Dear MEL Topic Readers
Forget the trade war, China's economy has other big problems
China’s growth seems to have been overly financed by debts. A number of generous investments were initiated to vitalize the economy back in 2008 when the financial crisis hit the world, and indeed they’ve pushed China’s economy to the second largest only after the US. As long as the real economy is growing, such debts don’t always create so much headache. However, when economic growth slows down, repaying debts becomes a serious burden, especially for often inefficient and uncompetitive state-owned enterprises. The same is true for the real estate market. Many emerging middle-class Chinese have invested heavily in residential properties, not just one but a few. Such investment is also financed by borrowings from banks with an expectation of higher market prices. But the housing market seems to be cooling, too. And then, the declining birth rate. The government relaxed the decades-long one-child policy recently but that seems to have done too late. Education costs and modern lifestyles have already changed the formation and value of Chinese families.
And now, a trade war with the U.S is about to kick in. No wonder China’s middle-class feel weary of their lives (Vol.2407).
Will China be able to manage this new challenge and start a sustainable and consistent growth?
Enjoy reading and learn what is going on in China’s economy.
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