Recent reports from the Ministry of Finance paint a picture of China’s declining economic growth. Growth is slowing in the entire economy from the labor market to prices to inflation. Some wonder if the economy will slip into the shadow of recession. Others are looking at the gradual improvement of the economy.
The Ministry of Finance reports that the downturn in China’s economy is driven by real estate and real estate. In fact, they find the decline in real estate sales and building activity as the main culprit in the decline in the real estate market. This in turn will affect the country’s capital budget. The government must take measures to prevent the situation from deteriorating. One possible way to do this is to tighten the policy for lending and financing to real estate developers.
There are two types of property developers: those who buy and develop property for economic purposes, such as the sale and rental of houses, and those who use plots for commercial and other development purposes. The Chinese government has been concerned with preserving its large rural areas. Therefore, to encourage local people to develop their land, it has long encouraged home-based projects and has even made it easier to buy property by offering cash incentives.
However, the process of home building is full of problems. In many cases, the home is built so badly that it can not even be used as a living unit. Then there are the problems of finding tenants and maintaining the property. So the only viable option is to rent it out.
The problem of real estate speculation and real estate speculation is not unique to China. Many developing countries have done the same. In fact, some countries like India have had the same problem over the last many years. However, with the growth of China’s economy, the government has become more aware of the dangers involved. Therefore, it has taken various steps to prevent the situation from becoming too much of a problem.
For example, the government launched a program in 2021 that allowed private citizens to invest up to 50% of property value in a particular piece of property. This was to help buyers and sellers gain a foothold in the market faster. The process works by allowing the property to be listed for a specific period of time and then having it sold at a specific price. This works in the same way as selling and buying shares in the stock market. But instead of investing in real estate, buyers buy shares in a real estate company.
Although this seems like a very simple idea, the impact has been profound. The Chinese real estate market saw a phenomenal growth in the years following the program. Buyers were attracted by the low price of the property and the large number of potential investors. As a result, property prices across the country have risen sharply in recent years. Such growth has been helped by the government-backed program, but it has also been stimulated by the booming economy in China itself.
This is just one example of how the Chinese economy supports real estate markets in other countries. Other examples include the state of California, Washington DC and Las Vegas, Nevada. The fact remains that with the Chinese buying property around the world, there are no indications that prices will fall anytime soon. Even if they did, the costs would be so high that they would not be affordable for many.
Another effect of China’s real estate has been on the construction industry. There has been an influx of skilled workers from China who want to work in the construction industry. These workers are able to find work in many different fields. Previously, these workers would only receive a Pescador salary, but as technology evolves, they can expect to earn more than that. Due to the high demand for these labor-intensive construction workers, the Chinese government has opened up for higher wages and more benefits. As China becomes an increasingly prosperous country, there is no telling how high these wages will rise in the future.
The Chinese economy also supports the development of sub-Saharan Africa. Construction companies from Africa are now buying properties in China that will be used as stations for their own construction projects. At the same time, the Chinese are investing in South Africa for infrastructure projects. China’s economy also supports the development of Caribbean countries. So while some people may see this as a bad thing, it is actually a good thing because it means more jobs for the people in these areas.
In general, China’s economy is doing very well. However, there have been times when things do not go as planned. Now that the world is improving, things should pick up soon. As long as China is at the forefront of technology, the economic benefits of globalization will continue to benefit its people. China has shown that it is willing to open its doors to other nations, especially those who are not neighbors. As a result, the world will once again become a stronger and more united place.
The growth of 4.9 per cent shows that the country’s huge industrial sector has had problems. But exports and services look strong.
BEIJING – Steel factories have faced power outages. Computer chips have slowed down car production. Troubled property companies have purchased smaller building materials. Floods have disrupted operations in north-central China.
It has all strained China’s economy, an important driver of global growth.
The National Bureau of Statistics announced Monday that China’s economy grew by 4.9 percent in the third quarter, compared to the same period last year; the period was markedly slower than the 7.9 percent increase country notch in the previous quarter. Industrial production, the mainstay of China’s growth, faltered poorly, especially in September, and had the worst results since the early days of the pandemic.
Two bright spots prevented the economy from stalling. Exports were still strong. And families, especially affluent ones, continued to spend money on restaurant meals and other services in September, as China once again succeeded in curbing small outbreaks of the coronavirus. Retail sales increased by 4.4 per cent in September from a year ago.
Chinese officials are showing signs of concern, even though they have so far refrained from unleashing a major economic stimulus.
“The current international environmental uncertainties are increasing, and the domestic economic recovery is still volatile and uneven,” said Fu Linghui, spokesman for the National Bureau of Statistics.
However, the government’s own efforts are part of the current economic challenges.
In recent months, the government has released a number of measures to deal with income inequality and tame businesses, partly with the aim of protecting the health of the economy. But this effort, including punishing technology companies and counteracting real estate speculation, has also weighed on growth in the current quarter.
The government had also imposed limits on energy use as part of a broader response to climate change. Now power shortages are hurting the industry, and the country is rushing to burn more coal.
“The economy is weak,” said Yang Qingjun, owner of a grocery store in an aging industrial shoe factory in Dongguan, near Hong Kong. Power outages have led nearby factories to reduce operations and eliminate overtime pay. Local workers live more frugally.
