More Signs Of China's Decline

 Recent developments indicate significant financial issues in China. Local governments are struggling with cash shortages so severe that they are now settling bills using unfinished and unsold apartments due to the property crisis.

1. Severe Financial Woes: Local governments in China are facing extreme cash shortages, resulting in a reliance on unfinished apartments for payments instead of moneya practice reminiscent of primitive economies.

2. Origins of the Crisis: The roots of this situation lie in years of excessive support for real estate development by Beijing. Initially beneficial, this overemphasis led to excessive borrowing and unsustainable growth.

3. Impact on Development: Real estate development reached nearly 25% of China's economy. By contrast, developed countries typically allocate no more than 5% of their GDP to real estate.

4. Withdrawal of Support: In 2019, Beijing recognized the excesses and abruptly ended its support for residential development. This sudden decision left developers and local governments unprepared to adjust, leading to significant financial failures.

5. Developer Failures: The property developer Evergrande was one of the first to announce it could not meet approximately $300 billion in obligations, marking the start of a wave of failures and a halt in construction and purchasing activities.

6. Local Government Struggles: Without revenue from land sales, local governments found themselves unable to fulfill their debts and civic responsibilities. Payments to contractors and even salaries for public employees were delayed.

7. Bartering with Apartments: Facing cash flow issues, local governments and developers have begun settling debts with unfinished apartments. Examples include:

• Changji City traded 260 apartments worth about $25 million for unpaid gas bills.

• Shanghai Urban Architecture Design exchanged 115 apartments for $10 million owed.

• Police departments in Dejiang, Yuping, and Sinan used apartments to clear $10 million owed to a software developer.

The shift to a barter economy using unfinished apartments reflects the severity of China's economic troubles. Despite the chance to mitigate these issues early, Beijing's delayed actions have contributed to an escalating crisis.

https://www.theepochtimes.com/opinion/more-signs-of-chinas-decline-5811874