China, which achieved spectacular growth since it opened up its markets in the late 1970s, is facing a serious crisis due to emerging faultlines in its real estate sector – which accounts for nearly 30 per cent of its GDP
All the high-frequency data coming from Beijing have, by now, established that the world’s second-largest economy is slowing down but one thing that economists and financial experts are still divided on is whether China can stage a comeback considering the growing challenges like a sharp rise in youth unemployment, mounting debts, and a slowdown in domestic consumption. China watchers say that Beijing has proven in the past that it has the ability to bounce back and it may do it again despite concerns that its current challenges are far deeper than what it overcame in past years. “Never underestimate China’s ability to make a comeback,” said Kishore Mahbubani, former President of the UNSC, while speaking to India Today on Sunday.
IMF’s Deputy Managing Director Gita Gopinath also believes that China has the capability to “turn things around”. “After the first quarter which was very strong because of the rebound from the re-opening, China’s economy has slowed,” said Gopinath in an exclusive interview with India Today Group’s News Director Rahul Kanwal. “And we see that in private consumption, the real estate sector, of course, has had a lot of trouble for a long time. We saw some improvement in the first few months, but again we see a deterioration. So that is an area of concern. Investment is down, confidence is down, consumption is down, and private investment is down.”
China, which achieved spectacular growth since it opened up its markets in the late 1970s, is facing a serious crisis due to emerging faultlines in its real estate sector – which accounts for nearly 30 per cent of its GDP, according to CaixaBank Research. China’s second-largest real estate firm – Evergrande Group – has already filed for bankruptcy, and its largest firm Country Garden is on the verge of collapse.