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China Widespread Political Instability and Implications

In the past few hours, China has experienced wide spread protests in many urban areas.  The average person on the street is involved. Folks are fed up with central government's handling of COVID and many other issues that have been simmering.

At this time, it is not possible to accurately predict where this political instability/unrest can/will lead to.  Some independent reporting sources I follow sense this is big.

China is the world's 2nd largest economy accounting for 19% of the world's GDP.  They do not have a society/government that allows for gradual venting of dissent so that when it does go off, it has been a long while in the making and tends to be major.  To protest against the central government is something that just does not happen there.

25% of China's economy is real estate related and is currently experience a LARGE number of problems.  Having COVID and political instability will adversely impact demand for RE within China--something they don't need especially now.

Impact to the United States:

COVID-related issues are going to expand in one of the world's largest populated country due to recently enacted COVID containment policies in China.   Where are masks, test kits and other med items manufactured?  Get ready for supply chain issues for these items and many, many other items ex:  I-phone, semiconductors.

With supply constraints, it has the potential to have inflationary pressures however it may also result in decreased energy demand.

Flight to safety of US Treasuries will likely occur---as such interest rates here will initially decrease.  Over a longer time period they won't.  China is 2nd largest purchaser of US Treasuries.  They will need these overseas assets for cash flow domestic demands.

This is all very preliminary and this is a developing event.  Trying to connect the dots.   Your opinions/insights are always appreciated.  


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