Chinese economy continues to decline - banking sector may take a hit of

Beijing: China, the world’s second-largest economy, is still in recession. Last month, it was revealed that China’s economic growth rate had dropped to 0.4%. After that, there are indications that the crisis in China’s ‘Real Estate’ sector is taking a more serious form. International financial institutions have predicted a 30% drop in China’s housing and property sector sales. The website ‘Bloomberg’ has claimed that the Chinese banking sector will hit $350 billion due to the problems in this sector.

In the past few months, new outbreaks of Coronavirus have been continuously coming to light in China. China’s ruling communist regime had strictly implemented the ‘Zero COVID Policy’ to contain the epidemic. Therefore, upset with China’s policy, big foreign companies decided to postpone and suspend their ‘orders’. Along with the manufacturing sector, a series of crises are also developing in the housing and property sectors, which account for a large share of China’s GDP.

Last year, it was revealed that Evergrande, a leading company in China, had failed to repay foreign loans. Its impact has also been felt in other Chinese companies, and the housing and property sector has become a trouble. A few weeks ago, there were massive protests in various Chinese cities by citizens buying houses. Intense reactions were received when it came to light that the Chinese rulers had deployed tanks to stop this demonstration.

It has been revealed that the Chinese banking sector is being hit hard by this. According to the information provided by the website ‘Bloomberg’, the Chinese banking sector may be hit by as much as $350 billion given the ‘real estate’ crisis. About eight trillion dollars of Chinese banks are involved in the real estate sector, both in the form of outstanding debt and loans. If USD 350 billion out of this goes down, the banking sector could be in trouble. On the other hand, home sales in China have been falling for the past year. According to the financial institution S&P, sales of Chinese houses and properties may fall by 30% this year. S&P explained that this situation is worse than the recession of 2008. The real estate sector accounts for more than 30% of Chinese GDP. Considering this, it is said that the extent of the real estate crisis will significantly impact China’s economic growth rate.

Moreover, its repercussions have been felt even in the recent meeting of China’s Politburo. In this meeting, the top leaders of the ruling regime refused to reveal the figures of the economic growth rate in 2022. It is only stated that the economy will progress at a reasonable pace. Therefore, there are clear indications that it will not be possible for China to achieve the projected growth rate of 5.5% by the end of the year.

Furthermore, China’s decline may also have an impact on the global economy. Earlier, the global economy was in trouble due to the Coronavirus outbreak in China and the ‘Energy Crisis. The West had a shortage of consumer goods, including cars. Therefore, the inflation rate increased in these countries. Other countries also suffered the consequences given the disruptions in the international supply chains.