CHINA’S NEW MASTERPLAN IS HERE! Why “Singapore Washing” holds the key to the commodity riches of the future

This week’s newsletter takes you to an apartment block in downtown Singapore.

It’s nothing to look at and would normally be unimportant. But behind its nondescript exterior could lie the key to the coming economic collapse.

To see why this unassuming apartment block might have such significance you need to join a few dots.

And dip into the insights of the 18.6-year Real Estate Cycle and the Long Cycle (or Kondratiev Wave), which is an approximately 60-year cycle of rising and falling commodity prices, technological change, and geopolitical conflict.

As usual the financial media is looking the wrong way. Luckily for you, I am here to help connect the dots for you.

Have we uncovered the real future for commodities here? Has China showed us precisely where you need to look to uncover investment riches for the remainder of this cycle?

Only one way for you to know – read on.

Our trail begins in China.

There’s been a flurry of policy announcements in recent weeks, most importantly those arising from the third plenum of the Chinese Communist Party (CCP).

These CCP events are dull affairs and result in dry documents and statements that need to be carefully scrutinized.

The final document from this 4-day meeting included over 300 proposals designed to address the weakening business and consumer sentiment of the Chinese economy. Important.

But this is where things start to get interesting.

About two weeks ago, in a rare public briefing, the People’s Bank of China (PBoC) announced government funding to boost the stock market and aid share buybacks, as well as more support for the stricken property sector.

As inevitably as the sun rising each morning, the biggest resource companies all jumped higher on the news. See the chart below.

Think of RIO, BHP, or Glencore, you think of iron ore and copper, to name two mining stocks. They were reacting to what appeared to be the usual set-up of China’s tried-and-tested stimulus: overinvestment in real estate.

Hence the boost to the companies providing the steel and copper for all of this development.

But that’s not actually what’s happening. Sure, the PBoC is opening the credit spigots, but the devil lies in the details.

This brings us to our second point on the trail.

This money is targeting yet-to-be sold properties, not brand-new developments. For the four stocks in the chart, this jump in price is likely to be a bear market rally, nothing more.

And indeed, those who bothered to read the third plenum final document will have noticed the following: it mentioned terms such as “technology”, “talent”, “science and innovation” 160 times. But the property sector warranted only four mentions, and did not appear until two-thirds of the way through the document.

China is not stimulating its economy like it did in the past.

China has a deepening lower growth challenge it must remedy. It wants economic growth each year between 4.5-5% per annum. It wants to double per-capita income to about $25,000 by 2035.

Growth in the second quarter slipped to 4.7 per cent year on year, and the IMF has projected that it will fall to less than 4 per cent in the coming years.

Thus, it is not pure infrastructure building nor an over-reliance once again on the domestic new-build housing market that will achieve this growth.

Instead, it is going to focus on technology, the green transition, and digital upgrades to its giant manufacturing sector — which is nearly 28 percent of GDP, compared with 10.7 percent in the US. Sorry BHP and RIO!

Even more important, though, is the way it has decided to undertake this.

And this brings us to our third point.

Governments around the world are engaging in completely stupid behaviour by erecting trade barriers and putting tariffs on imports as a means of economic protectionism (in the name of national security). These boneheaded policies are not going to work.

As if a nation as large as China, or indeed the US, would simply sit back and allow others to dictate which markets its goods are and are not welcomed in.

Instead, China has thought outside the box to cement its economic legacy.  And here is how they’ll do it.

From the above article (my emphasis in bold):

China’s outbound investment is surging from already-record levels, government data shows, as analysts suggest that the country’s booming clean energy technology sector is increasingly looking to set up manufacturing operations abroad in the face of US and EU tariffs.

Operations are moving overseas.

Climate Energy Finance (CEF), a Sydney-based research group, calculates Chinese companies have committed $109.2bn in outbound FDI across 130 clean technology transactions since the start of 2023, according to corporate announcements and financial statements.

As usual with anything to do with Chinese direct investments, the sums involved are massive.