“It’s hard to make money,” Yang said.
Contents
Trying to Solve the Real Estate Question
Urbanization was once a major engine of growth for China. The country built spacious apartments in modern high-rise buildings for hundreds of millions of people, where China produced as much steel and cement as the rest of the world’s production combined, if not more.
Real estate – especially the debt that developers and home buyers collectively – is now a major threat to growth. The country’s largest developer, China Evergrande Group, is facing a serious cash shortage that is already trickling through the economy.
Construction has halted some of the company’s 800 projects as suppliers wait to get paid. Several smaller developers have had to fight to cover bond payments.
This can create a vicious circle for the housing market. The concern is that developers could dump a large number of unsold apartments on the market, and keep home buyers away while they watch to see how far prices can fall.
“Some developers have encountered certain difficulties, which can further affect the mood and confidence of buyers, which causes everyone to postpone buying a house,” said Ning Zhang, senior economist at UBS.
Evergrande’s fate is of greater importance for the long – term health of the economy.
Officials want to send a message that bond buyers and other investors should be more careful about lending money to debt-ridden companies like Evergrande, and that they should not assume that the government will always be there to save them. But the authorities must also ensure that suppliers, builders, home buyers and other groups are not seriously burned financially.
These groups “will be made more whole than the bondholders, that’s for sure,” predicted David Yu, a professor of finance at the Shanghai Campus at New York University.
Addressing Difficulties in Heavy Industry
As power shortages have spread across eastern China in recent weeks, regulators have cut off power to energy-intensive operations such as chemical plants and steel mills to avoid leaving households in the dark. It has been a double whammy for industrial production, which has also been beaten by weakness in construction.
Industrial production in September increased only 3.1 percent from the previous year, the lowest since March last year, when the city of Wuhan was still locked up due to the pandemic.
“The power outages are to some extent more worrying than the Evergrande crisis,” said Sara Hsu, a visiting fellow at Fudan University in Shanghai.
The Energy Agency of Zhejiang Province, a heavily industrialized region off the coast of China, cut power this fall for eight energy-intensive industries that process raw materials for industrial materials such as steel, cement and chemicals. Together, they use almost half of the province’s electricity, but account for only one-eighth of economic output.
Turning down the power to these industries risks creating a shortage of industrial materials, which can crack through supply chains.
Understand China’s New Economy
An economic transformation. China adopts new measures to change the way its business works and limit leaders’ power. Driven by a desire for state control and self-reliance, these changes mark the end of a gilded age for private enterprise that made the country a power of production and a hub for innovation.
China’s leader, Xi Jinping, is reshaping China’s business world in its own image. Above all, it means control. Where managers once had the green light to grow at any cost, officials now want to dictate which industries are flourishing, which are breaking down and how it is happening.
Many measures have already been implemented. The Chinese government has tightened oversight of the country’s internet gangs, declared all financial transactions involving cryptocurrencies illegal and arrested top executives from troubled companies. Meanwhile, China’s biggest developer, Evergrande, is twisting without a word from officials about a rescue.
What China does next will be significant. If Chinese officials save Evergrande, they risk sending a message that some companies are still too big to fail. If they do not, as many as 1.6 million homebuyers waiting for unfinished apartments and hundreds of small businesses, creditors and banks could lose their money.
The long-term outlook is unclear. Some analysts say that Xi’s measures and the pressure to curb excess loans have already made a big difference. But the world’s number 2 economy is slowing down, and the Chinese government may have to work harder to revive it.
Installation systems in industries that use less electricity, such as car production, have not met the same requirements for power outages. But they face other challenges.
Ongoing coronavirus outbreaks in Southeast Asia have disrupted the supply of some car parts. There is also a global shortage of semiconductors, a critical component in cars.
Volkswagen, the market leader in China, said on Friday that production had fallen as the company faced an ever-worsening chip shortage and other supply chain problems. The company does not have enough cars to fill orders from customers and dealers, which creates a backlog.
“Our priority is to end our backlog,” said Stephan Wöllenstein, CEO of Volkswagen’s China division.
Finding Strength in Exports
For several months, economists have been predicting the same thing: the rapid growth in China’s exports cannot last.
China’s exports continued to rise through the third quarter and ended strong, up 28.1 percent in September compared to the same month last year. China had its third-highest monthly trade surplus ever last month.
China has mainly maintained its export strength ever since the economy emerged from the pandemic last spring. As large parts of the world sank down at home, families threw in consumer electronics, furniture, clothing and other goods that China produces in abundance.
However, the export boom is creating another source of tension between the United States and China.
Katherine Tai, the US Trade Representative, suggested in a speech two weeks ago that China’s export knowledge was partly the result of subsidies and other unfair practices. “For too long, China’s failure to comply with global trade standards has undermined the prosperity of Americans and others around the world,” she said.
But Chinese officials and experts claim that the country’s success is the result of strong work ethic and consistent, large-scale investment in production. They are quick to point out that by bringing the pandemic well under control within several weeks early last year, China was able to reopen its factories and offices quickly.
“We have a very strong supply, but weak demand,” said Tu Xinquan, dean of the China Institute for World Trade Organization Studies at the University of International Business and Technology in Beijing. “So companies need to export.”
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