Is China undergoing an economic crisis?

china economic downfall

What’s common between Uber, China, and WeWork? All these entities seem to be undergoing a drastic financial turmoil, one that has been affecting the entire economy of the world.

 

China’s economy is in trouble right now. The national and international debt is at an all-time high and the Chinese government is delaying the issuance of key data that gives you an idea of the country’s economic condition. 

 

Let’s talk about it…

 

The debt

Over the years, China has been gathering debt. So much so that just from 2020 to 2021, the country borrowed more than $1.2 trillion. And guess what? This debt needs to be paid off!

 

But wait, why isn’t China paying its debt?

 

Well, the answer is simple. Other countries around the world owe China more than $400 billion right now. This means that in order to pay off its debts, China is dependent on other countries to pay back its money first, and only then China can start paying off its debts.

 

China’s grand plan was to always be the superpower of the world and emerge as one of the most economically successful countries in the world. To do this, it went to its neighboring countries and gave them loans, helped with their infrastructure, and established its dominance.

 

However, many of these countries right now are also going through an economic turmoil, Sri Lanka and Pakistan being the most accurate examples of the same. This has put the China government in such a position where most of the debt is being struck off as bad debt, which is a really bad thing for the country’s economy.

 

The result of this was evident enough when China decided to pull its support from Sri Lanka, causing one of the worst economic depressions in the country. 

 

The massive projects

So looks like China isn’t just helping out other countries, but it also has plans for itself and its internal development. 

 

For instance, the country has a lot of water in the South, yet the North is dry, which isn’t exactly sustainable for the country. 

 

To tackle this, China started a project back in the year 2000. The South-North water project was started which was supposed to transfer more than 44 billion cubic metres of water from the South to the North.

 

The project alone is one of the biggest engineering projects and is estimated to cost more than $60 billion.

The pressure of this kind isn’t the easiest for the country, yet it is still continuing with this development and not planning to stop anytime soon.

 

The trade wars and the geopolitical tensions

Over the last few years, China has been witnessing a lot of pressure and competition from countries like Vietnam, Bangladesh, and India, but most importantly, the US.

 

Not only is the country in cold wars with India, but it has also reduced imports from countries like the US. 

 

While this did help the country carry forward a nationalist sentiment, the brunt of this was soon born by the country when it saw its output growth fall to just 5%, the lowest in 17 years.

 

Overall, the country isn’t doing the best right now. If the country follows the same trajectory, the country is bound to join other countries and share their economic conditions.

 

Only future will tell.

 

Till next time…

Related posts

GraphUP-icon-250x250-1
GraphUp
Logo-1
CapitPlan
TradeCross
TradeCross
priMarket-icon-250x250-1
PriMarket
DECK-icon-250x250-1
Deck