China’s Economy Suffers ‘Rapid’ Slowdown amid Looming Financial Collapse
'China's economy has been slowing for quite some time'
China’s economic woes are facing more pressures from within the real estate sector and "frustrations" in the banking industry.
"China's economy has been slowing for quite some time," Craig Singleton, a fellow at the nonpartisan Foundation for Defense of Democracies said.
"What we're witnessing now is a rapid economic slowdown."
GDP data indicated a sharp slowdown in Q2, but weeks ago Hang Seng hit a 3-month high in what some analysts hailed as signs of recovery.
The chief Chinese economist at Macquarie in Australia, Larry Hu, said the economy "is on the mend, but it remains very weak."
He added that struggles were due to the impact of extended lockdowns during the pandemic
The policy requiring localized lockdowns has led to the prolonged lockdown of major ports and economic centers.
Shanghai shut down for 60 days in Spring 2022 as 26,000 cases per day were reported in April.
Singleton argues China’s recovery slowdown has resulted from "deeper structural, systemic problems."
"One of them happens to be … China's hyper leveraged property market by some conservative estimates," he explained.
"China's property sector makes up 30% of Chinese GDP, so even small deviations in that market can have an outsized impact on China's broader global domestic product and its broader growth."
Chinese homebuyers threatened to stop making mortgage payments, blaming "stalled" building work, which has added a serious wrinkle against any recovery Beijing has recorded.
"We've seen a number of very large defaults of some of the largest Chinese property construction companies," Singleton said.
"We've seen an increasing amount of frustration from Chinese citizens who have sunk their life savings into China's real estate market, primarily viewing it as an investment vehicle or a safe investment, and now many of them are left unable to move into their homes."
The China Banking and Insurance Regulatory Commission (CBIRC) insisted that the banks should meet "reasonable" developer financing needs and that "all the difficulties and problems will be properly solved," Reuters reported.
Data for the property sector showed a 7% shrink in the second quarter compared to the previous year.
Chinese Premier Li Keqiang spoke with 100,000 officials to lay out a 33-point plan that included a $120 billion credit line for infrastructure projects.
The World Bank also expressed concern that Beijing would turn to "the old playbook of boosting growth through debt-financed infrastructure and real estate investment."
"Such a growth model is ultimately unsustainable, and the indebtedness of many corporates and local governments is already too high," the World Bank wrote, instead supporting consumer-based incentives.
As Fox News noted:
That economic weakness creates a troubling picture for Chinese President Xi Jinping as he seeks another, record third term as leader, according to Asia expert and Gatestone Institute senior fellow Gordon Chang. Xi might try to shake things up in order to show that China remains strong internationally even as it faces these domestic troubles.
"Xi Jinping has every incentive in the world to cause some military misadventure abroad," Chang said, saying Xi could "either invade a neighbor or perhaps dangerously intercept a plane or a vessel."
"We don’t know exactly what he would do, but he does have reason to do it," Chang added.
"Right now, China is in distress: [Xi]'s got the mortgage boycott, which is now in 86 cities; a new supplier’s boycott; bank runs - this is just unprecedented."