Has China's Downfall Started?

China's Demographic Disorder Video: https://youtu.be/YkuuuQYEh_o

China, the country that has gone through one of the fastest economic transformations the world has ever seen.
You see, for the last 30 years, China's economy has grown significantly. Due to industrialization. China has achieved similar economic growth which previously took decades to achieve for the western world. The country has managed to become the world's factory and the 2nd biggest economy. But in recent times things have been changing, and not in a good way. In today's video, we are going to talk about the problems which have been weighing down the Chinese economy to the point where economists are starting to question its impact on global growth. We can see the results of all these problems in the GDP growth of the country. The Chinese economy expanded 4.9 percent year-on-year in the third quarter of 2021, decreasing sharply from a 7.9 percent growth in the previous period and slightly missing the market prediction of 5.2 percent.
You might be knowing two major events that impacted China's growth, first the energy crisis, and second is the real estate crisis. Apart from these there are a couple more which we will talk about in the later part of the video.
First let's look at the energy crisis. The energy shortage has severely impacted the manufacturing sector of China's, which contributes heavily to exports. China’s energy crisis had pushed the government to extend power restrictions in at least 20 provinces and regions, as they struggled to cope with the power shortage. This has affected more than 66% of the country’s GDP. Several companies closed their operations as millions of homes in the country faced a blackout situation. Still, even after a few months of struggle China has not come out of it.
Now Amid this power shortage, the Chinese economy is stuck with another storm. The real estate crisis. And the Evergrand company is at the forefront of it. The fall of Evergrand has triggered the slowdown in the Chinese economy as the real estate sector has been driving the growth of the economy for too much, and for too long. We all have seen a lot of footage of ghost cities in China where many buildings are empty and nobody lives there. China is home to one of the largest number of unoccupied apartments in the world.
In this graph, you can see China's reliance on the real estate sector compared to other countries. China is far more reliant on real estate than any of these nations and the only nation that comes close to it is Spain in 2008, and we all know how that bubble burst for Spain's economy. Also, many experts are comparing China’s real estate investment model to the housing crisis of the United States in 2008-09. Both countries had placed their bets on housing demand and prices going up exponentially, and had thus made provisions for cheap credit. The only difference was the motivation. In America, banks were using subprime loans to create financial products. In China, cheap credit was ensured for developers by both state-backed financial institutions and offshore private investors to fuel the Chinese growth story. But now after this bubble has burst in China, other countries are in fear that the fall could spread to other regions of the world like it did in the 2008-09 crisis.
Now there is another reason that no one really talks about, that is the massive infrastructure spending. Yes, we always talk about how infrastructure spending is good for the economy and all, but unplanned and unrequired spending could be dangerous. For instance, let's talk about China's massive high-speed rail transport infrastructure program. You see, in the early 2000s, the Chinese economy was expanding at an incredible rate and many young job-seeking workers started to come to big cities in search of work. Now for workers to travel between cities to their native places was necessary, but air and personal cars are too expensive. So the Chinese government started to plan high-speed railway projects. Plus, to save the Chinese economy from the 2008-09 financial crisis, the government used these projects as a stimulus to the economy. Infrastructure projects like these are very effective to counter economic slowdown, as they created thousands of jobs, helped the local industries, and created a long-term sustainable income source. But there were many problems with it.
Now we all know how China has capitalized upon its workforce. But this demographic advantage of the country is also fading away. We have already made a detailed video on this. Please click on the card above to watch that video.
So at the end we can say it will be very interesting to see how China make their way out of these problems.
#evergrandecrisis #chinadebtcrisis

Music:
Creative Commons Music by Jason Shaw on http://audionautix.com/
Music by Audionautix is licensed under a Creative Commons Attribution license (https://creativecommons.org/licenses/...)

Видео Has China's Downfall Started? канала Global Economics