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China’s Economy in Deep Trouble: Worst Crisis in 45 Years! Here’s Why!

Daniel Kim Views  

Analysts suggest the Chinese economy shows signs of a severe crisis, sparking concerns among foreign media. Reports indicate that China is facing a crisis unlike any it has encountered in the 45 years since the country began its market reforms, indicating the severity of the situation. Given the current atmosphere, it is likely that this crisis will be prolonged and challenging to resolve.

Hong Kong Economic Times

The New York Times (NYT) recently highlighted the seriousness of the situation in an article titled “Why It’s So Hard for China to Fix Its Ailing Economy.” According to the NYT, sources familiar with China’s issues reported that “consumers have become cautious due to the real estate collapse, and businesses are also on high alert.”

The NYT outlined several reasons contributing to the crisis in the Chinese economy. One major factor is the ongoing crisis in the real estate sector, which has long been a pillar of household savings, banking stability, and local government finances for decades. The bursting of the real estate bubble has led to the collapse of developers, massive debts, and a surge in unfinished buildings known as “lanweilou” (爛尾樓). These problems have resulted in job losses and other consequences.

Chinese consumers, traditionally known for their strong saving habits, are now even less inclined to spend. As a result, domestic consumption is unlikely to stimulate the economy. This is evident in sectors like the theater industry, where revenues have plummeted to half of what they were the previous year. These conditions are not expected to improve for quite some time.

Another critical issue is the staggering debts of local governments, which some experts describe as impossible to quantify. Even economists who are usually optimistic about China’s economy estimate these debts to be around 10 trillion yuan (approximately $1.4 trillion). Considering the so-called “hidden debts,” estimated to be around 5 trillion yuan (approximately $700 billion), the situation appears even more dire.

In response to these economic strains, businesses are adopting increasingly cautious management strategies. This has contributed to a sharp rise in unemployment, particularly among young people, with quarterly unemployment rates for those around 25 hovering around 15%. The concerns raised by foreign media, including the NYT, about the scale and impact of China’s current economic crisis are indeed substantiated.

Daniel Kim
content@viewusglobal.com

Comments2

300

Comments2

  • Aric

    Just one more reason China will go to war soon. war has traditionally been a large boom for economies through out history.

  • Carl L. McWilliams

    Keynesian economics is a house of cards.

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