU], Alibaba Group Holding Ltd [NYSE:BABA] and Tencent Holdings Ltd [HKG:0700]. All three companies lead the way in pushing China to become a key player in the artificial intelligence space.

In a report, ‘A Next Generation Artificial Intelligence Development Plan’, the China State Council expressed that it’s keen to fund small start-up companies in the AI space. The report lays out that it’s willing to support the smaller players in the market by assisting with IP protection, capital funding and international cooperation. 

Importantly, the Middle Kingdom sees AI as a key driver of economic growth. A way to ‘upgrade’ the economy from a manufacturing hub. And it wants to be a global innovation centre in the AI field by 2030.

Once a futuristic concept, AI is rapidly becoming part of our everyday lives. Siri — the voice-operated assistance in iPhones — is one example. Cars with automatic breaking or crash-avoidance technology is another. The point is, the use of AI is slowly creeping into our lives, and China has plans to become one of the biggest influencers in the AI field.

It has already made a step in the right direction. Here’s a chart of the country of origin for journal articles mentioning ‘deep learning’ or ‘deep neural network’:


Source: US National Science and Technology Council
[Click to enlarge]

The government has published a bold plan with specific policies to guide the Chinese private sector.

The private sector is well-established to take advantage. Internet giants Baidu, Alibaba and Tencent have a history of snapping up talent.

All this is happening in a country with a huge population that is very well connected to the net. Even if large parts of the country are hidden behind the Great Firewall of China.

The problem is, from a distance, the debt-laden Chinese economy looks like it can’t possibly reach economic superpower status. Phil Anderson says this is entirely possible. It’s just a matter of knowing the ‘boom and bust’ cycle of markets. Or as Phil likes to call it, the Grand Cycle Theory.

He says the Grand Cycle Theory is the perfect tool in forecasting market moves, especially real estate and global stock markets.

So, where is China sitting in Phil’s grand cycle? You’ll find out here.

Regardless, one thing is clear: China plans on becoming a technology leader. Investors looking for new opportunities should take note.

Kind regards,

Shae Russell,

Editor, Markets & Money

Shae Russell started out in financial markets more than a decade ago. Working with a derivative brokering firm, she helped clients understand derivative markets, as well as teaching them the basics of technical analysis. Since joining Port Phillip Publishing eight years ago, Shae has worked across a number of publications. She holds the record for the highest-returning stock recommendation, in which a microcap stock returned over 1,200% in six months. Ask her about it, and she won’t stop yapping on. For the past two years, Shae has worked alongside Jim Rickards as his Australian analyst, translating global macro trends for Aussie investors, and how they can take advantage of these trends. Drawing on her extensive experience, Shae is the lead editor of Markets & Money. Each day, Shae looks at broad macro trends developing around the world, combining them with her distaste for central banks and irrational love of all things bullion.

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