08 November, 2021 86

EXPERTS EXPLAIN THE REAL ESTATE CRISIS IN CHINA

The researcher of economies of the world Chris Kanthan explained the dangerous crisis in the real estate market by the huge debts of developers to the banks of the China.


The American researcher of world politics and finance Chris Kanthan spoke on the Medium portal about the nature of the housing bubble and the dangers of its breakthrough for one of the strongest economies in the world.

This is reported by Lenta.ru with reference to a source.

The scale of the real estate market in China sets the country apart from other states. This segment of the economy in the China accounts for a third of GDP, 40 percent of all bank loans, and half of municipal taxes. At the same time, at the height of the housing crisis in the United States, the real estate market accounted for only 18 percent of the country's GDP.

Collectively, China's developers owe banks about $ 5.2 trillion. The largest debtor among them is Evergrande with a debt of $ 305 billion. The default of the real estate giant will hit not only the economy of China, but also other countries, financial analysts predict. Any drop in house prices threatens bankruptcy and smaller debtor builders.

At the same time, since about 75 percent of the wealth of Chinese families is associated with real estate, the government is not interested in severely understating housing prices. The construction sector employs more than 100 million professionals who, in the event of a market collapse, face unemployment.

“The Chinese government has tools such as price controls, money printing, loan rollovers to avoid an immediate collapse of the property market. When you look at the ratio of the average home price to the average annual income, Chinese cities are five times more expensive to live in than New York or San Francisco,” said Chris Kanthan.

The specialist noted that Chinese President Xi Jinping needs to reduce housing prices by 50 percent. This will make real estate affordable, but it will destroy the economy.

According to the Chinese authorities, GDP growth in the third quarter slowed to 4.9 percent in annual terms and showed the weakest growth. According to Lenta.ru analysts, the trend is associated not only with debt obligations of developers, but also with a general decrease in consumer activity due to the coronavirus pandemic.

 



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