China’s economic structure is getting increasingly unsustainable. Several indicators show that the world’s second-largest economy is standing on very shaky ground right now. A major meltdown is already in motion after the collapse of the country’s second-largest property developer Evergrande, whose shares collapsed by 80% on Monday. But Evergrande’s bankruptcy is just one aspect of the historic crisis gripping the Eastern economic superpower. China’s growth is falling, production levels are rapidly declining, and dropping trading volumes suggest that economic activity is grinding to a halt. The pandemic recovery officials were expecting hasn’t materialized yet. Instead, new data suggests that it will take years before the economy gets back on its feet.
Even though many experts predicted that the Chinese economy would soon eclipse the American economy and replace the U.S. as the global hegemon, today, they say that when and if that scenario comes to fruition, it will be mostly due to our domestic policy failures rather than China’s success. The mistakes of our leaders may have given our adversaries in Beijing some leverage in the global market. However, the deleterious policies of the Chinese Communist Party have been destroying businesses, causing record unemployment, and stirring social unrest all over the nation.
With people’s purchasing power being squeezed, consumer prices are dropping for the first time in several years as demand continues to fall. While inflation is a major concern of the Federal Reserve, the People’s Bank of China is currently dealing with the opposite problem. Deflation – the trend of crashing prices throughout the economy – presents a particular threat to the Chinese economy, which carries a massive amount of debt. David Dollar, a senior fellow at the Brookings Institute’s China Center, explains that deflation means the real value of debt goes up. Although inflation is certainly bad for any economy, it does help manage debt burdens over time. But deflation actually does the opposite. The crisis helps to explain China’s weak second-quarter GDP, which came in lower than expected at 6.3%.
The party’s corruption is eviscerating the private sector and putting the financial market in great danger as elitists take control of the system to obtain more and more wealth. Their goal of having absolute power is deteriorating the health of the population and the economy. Recent figures add to the anxiety that cascading failures will completely break down the Chinese economy. Earlier this year, JPMorgan’s analysts predicted that China risks a 1990-style “Japanification” if officials fail to address the housing market crash, financial imbalances, and aging demographics.
From an unstable economy to a debt-ridden property market to anti-business policies and demographic imbalances, Beijing is buried in problems right now. State officials must come up with better strategies than hiding negative information if they want to save the Chinese economy from the ongoing meltdown. The economic superpower is losing its strength and in danger of falling apart just as Japan did in 1990. But if China goes down, the entire world will suffer repercussions. That outcome could push us into one of the biggest economic and financial crises in history, and the consequences of it will be absolutely destructive for the global market. In this video, we identified 10 signs that prove that China is in deep trouble as economic and social stability continues to erode across the country. So keep tuned until the end to understand what’s behind the downfall of the Chinese empire.
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