Chinese leader Xi Jinping has sought to change the playbook by supporting advanced manufacturing, including next-generation and clean energy technologies, to boost growth in the world’s second-biggest economy.

As stated above, this constitutes a targeted approach to massively increase advanced manufacturing and clean energy technology whilst making a strategic decision to move away from investments into the property and infrastructure sectors.

So, we are talking about industries like electric vehicles and their batteries, battery-based energy storage systems, hydro, solar, wind and the electricity transmission such energy sources require. But why via foreign direct investment?

This part is important and is the fourth clue.

Not only is it a way to take market share of the huge supply chains such investments demand, but it speaks to a western world that today isn’t on friendly terms with China anymore.

The US and EU have accused Chinese manufacturers of expanding overseas in order to dodge tariffs in their markets. Tariffs, mind you, that both parties placed themselves. CEF noted that China’s overseas investment spree was driving new industrial hubs in countries including Thailand, Indonesia, Brazil, Hungary and Morocco.

The reason? Because manufactured goods in these countries are exempt from the worst of these tariffs. Regardless of their ultimate country of origin, in this case – China.

These economies of scale are making dramatic changes in the price of goods such as batteries and solar panels. In 2023 alone, both products have halved in price for domestic Chinese buyers.

This is one of several strategies that Chinese corporations are using to adapt to a hostile world around them.

An intensifying rivalry between China and the US-led west is driving a fragmentation in the world’s economic order.

Beijing, Washington, Brussels, and other capitals have imposed a range of tariffs, export controls, and other measures to protect their domestic markets and stymie competitors’ technological progress.

And thus, trade between these blocs has reduced, whilst the above-mentioned ‘connector‘ countries are seeking to insert themselves between them and are rapidly gaining importance and serving as a bridge.

That bridge of course is both the flow of trade and investment within each country and allowing Chinese companies to domicile in a new geographic area and repurpose their identity. To better fly below the worst of the flak between the US-led west and China.

And avoid their tariffs too.

Nowhere more has this behaviour been so obvious than in Singapore – hence the term “Singapore-Washing” that you may have heard of. It refers to renting out nondescript and low-profile apartment blocks to set up a subsidiary or reincorporate in the city state to mitigate the geopolitical risks and scrutiny often directed at China-based entities.

In return, business partners and potential investors will look at Singapore and see a respected jurisdiction providing a transparent pathway towards legal redress if things go wrong.

I ask you again; why do we let idiotic governments worldwide run the world like this on our supposed behalf?

The west made their opening shots. China has counter-attacked and appears to have successfully outflanked these initial attacks. This is very much consistent with the geopolitical conflict you’d expect at this stage of the Long Cycle.

The problem with these manoeuvres is that they invite reactions and new ways to inflict pain on the other side. This leads to further fragmentation in the global economy.

At a time – and here is when the 18.6-year Real Estate Cycle comes into play – when demand for goods remains high.

Have governments conquered inflation? They think so, given what they are doing with interest rates.

I am not sure about this. The peak of every 18.6-year Real Estate Cycle always involves inflation coming back into economies.

It is what governments then do to counteract this re-emergence of inflationary pressure that leads to the next economic collapse. You need to follow this emerging story carefully because it WILL affect your investment portfolio.

The key is in the timing. So where do you start? You won’t do better than to become our latest Boom Bust Bulletin (BBB) member. Together, we will research and cover all the latest news as it pertains to the remaining few years for the real estate cycle and this Long Cycle.

The BBB will guide you through the repeating history of the land markets, and by extension teach you its unique timing. It will introduce you to the basics of chart reading and show you how best to interpret what they are telling you and help you track the cycle even better.

We are entering a complex, multi-polar world now. The old order will not go quietly into the night.

This transition will not go smoothly. Enjoy the remaining few peak years of this current cycle.

But understand what’s at risk once boom turns to bust. Only once in the last hundred years has both a real estate cycle and Kondratieff wave peaked around the same time.

We walk through rarified air here. Profit but protect should be your motto. 99% of the market today do not understand what’s about to happen.

Please ensure you place you and your family on the right side of this trend.

Sign up now.