August 14, 2022

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China has problems.  And it could go wrong.  - VG

China has problems. And it could go wrong. – VG

Problems at home: Chinese President Xi Jinping struggles. Chinese growth fell sharply in the second quarter of this year.

Chinese growth fell sharply in the second quarter of this year – and it could only get worse.

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The economy is going poorly when Corona shuts down society, and the turbulent housing market is about to give the world’s second largest economy a new gray hair.

The entire real estate market is shaken, because Homebuyers refuse to pay on their mortgages before the developers complete the apartments.

It will include hundreds of thousands of home buyers in at least 80 Chinese cities.

The boycott is spreading online.

People are concerned that real estate developers are struggling to complete their construction projects. This, of course, creates new turmoil in a country where the real estate market is already suffering.

According to Bloomberg, authorities are now censoring social media with posts and documents showing how many people are boycotting their mortgage loans and construction projects that have been delayed.

It is common in China for buyers to prepay for undeveloped apartments, as a type of interest-free loan to property developers.

Alliance: Presidents Xi Jinping and Vladimir Putin in Beijing on February 4.

Bloomberg now writes that the system is considering granting a “pardon” so that borrowers are not penalized if they delay repaying the loan until the homes are delivered.

The fear for Beijing, of course, is whether this could lead to social unrest.

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Bloomberg continued Comment space As much as we say that “it reminds us of the Lehman Brothers”.

The words “Lehman Brothers” make it cool down a lot more ass than Blue Russia. They were a symbol of the 2008 global financial crisis.

Then the question is what happens in the long run with China.

After launching a market economy in 1978, China quickly became one of the world’s most in-demand countries for the production of goods – due to the large supply of cheap labor.

For decades, China has made a significant contribution to global economic growth.

President Xi Jinping faces much deeper problems than economic growth that is unlikely to be as promised.

India is expected to replace China as the world’s most populous country early next year. They now have 1.41 and 1.43 billion people, respectively.

And while demography is not everything, the future prospects for China are not very good. The number of newborns fell in 2021 for the fifth year in a row.

It was young people who made China’s economic prosperity possible. But now more people are leaving the labor market than they are entering. It is an aging population.

For a number of reasons, China is also not considered an attractive country for immigrants – unlike many European countries.

Experts are now comparing China to Japan, which after great growth was hit by economic stagnation in the mid-1990s.

Horizon: A young man looks at central Shanghai.

Demographer Paul Morland says in an interview with Spiegel that China did not need to run the one-child policy, which was introduced around the same time as the market economy. He says the birth rate has already fallen sharply. China now has very few children. The population is aging rapidly – and will eventually shrink.

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Finance website Bloomberg writes that President Xi Jinping, who for years has been attracting foreign capital to China’s markets, is now helping investors flee China.

They cited coronavirus lockdowns, unpredictable regulations, a shaky real estate market, and Xi’s flirtations with Russian President Vladimir Putin as reasons why China is no longer interesting.

It’s a dramatic turnaround for a market that has been a magnet for investors from all over the world, which has seen sky-high growth and just over a decade ago made China the world’s second largest economy.

Few Children: China had a one-child policy for a long time, and families were only allowed to have one child. In 2015, it opened for one to find two, and three later, but the vast majority are still content with having one child. If it continues, China will face a demographic crisis.

Xi and his government imposed a number of restrictions last year. This led to distrust and confusion about the goals of the Communist Party – and shareholder losses.

At the same time, good economic growth is crucial to the legitimacy of the communist regime, which for more than 40 years has sought to achieve a special balance between a one-party state and a market economy.

Growing up was full of adventure, but it also had its price. The desire for economic growth at any cost has increased inequality, especially between rural and urban areas. It also led to severe environmental damage.

The Chinese government is well aware of these problems and is trying to address them. But demographic changes are coming in.

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Growth hasn’t led to democracy in China, but perhaps deflation will?

The economic recovery led people to see through the fingers of totalitarian government. If there is a downturn now, the stress on the system will likely increase.

And so the housing market has become a nuisance. In some places, homebuyers have tried to refund their purchases from developers.

Elsewhere, people have stopped paying their mortgages at the bank before developers actually complete homes. Bloomberg He wrote last week that Chinese authorities are trying to censor documents that show how many people refuse to pay their mortgages before handing over the house.

Of course, the collapse in the housing market is something that Beijing will avoid by all means. Therefore, the authorities are likely to go to great lengths to satisfy angry homebuyers.