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China Home Sales Plunge in July, as Mortgage Revolt Deters Buyers
There may be psychological hurdles in China's growth with the effects on mental health from lockdowns in major cities, the revolt in the property sector with home buyers losing confidence in developers, the loss of confidence of foreign investors from US and EU. The dependence on the property sector to carry so large a burden of growth for the last 2 decades in China may now look like an error. The dependence on foreign investment may also be an error as the loss of confidence could mean some withdrawal and a lack of sustained investment.
It could even be said that restraints on both sectors property and foreign investors could have created alternative paths to growth, and reduced the shift of factories from the US and Europe to China that have now caused trade friction and and a reverse shift of investment back to home countries of US and EU. Trade friction has it appears backfired in a way that extends to the overall relationship which could have been prevented by preventing the hyper growth that happened. Greg Ip of the WSJ has argued that compared to Japan's growth in the sixties and seventies from a country of 100 million the hyper growth for a country of 1 billion for 2 decades created a massive impact on communities in US and EU that were dependent on factories that were lost to China. This has alienated large sectors of the public in the US and EU which could have been prevented by restraints on hyper growth in China. Ip says the growth was too large and too fast for the US to cope. It may have permanently damaged the relations between the two countries showing that trade and globalization had unintended effects when left to business and governments staying away from keeping an eye on how it was happening.
Unintended consequences of China's years of hyper growth- climate change and sharply slowing growth
07/31/2022
China's overdependence on the property sector and foreign investment in offshoring factories from home countries to China had unintended effects. The property sector led growth has led to sudden collapse with local governments finances strained by $900 billion according to WSJ and loss of buyer confidence. The effects on communities in the US and EU of shifting local factories to China is well known having alienated the US and EU public, and permanently damaging friendly relations leading to its reversal and shift back to home countries. Years of unbridled hyper growth has not done well for China with the consequences seen today. At the start of this experiment China embarked on in 1990 China had little experience with market economy. The self interested advice of American investment banks and business and the zeal of local government officials led to hyper growth. The US and EU countries could not cope with the scale of China's hyper growth and shift of factories overseas as they had done with Japan in the sixties and seventies because of the sheer scale and compression in a short period for China. The result is sharply slowing growth in China and loss of faith on both sides. It did not have to happen this way and shows the unintended consequences of letting capitalism go its own way with interested parties acting excessively and governments not acting where prudence is needed. The burning of coal in unlimited quantities created the problems of climate change the world faces today- a double blow for the world and for China with lessons for today and how we think about his in future.
Grouped Articles
China’s Manufacturing Sector Unexpectedly Contracts Amid Weak Demand, Covid Lockdowns
WSJ 07/31/2022
China’s Economy Tested by Strained City Finances
WSJ 07/31/2022
China Home Sales Plunge in July, as Mortgage Revolt Deters Buyers
WSJ 07/31/2022
China property sales could plunge by one-third, analysts say, as crisis deepens
The Guardian 07/26/2022
China Bet It All on Real Estate. Now Its Economy Is Paying the Price.
NYTimes.com 10/16/2023
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