"China’s Incoming Collapse Is Worse Than You Think"

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"China’s Incoming Collapse Is Worse Than You Think"

by Epic Economist

"The alarm bells are ringing louder and louder as China's economic crisis enters a defining phase. China's economic collapse is being fueled by the Mortgage crisis engulfing the housing market. But there are a lot of other factors causing this economic collapse.

The country's total public debt now exceeds 300 percent of GDP - 60 percent higher than the average across other countries. The debt-to-GDP ratio is growing at 11 percent per year. China's GDP though has grown far less than 11 percent annually during the past decade, so the debt is comfortably outpacing growth. To top it all off, China is fighting an unwinnable fight against the pandemic. All these issues and their impact on the global economy is explained here.

Debt: China's total public debt now exceeds 300 percent of GDP - 60 percent higher than the average across other countries. This debt-to-GDP ratio is growing at 11 percent per year. China’s GDP though has grown far less than 11 percent annually during the past decade, so the debt is comfortably outpacing growth.

The Housing Bubble: Ever since the 2008 recession, the Chinese stock market has remained stagnant so real estate has been the preferred investment sector for most Chinese people. Right now about 70 percent of household wealth is tied up with real estate. Evergrande is at the center of the crisis that is hurting China. The real estate giant owns 1300 projects in 280 Chinese Cities. But as Beijing started clamping down on borrowing, Evergrande lost access to Capital and most of its projects were stalled. The company started defaulting on its 300 billion dollar debt making it the most indebted company in the world.

China's collapse is hardly a cause for celebration for western powers. Back in 2008, it was China that bailed out the world economy with a 586 Billion dollar stimulus. But now we are in 2022 and the whole world, not just China, is at risk. China’s economy accounts for one-fifth of global GDP, and many countries thrive off trade with China.

2008 was a crisis of Mortgage, it was the crash of housing. But this is the Crash of Everything. There's a gas shock in Europe, interest rate hikes in the U.S, and a housing market crisis exacerbated by never-ending lockdowns in China. A combined effect of it all is a giant cloud of a global recession. The threat is big enough for a consensus that a cold winter is coming for consumers everywhere. China might be at the forefront but no one is safe."

- https://www.epiceconomist.com/