Chinese real estate crisis (2020–present)

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After China's real estate developer giant Evergrande defaulted on its offshore debt in December 2021, it sent shockwaves through the Chinese economy.[1]

On February 6, 2024, Yahoo Finance said concerning the Chinese real estate crisis (2020–present):

“ China's overreliance on real estate has sent its economy tumbling toward 2008-era financial conditions, Kyle Bass told CNBC on Tuesday.

"This is just like the US financial crisis on steroids," the Hayman Capital founder said. "They have three and a half times more banking leverage than we did going into the crisis. And they've only been at this banking thing for a couple of decades."

The years of double-digit growth China enjoyed prior to the pandemic were made possible by an unregulated real estate market, Bass noted, which leaned too heavily on debt to expand.

With defaults now plaguing the industry, this spells massive trouble for the country's broader economy. The real estate sector makes up around a quarter of the country's GDP and 70% of household wealth.

"The basic architecture of the Chinese economy is broken," Bass summarized.[2]

”

In December 2023, Nikkei Asia reported:

“ If the Chinese real estate bubble bursts and triggers a financial crisis, the nation's economic growth will be stuck at around 1%, jeopardizing its goal of doubling gross domestic product by 2035, the Japan Center for Economic Research says in a new report.

The report projects GDP growth for 18 Asia-Pacific countries and regions through 2035, with annual updates made to reflect the latest policies and economic conditions. The JCER released a summary of this year's report Monday.

China's economy has been dragged down by property market woes for more than two years. The government's plans to strengthen financial support for real estate companies could place an excessive burden on the financial system.

Mishandling the response could wreak havoc. Sluggish condominium sales and plunging prices could significantly push up defaults on bank loans, resulting in widespread financial woes at small and midsize banks.[3]

”

See also

External links

Videos:

References

  1. ↑ this the end of Evergrande? Here’s what may happen next, CNN, 2024
  2. ↑ China is facing the US financial crisis 'on steroids' as the real estate market collapses, famed hedge fund boss says, Yahoo Finance, February 6, 2024
  3. ↑ China real estate crash would threaten goal of doubling GDP: report, Nikkei Asia, 2023
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