According to Graham Stephan, a noted real estate investor from the U.S., China’s economy is going to collapse.
Stephan cited China’s ongoing property crisis, mortgage defaults, and banking problems to back his claim.
He stressed that real estate is the source of the problem in China, saying, “All of this begins with one thing – Real Estate. Chinese are obsessed with Real Estate and 70% of China’s wealth is tied to real estate (twice as high as the U.S.).”
He mentioned key problems that China has been suffering, including “real estate Ponzi schemes, mortgage boycotts, and an unfolding banking crisis.”
According to Stephan, the median home price in Beijing is as high as 25 times the median annual income, while in New York, the home price is around 10 times.
With all the problems that China is facing, Stephan stressed, “The Chinese economy is experiencing a near-complete collapse.”
China just released its data for July, where key economic indicators fell short of expectations.
In the real estate sector, its data shows that property sales contracted 29% and construction starts declined 45%.
An important economic indicator, China’s youth unemployment rate hit 19.9% in July. This is the highest rate since China began releasing such data in 2018.
To boost the economy, China’s central bank, the People’s Bank of China, lowered the two key rates on Monday, August 15, and pumped $59 billion into its financial system.
A Bloomberg opinion article from last week also noted that China’s data show its economy might fall into recession. The article shows key points that back up its argument.
It argues that the volume of Chinese imports is the most critical data point, and this figure has dropped over the last 12 months.
Another key indicator the news outlet pointed out is the price of commodities, particularly those of industrial metals. The Chinese iron ore contract has faced a plunge since last year, while copper prices fell sharply this year. Both show clear signs of weak China’s demand.
It also shows that there is no sign of China’s credit growth. Growth in credit or new bank loans often reflects a proportion of growth in the economy. China’s interest rate on one-month bank notes has dropped to zero, meaning almost no demand for credit in the country.
And the last factor the article describes is the ongoing property crisis. Chinese developers have been suffering a market downturn for almost a year, which seems to be worsening.