Despite china economy slowdown, the country may still experience a few rebounds, similar to the “false dawns” Japan saw in the 1990s.
The Chinese tech sector, which continues to outperform other leading economies, could cause temporary bouncebacks. Despite Beijing’s heavy-handed regulation of its tech firms, these industries continue to grow; for example, China is the world’s top exporter of electric vehicles.
Alternatively, China property market may end up mirroring US real estate in summer 2008, when a downturn was underway but Wall Street didn’t collapse.
The next big step for China would be a full-blown financial crisis-china economy downfall
As China economy faces a slew of headwinds, its property market is one of the most troublesome. Up to a third of the country’s GDP comes from the sector, which is deeply indebted.
It is estimated that land and home prices have declined by around 5% annually, and almost half of China’s government debt is financed by local governments to purchase property. In the sector, defaults have been common, with even the most stable developers at risk.
Instead of launching a broad economic stimulus, Beijing has introduced a number of smaller support measures that have had a limited impact thus far.
The crisis scenario is a bit more likely than a big rebound, Sharma said, since property bubbles fueled by surging debts are more likely to result in sharper economic downturns than what has happened so far in China. Whether China’s next step takes it for the better or worse, it’s likely to be a lot more dramatic than what the consensus expects.
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