Is China on the Verge of Collapse?
Channel: Radix Verum
Date: 2022-07-18

China’s economy is collapsing as we speak. The Chinese Communist Party has instituted a policy called “Zero Covid.” With China having a population of about 1.4 billion people, this is obviously not attainable. China has forced harsh lockdowns that brought the busiest cities in the world’s second-largest economy to a standstill, leading to major problems. It has damaged businesses and industrial supply chains that affect not just China but the entire world thanks to our globalized, inter-connected modern society. 
According to the National Bureau of Statistics, this has caused China’s economic growth to fall short of expectations in the second quarter of 2022. It is the lowest growth rate since China’s economy shrank by 6.8 percent in the first quarter of 2020. Under its zero-COVID policy, the Chinese government has shut down Shanghai, China’s biggest business and industrial hub with over 25 million people for over two months to bring down the spread of the so-called Omicron variant.
The city is yet to achieve complete normality. Likewise, Beijing and several other cities also clamped prolonged restrictions on travel and business operations prompting analysts to scale down expectations of quick economic recovery for China as the government continues to persist with a strict zero-COVID policy to deal with periodic outbreaks of the virus.
The once booming economy was also hit hard by a deep slump in the property market and weighed down by the weakening outlook for the global economy.
The property market was severely impacted by investor sentiment after China’s biggest real estate developer Evergrande Group sparked off a major crisis last year by defaulting payment of installments of its whopping USD 309 billion debt.
China is in a massive property bubble with impossible levels of debt. This is a big deal; it affects the entire world. Evergrande is China’s Lehman Brothers. 
It’s not just Evergrande, the Chinese property market is the largest asset class in the world – sitting at around $62 trillion US dollars. But this is built on a house of cards.
China’s property bond crash continues to spread as homebuyers are refusing to pay mortgages for unfinished construction projects. Chinese citizens in 86 cities are now boycotting as Chinese censors attempt to erase information about this. The dollar bond selloff that began with Evergrande, and decimated nearly all weaker developers, is now threatening investment-grade giants like Vanke that until this week seemed insulated.
All four of China’s banks are seeing bank runs due to problems with liquidity. Depositors found they could not withdraw money on their bank cards, sparking a run on banks. These bank runs are happening all over China. The Chinese banking system represents 350% of Chinese GDP unlike the US system, which is only 100 percent. One of the largest lending categories is of course real estate, and as we just discussed there are major problems there. Chinese property developers are filing bankruptcies at record levels. 

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