Author Topic: How China’s Crumbling Real-Estate Market Puts The World Economy At Risk  (Read 374 times)

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Offline Kamaji

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How China’s Crumbling Real-Estate Market Puts The World Economy At Risk

The fallout of China’s real-estate market weighs on the rest of the nation’s economy — and soon, the world’s.

AUGUST 24, 2023

Evergrande, one of China’s largest real-estate developers, filed for bankruptcy last week, the latest sign that the nation’s once high-flying real-estate market is falling apart. China’s economy is heavily influenced by its real-estate market, and China’s continued struggles will undoubtedly harm the broader world economy.

The ruling Chinese Communist Party’s (CCP) policies have always driven the boom and bust of China’s real-estate sector. The party abolished private property rights and nationalized land and home ownership after it took control of China in 1949. Before 1980, the Chinese government controlled all housing in urban areas, including construction and distribution. City dwellers received public housing allocations through their work units based on needs, seniority, and social class (for example, people classified as counter-revolutionaries wouldn’t qualify for public housing). Most of these public housing units were small and poorly built, and their only attractive feature was the low rent due to government subsidies.

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The Chinese government stimulated demand for housing through its urbanization movement, aiming to transform excessive rural laborers into industrial workers in cities and better control the Chinese population. As of 2011, over half of the nation’s 1.3 billion people lived in urban areas, compared to less than 20 percent in the 1980s. More urban dwellers meant more demand for urban housing.

Housing demand remained strong in China for decades for other reasons too. Chinese household disposable income grew at an annual rate of 10 percent on average between 1999 and 2010 as the economy grew. Yet the Chinese have few options to invest their newfound wealth because the nation’s stock markets behave like a casino, and many Chinese see it as a place to lose money. Meanwhile, the Chinese government’s strict capital control and the reluctance to open China’s financial sector to foreign banks and investment firms mean the Chinese people have minimal access to foreign stock markets and investment products.

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Offline kevindavis007

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It's going to hurt the world economy but not as bad as the crash of 08. A lot of companies are starting to decouple from China.
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