Dragon on the verge of poverty? Huge historic decline in China’s economy, property market completely devastated Is the Dragon on the brink of bankruptcy? China’s economy faces a massive, historic slump; the property market is completely devastated.

China, the world’s second largest economy, is currently going through a very serious economic crisis. There has been an unprecedented recession in the real estate sector (property market), which is considered the economic backbone of the dragon. China’s biggest real estate companies like Evergrande and Country Garden are on the verge of bankruptcy under the burden of huge debt. Due to crores of unsold and incomplete apartments, property prices have fallen to a record low. The confidence of ordinary Chinese citizens has been completely shaken as their lifetime earnings are locked up in property, creating a kind of financial emergency across the country.

Weak domestic demand and silence in factories: GDP growth slowed down

The property crisis has had a direct impact on China’s domestic consumption. Chinese consumers are now avoiding spending money, due to which a situation of ‘deflation’ i.e. recession has arisen in the country. According to data from China’s National Bureau of Statistics (NBS), the country’s GDP growth rate is lagging far behind the annual target set by the government. Retail sales and industrial output figures have been very weak. Along with this, production in China’s factories has slowed down significantly because China’s export business has also been badly affected due to the heavy tariffs being imposed on Chinese goods by the US and the European Union (EU).

Record unemployment among youth: Every strategy of Beijing is failing

China’s young population is suffering the biggest brunt of the economic slowdown. The youth unemployment rate for urban youth in China has reached a historically high level. Lakhs of youth who have passed out from colleges and universities are not able to get jobs. Various relief packages (Economic Stimulus) by the government of Chinese President Xi Jinping and Prime Minister Li Qiang like cutting interest rates and instructions to give more loans to banks are also proving unsuccessful in stopping this economic slowdown. Global rating agencies have also reduced China’s economic outlook from ‘stable’ to ‘negative’ category.

What will be its impact on India and global market?

According to global economic experts, this weakness of China can have a double impact on the global and especially the Indian markets. On one hand, due to recession in China, global demand for commodities like crude oil and steel-aluminium will decrease, due to which their prices may reduce and India’s import bill will reduce. On the other hand, global companies are now shifting their manufacturing base from China to countries like India, Vietnam and Mexico, which is expected to give a big boost to India’s ‘Make in India’ campaign and local manufacturing sectors.