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China’s Looming Crises | CNBC Marathon

CNBC・24 minutes read

China's population declines for the first time in decades, impacting the end of rapid growth and cheap labor, leading to a rise in urban youth unemployment and economic challenges. The real estate industry collapses, with defaults on debt payments, a decline in property sales, and a significant risk to the global economy, prompting policymakers to address the issue to stabilize the future.

Insights

  • China's population has declined for the first time in decades, marking the end of an era of rapid growth and cheap labor. This decline is accompanied by a rise in urban youth unemployment, hitting a record high of 21%, highlighting significant economic challenges and impacting millions of young individuals seeking jobs.
  • China's real estate market is in crisis, with a collapse affecting developers, default rates, and property sales. This crisis has broader implications, as the International Monetary Fund has lowered global growth forecasts due to China's real estate issues, emphasizing the urgent need for policymakers to address this significant risk to the global economy.

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Recent questions

  • Why has China's population declined?

    Due to a drop of 850,000 in 2022.

  • What is the impact of China's urban youth unemployment rate?

    Affecting about 96 million people aged 16 to 24.

  • How is China's real estate market affected by recent developments?

    Facing challenges such as a decline in investment and bankruptcies.

  • What measures has China taken to stabilize its economy?

    Cutting interest rates to stimulate spending.

  • What are the consequences of China's population imbalance?

    Too many males and elderly individuals.

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Summary

00:00

China's Population Decline Signals Economic Shift

  • China's population has declined for the first time in decades, with a drop of 850,000 in 2022.
  • The decline in population signifies the end of an era of rapid growth and cheap labor in China.
  • Ghost cities in China, with empty residential buildings, symbolize the crisis caused by disappearing demand and lack of trust among buyers.
  • China's urban youth unemployment rate has risen to 21%, affecting about 96 million people aged 16 to 24, with 6 million still seeking jobs.
  • The country faces challenges in real estate, semiconductor bans, and labor market fluctuations.
  • China's youth unemployment rate hit a record high of 20.8% in May, with concerns about job availability for recent graduates.
  • China's economy struggles due to a decline in real estate investment, leading to bankruptcies like Evergrande and a drop in consumer confidence.
  • The service sector in China faces weaknesses, with reduced investment and declining imports and exports.
  • China's government cuts interest rates to stimulate spending and stabilize the economy amidst market volatility.
  • Chinese youth, despite economic challenges, may still lead comfortable lives due to their affluent families, impacting their employment decisions.

14:34

China's Demographic Crisis and Economic Impact

  • China is facing consequences due to a lack of women for future baby-making, leading to a population imbalance with too many males and elderly individuals.
  • The younger generation is hesitant to respond to policy changes due to the high cost of living, particularly in cities where buying property requires a 30-year mortgage commitment.
  • In rural China, housing may be affordable, but education poses a challenge as children must leave their villages for secondary schools or universities, incurring boarding costs and fees.
  • Despite the relaxation of the one-child policy to a three-child policy, the birth rate remains low, partly due to the impact of Covid restrictions in 2022.
  • China's real estate market, previously booming, is now stalled due to a housing crisis, population growth slowdown, and the economic impact of Covid.
  • The aging population in China is affecting productivity and increasing government spending on welfare programs, leading to a budget deficit.
  • China's manufacturing-based economy, reliant on cheap labor, faces challenges as global supply chains are disrupted, potentially causing a shortage of affordable goods.
  • India's young population and growing workforce position it to dominate the global economy, with a focus on infrastructure, gender equality, and economic development.
  • China's real estate industry is experiencing a collapse, with developers defaulting on debt payments and a decline in property sales, impacting the overall economy.
  • The International Monetary Fund has lowered global growth forecasts due to China's real estate crisis, citing it as a significant risk for the global economy and emphasizing the need for policymakers to address the issue.

28:16

China's Property Market: Defaults and Stabilization

  • China's three red lines policy doubled the default rate of real estate developers to 4.4% in 2021 and then to 8.2% in the following year, leading the government to encourage negotiations with creditors instead of bailouts.
  • To boost home sales, China's central bank and government officials reduced minimum down payments for first-time home buyers to 20% and for second-time purchasers to 30%, while also urging lenders to lower rates on existing mortgages.
  • Private sector developers relied more on international markets for funding, while state-owned developers primarily funded themselves domestically, resulting in a significant difference in default amounts during 2021 and 2022.
  • China's property sector saw a surge in offshore defaults to $54 billion in 2022, with varying responses from different cities and localities, indicating a slowdown in the booming growth of the property market and a need for stabilization in the future due to oversupply and declining demand.
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