Despite the Chinese dictatorship trying to hide it, the country is experiencing a serious economic and banking crisis. There is a strong conflict involving regional banks, with confiscated money and tanks at the doors of the branches, to prevent the entry of protesters who have been asking for three months to withdraw their savings from their accounts. At the same time, China is experiencing an unprecedented housing crisis, which reinforces the instability arising from the Covid-19 pandemic.
This situation means that the country, which had a growth of 8.1% of GDP in 2021, has the forecast of a timid growth of only 3% in 2022. Despite still being a positive percentage, the slowdown of the Chinese economy should make Brazilian exports fall, for example, because it affects the internal dynamics and reduces Chinese investments abroad.
“It’s as if this bicycle is not only stationary, but starts to go backwards”, explains Igor Lucena, economist and doctor in International Relations. “This, today, is the greatest global geoeconomic risk that exists”, he adds.
Tanks in banks and blocked deposits
The Chinese government is deploying tanks to protect bank branches from protesters outraged by the blockade of deposits. According to videos and reports posted on Twitter, the measure was adopted in Henan province, where protests by account holders in the city of Zhengzhou were violently suppressed last week.
Account holders at four regional banks allege that their savings have been blocked since April. These amounts are being transferred to “investment products”, according to Chinese authorities.
Censorship makes it difficult to interpret what leads to this situation in the country. “Apparently, several regional banks are involved in fraud operations and have made the liquidity of these banks very low. So they are not able to honor these deposits”, points out Lucena.
It is not yet known, however, whether this is a case of a pyramid scheme or corruption. In late June, Chinese police announced mass arrests: “The case involves old crimes, multiple suspects and a complex scenario,” the Henan police statement said.
“What is scary is that the central bank has not intervened yet,” Dan Wang, chief economist at Hong Kong Bank Hang Seng, told Le Monde newspaper. “There is a high risk of contagion if people get scared and seek to withdraw money. Nine banks have already been affected. The banking system is very sensitive to this kind of sentiment”, warned the economist.
To stop the demonstrations of account holders, the Chinese government would still have manipulated the population identification platform, marking them as if they had tested positive for Covid-19 or had been in contact with infected people. According to complaints made by the protesters, dozens of them would be in “red” in the app used in the country, being prevented from leaving the house.
real estate crisis
At the same time, a serious real estate crisis jeopardizes the sector that represents more than 25% of the country’s economy, involving Chinese subnational entities, construction companies and investment vehicles.
Last week, China urged banks to extend more credit to developers struggling with a growing number of homeowners refusing to pay monthly fees for late works.
Off-plan pre-sales are the most common way to “sell” real estate in China. The verb is in quotation marks, because in the country there is no real sale of houses or apartments, but a lease for 70 years of properties that belong to the provinces.
At least a hundred real estate developments in China are not receiving monthly fees, according to industry data and analysts. This monthly strike raises fears of a risk of contagion to the financial system from this housing crisis.
To reduce the sector’s indebtedness, Beijing reduced the conditions of access to credit for construction companies. Many groups, therefore, find themselves short of cash, among them the number one in the sector, Evergrande, which has a billion dollar debt (US$ 300 billion, R$ 1.65 trillion at the current conversion). The company stopped paying its bonds in dollars last year and does not hide the possibility of defaulting.
The real estate sector was one of the pillars of growth in China, especially through regional banks. It was also one of the financial security bets of the second largest economy in the world in the face of the crisis resulting from Covid-19. However, this disastrous scenario compromises the economy of the country and the world.
In January, the International Monetary Fund (IMF) warned of the risk of “contagion from the Chinese housing crisis to the world economy and markets”. in global demand,” the agency said in a report sent to China earlier this year. The real size of the problem is still unknown, due to the lack of transparency of the Xi Jinping dictatorship.
#Confiscation #regional #banks #disaster #real #estate #sector #economic #crisis #China #hide