Could China’s economic woe’s destroy NZ property prices?

If China’s economy keeps stumbling, it won’t just take down Beijing — the whole world will collapse with it

China’s economy — the 2nd-largest in the world — is teetering on the brink of disaster.

Since this spring, Beijing has canceled initial public offerings, fined tech companies billions for antitrust violations, forcibly shut down China’sentire for-profit education industry, and sent CEOs running for the exitsto avoid the government’s ire. Even more dire, the Chinese megadeveloper Evergrande recently started missing payments on its more than $300 billion in debt, shaking global markets. The convulsions have woken the world up to a startling new possibility — that Beijing may be willing to allow some of its private corporate behemoths to collapse in a bid to reshape the economic model that made China a superpower.

The upheaval, spanning multiple industries and vast swaths of the country, is the result of one giant issue: China’s inability to borrow or buy its way out of its current economic crisis. For decades, the country relied on cheap labor and eye-popping amounts of debt, handed out by government-owned banks, to fuel economic growth — pouring money into massive apartment developments, factories, bridges, and other projects at lightning speed. Now the country needs people to actually use, and pay for, everything that’s been built. But the bulk of China’s population lacks the income needed to shift the economy from one driven by state investments to one sustained by consumer spending.

As a result, China finds itself stuck with a system that is overbuilt and overindebted. Take the country’s $52 trillion property market, of which the Evergrande mess is the poster child. With money easy to borrow, real-estate speculation became a popular way to store and build wealth for China’s young middle class. One academic described this model to me colorfully as an “addiction to real-estate cocaine.” It’s also been called a “treadmill to hell.”

As the government now attempts to deflate the real-estate bubble without bursting it, it has been forced to prepare the country for a period of slower growth and belt-tightening. And to make matters worse, China is also facing an energy crisis fueled by skyrocketing coal prices as well as a working-age population that is getting old without enough resources to retire on.

With China our new Economic Overlord, what hurts them hurts us.

The building blocks of globalized free market lowest cost capitalism is fracturing as the model can’t keep up with demand while decarbonising.

Those fractures are becoming impossible to ignore…

Chinese magnesium shortage: Global car industry to grind to a halt within weeks amid ‘catastrophic’ halt

The world’s largest carmakers and other users of aluminium could be forced to halt production within weeks amid a “catastrophic” shortage of magnesium across Europe.

Magnesium is a key material used in the production of aluminium alloys, which are used in everything from car parts to building materials and food packaging.

China has a near-monopoly on global magnesium manufacturing, accounting for 87 per cent of production, but the Chinese government’s efforts to reduce domestic power consumption amid rising energy prices have slowed output to a trickle since September 20.

In Shaanxi and Shanxi provinces, the world’s main magnesium production hubs, 25 plants had to shut down and five further plants slashed production by 50 per cent as a result of the power cuts.

…if China’s domestic real estate bubble implodes, investors with external holdings may have to sell enmasse causing a glut.

How much of NZs housing market consists of Chinese speculators?

Looks like we might find out.

The economic threats makes the current sabre rattling military threats look friendly.

All eyes are on Evergrande and the dozen other companies who are now teetering before Christmas.

We should urgently start looking to other markets for our products.

 

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Original Source: https://thedailyblog.co.nz/2021/10/31/could-chinas-economic-woes-destroy-nz-property-prices/

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