Commentary
China’s real estate industry has been facing challenges with declining sales and prices for the past two years. Major companies like Evergrande have filed for bankruptcy, and Country Garden is experiencing financial difficulties. Experts on the show “Pinnacle View” have raised concerns that the ongoing downturn in the real estate market could potentially lead to a severe financial crisis.
Independent TV producer Li Jun shared insights on the current state of China’s real estate market, highlighting that around 95 cities in China are witnessing significant drops in property values. In some smaller cities, prices have plummeted to 60-70% of their peak values.
Real Estate Collapse and Financial Crisis
Chinese economist and blogger Cai Shenkun emphasized the heavy reliance of China’s economic growth on the real estate sector. He pointed out the deep connection between the banking industry and real estate, where rising property prices have translated into higher bank profits.
Mr. Cai warned of the potential risks posed by the current market downturn to both large and small banks, highlighting the presence of significant non-performing loans. He estimated that nonperforming debts in the property market could exceed 100 trillion yuan, drawing parallels to the Hainan property crisis in the 1990s.
He expressed concerns about the possibility of widespread bank failures, especially as local governments, which own many small and medium-sized banks, lack sufficient funds to address bad debts, potentially leading to customers being unable to retrieve their deposits.
Governance and Economic Downgrading
Guo Jun, president of the Hong Kong edition of The Epoch Times, discussed the concept of “downgrading” in China, where various aspects such as consumption, investment, expectations, and aspirations are being downgraded.
She attributed these issues to the downgrading of China’s management model and political system, characterized by increased centralization of power and a departure from past reforms. Ms. Guo expressed concerns about the tightening control over people’s behavior, citing examples like the abolition of village committee elections and increased surveillance measures.
She highlighted the shift towards strengthening the party’s overall leadership and moving towards a planned economy, which she believes undermines the decentralization efforts of China’s reform and opening-up period.
Ms. Guo emphasized that the downgrading of China’s institutional system has broader implications for society, including economic downgrading. She noted that these changes align with the political goals of Xi Jinping, particularly in the context of Taiwan unification and potential conflicts with the United States.
Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.
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