The Economy of China, WSJ




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Imagine if your bank accounts were frozen without warning. Or you’ve been paying for an apartment that hasn’t been built.

That’s happening in China where economic woes have pushed people to the streets, and some people online, like homeowners who are threatening to stop paying their mortgages until developers clear construction delays and hand over the homes they bought.

China’s GDP growth was close to zero during the second quarter amid COVID lockdowns and supply chain issues.

These protests highlight specific troubles and parts of China’s economy. So here’s what’s happening and how the authorities are trying to keep things under control.

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In China, there’s been no room for political protests to challenge the leadership. Just look at Beijing’s suppression of Hong Kong’s pro-democracy movement since 2019. But the protests this summer are different.

Tai Zixue, Associate Professor, University of Kentucky: “This shows the recent pattern mass protest in China ’cause people have immediate issues to address that really affect themselves directly.”

Tai Zixue is an associate professor who’s been studying social activism in China for 20 years. He says protesters can’t target the ruling communist party if they want to be heard.

Tai Zixue, Associate Professor, University of Kentucky: “If you have political demands, there’s no room for negotiation. But the scenarios we have seen are different. They’re not political; they’re economic or financial interest driven.”

One major issue has been the country’s real estate sector. Collectively, urban Chinese have nearly 78% of their wealth tied up in residential property. And many have yet to see their new homes because developers don’t have enough money to finish building apartments they’ve pre-sold.

To get a sense of how homeowners have been left waiting in limbo, take a look at this chart. The blue line shows the number of housing projects that started construction in 2021. The red line is the number of projects that have been completed.

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There are few reasons for this. First, the government’s strict limits on property developers’ leverage cause some of them to default on their debt.

Add on top of that, the slowing economy and COVID lockdowns that triggered a drop in home sales which fell nearly 40% in July compared to last year.
As a result, many developers have had less cash to fund construction.

So frustrated fires of unfinished homes have joined a movement that’s been gathering steam on Chinese social media. These are hundreds of joint letters issued by homeowners for more than 100 cities across the country.

They’ve been circulating online and all of them share a similar message: that they’ll stop their mortgage payments until developers finish and hand over the apartments.

The mortgage revolt left authority scrambling to reassure home buyers that projects will be completed. Some local governments rolled out tax rebates, cash rewards, and lower down payments to boost their property markets.

Tai Zixue, Associate Professor, University of Kentucky: “It’s tradition, Chinese protests. You have to make a very loud voice to get heard.”

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Another problem that’s triggered loud complaints, thanks. In the city of Zhengzhou, protestors vented their anger at rural lenders for freezing their accounts. This comes amid a government investigation into financial misconduct by a private investment group.

Tai Zixue, Associate Professor, University of Kentucky: “Their immediate deal is to get their money back. They’re not asking anything more than that.”

Chaos erupted when a group of unidentified men in white T-shirts rammed into the crowd. The Wall Street Journal couldn’t determine their identity and neither the bank nor the local government responded to request for comment.

The incident went viral on Chinese social media and got the attention of the authorities. That’s when local officials stepped in and made concessions to appease demonstrators with two rounds of repayments to depositors.

Tai Zixue, Associate Professor, University of Kentucky: “They are giving indications that the government is working with those issues. That’s the typical strategy.”

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For China’s leaders, maintaining stability is a top economic priority.

So to stop the protest from growing, the country’s top policy-making body said it would work to resolve problems in the rural banking system. And it told local governments to take direct responsibility for delivering unfinished homes and supporting demand for housing.

Tai Zixue, Associate Professor, University of Kentucky: “So without finding ways to keep the economy going, more problems will show up. This may be the opportunity for them to figure out, okay, what’s the best way to move forward. and also to find ways into the national economic policy to solve those issues.”

Stability is also the back to our president Xi Jinping needs as he tries to secure a precedent-breaking third term in a few months.

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Real Estate, Property. Everything fine and normal for everyone in China. True or false?

Loan, Mortgage. Is the economy of China doing very well? Is it currently growing at a very high rate?

House, Home, Apartment. It is normal for Chinese citizens to protest. The Chinese often and regularly protest, especially against the government. Is this right or wrong?

Interest, Debt. Do most people in China have assents in the form of stocks, bonds, gold, silver, art and Swiss bank accounts?

Construction. What has cause China’s economy to slow down?

Materials, Supplies. Are Chinese citizens going about their normal business? Have they changed in any way?

Construction Worker, Builder. Why have people in Zhengzhou been protesting? Did government officials meet and speak with them?

Architect, Engineer. The most important thing for the government is helping people. Is this correct or incorrect? What is the most important thing for the government?

Bank, Lender. Has the price and value of real estate in China been increasing, decreasing or remaining the same?

Borrower, Home Owner. What has the government done? How has the government responded to people’s problems?
Regulations. Are houses cheap, medium-priced, expensive or very expensive in your city, region and country, or does it depend?

Inflation. Everyone wants to buy and own their own home. Yes or no?

Appreciation, Depreciation. Is property, housing and real estate a good investment? Do many people buy houses and property?

Housing Bubble, Overpriced. What might happen in the future?

Collapse, Bubble Burst. Is there a housing problem? What is the solution?

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