Produced by: Tarun Mishra
Designed by: Mohsin Shaikh
China's real estate market woes are sending tremors through the nation's economy, with global repercussions turning out to be a possibility. Major property developers are struggling, grappling with extensive debts, and missing payments to lenders. This downturn, once the driving force behind China's growth, is jeopardising millions of households' jobs and savings
For decades, China's economic growth was heavily reliant on a booming real estate sector, driven by population growth. This market was an essential source of job creation and wealth preservation for China's expanding middle class. It also contributed significantly to local government revenues through land sales
China's population is no longer growing at the same rate, and the COVID-19 pandemic has disrupted Chinese consumer behaviour. The government has also taken steps to curtail risky practices in the real estate sector, leaving developers laden with debt and a surplus of unsold housing units
As a result, home prices have declined, affecting Chinese households' savings and consumer confidence. The government is trying to shift from an economy reliant on state-directed investments and exports to one driven by domestic consumer spending
Private Chinese developers are grappling with approximately $390 billion in unpaid bills, posing a substantial threat to the nation's economy
Economists have lowered their forecasts for China's economic growth, with many now expecting it to fall below the government's target of around 5 per cent. Both imports and exports have recently decreased, and foreign investments in China have plummeted
China witnessed a rare decline in consumer prices in July, the first in two years, indicating reduced spending by Chinese households
The Hang Seng Index in Hong Kong has entered bear market territory, falling over 20 per cent from its peak in January, reflecting economic instability in the region
Leading real estate developers, including Country Garden and China Evergrande, are at the heart of this crisis. Country Garden expects to report losses of up to $7.6 billion for the first half of the year, while Evergrande recently filed for US bankruptcy and defaulted on $300-billion of debt in 2021
China's government has been cracking down on excessive borrowing in the real estate sector since 2020. Despite recent measures aimed at stimulating spending and investment, the details remain unclear. China's economic struggles can impact the global economy, especially given China's crucial role in global growth over the past decade
A weaker Chinese economy affects companies doing business there and decreases demand for global commodities. It also has implications for U.S. and European trade, given China's status as one of the largest trading partners of the United States