Kyle Bass: Why the Chinese Economy is Going to Collapse

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This is the 30 minute TV version of Jan Jekielek’s interview with Kyle Bass. The longer-form version was released on Epoch TV on December 26, 2024.

🔴 Watch the extended version of this episode: https://ept.ms/Y1226KyleBass

Kyle Bass is the founder and chief investment officer of Hayman Capital Management, and he’s known for his prescient bets on major global economic events.

In this episode, we dive into why he believes China’s economy is collapsing, why Bytedance hasn’t sold TikTok despite a looming January deadline, and what he believes the big economic and financial priorities of the incoming Trump administration should be.

Kyle Bass about the incoming Trump administration: “I think the roadmap that the Trump administration has, starting January 20, is exactly what's needed. I agree with the roadmap wholeheartedly. And Scott Bessent’s vision of how the Treasury will act, and Elon Musk's vision on cost cutting, well, I think all of those things together create such a beautiful menagerie of growth and also fat cutting. You know, we need to be leaner, meaner, and we need to, we need to, we need to show our true economic potential. And I think with those people in charge, along with President Trump, I think we're going to be able to achieve that.”

Bass about Scott Bessent, Trump’s nominee for secretary of the treasury: “When you look at Scott Bessent, one thing you realize is that he doesn't need any more money. He doesn't need to go raise money from the Chinese or the Saudis or anyone afterwards. He is a pragmatist. He understands the plumbing of global capital flows better than anyone that was in the running, by far, and he also has a gravitas among global central bankers that is important. He doesn't have to earn it. He already has it. So when he steps in there on January 20 or January 21 he already has the world kind of mapped out and figured out. And so when you say, how is this going to change? We are not going to be taken advantage of the way we had been taken advantage of in the past.”

CHAPTER TITLES
0:00:00 - China's Domestic and Global Economic Challenges
0:05:32 - The Role of Real Estate and Demographic Shifts in China
0:10:21 - Concerns Around Chinese Stocks and VIEs
0:14:03 - Expectations for the New US Treasury Leadership
0:19:45 - Addressing Global Economic Imbalances and Inflation
0:24:15 - Opportunities and Challenges for the US Economy

About China’s economic problems: “China's banking system is twice as large as ours, in an economy substantially smaller than ours, in a world in which they've only been at call it advanced banking since 2002 they've only been at this 20 years, so they've got a lot of plates spinning, and they've got a lot of leverage, and almost 40% of bank assets in China are lent to domestic real estate. So if your real estate markets are down 30 to 50 and your economy is three and a half times leveraged, your banks and your banks are insolvent, you have a real problem, and their problem is larger than ours was during the global financial crisis.”

Kyle Bass about China’s dependence on crude oil and gas imports as well as food imports and the US dollar: “China imports about 13 million barrels of crude oil every day. That is the world's largest importer of crude oil. They import almost nine BCF of LNG every day. They are the largest importer of LNG in the world. They import 40% of their food every single day, and all of those imports they have to pay dollars for. So where do they get the dollars? Is the question, and they have to keep a robust trade relationship in dollars with us to be able to pay for their daily operations with the rest of the world, because they have a closed capital account. Their RMB is not convertible into anything, unless the Chinese party allows it to happen. They control that escape valve. So it's really an artificial exchange rate, closed capital account. Internal disaster. But they've made a lot of money by being the world's factory floor. They made it two ways, right? They've been the world's factory floor since 2002 and then they started stealing Intellectual Property.”

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