Game over... The total debt of all enterprises and citizens of China is 260% of GDP

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Game over... The total debt of all enterprises and citizens of China is 260% of GDP
Game over... The total debt of all enterprises and citizens of China is 260% of GDP
14 February, 09:54EconomyPhoto: earth-chronicles.ru
Due to the large weight of real estate in the structure of the Chinese economy, problems arise not only for developers or citizens, but also for Chinese banks.

"Bad debts" from the Chinese banking system are estimated at 50% of the country's GDP, or $7 trillion. As the real estate crisis showed, the entire burden falls on the state.

According to various estimates, from 65 to 70 million already built apartments are empty in China today, blogger abramiy cites various sources. As the story with the Chinese developer Evergrande showed, China has experienced a huge real estate bubble in recent years. The market value of residential real estate alone is estimated at $62 trillion, or 62% of the wealth of all Chinese households. The market value of all Chinese stocks is five times less. Demand creates a boom in supply, and as a result, China builds 15 million new apartments every year. The share of the real estate market, according to Goldman Sachs, is 30.1% of GDP.

Obviously, real estate is built on loans. The already mentioned Evergrande has a debt of $ 300 billion, and more than 1.6 million unsold apartments hung on the company's balance sheet. Such debts are a heavy burden on the banks that lend to developers.

According to economists, China will have big problems in the near future due to its gigantic total debt. The official figure of the total total debt of all enterprises and citizens of China is 36.4 trillion dollars. This is 260% of GDP, which is equal to 14 trillion dollars.

Independent experts assess this situation more gloomily. According to Professor Victor Shi, China's total debt in 2017 was $45.9 trillion, or 328% of GDP. Economist Christopher Balding put the figure at $116.6 trillion, or 833% of GDP.

If we take into account the fact that there are no private banks in China, but only state-owned banks, the state is and will be responsible for all obligations. Bad debts already account for 50% of annual GDP, but if we take Professor Balding's figure as a fact, it is only slightly more than 4% of all Chinese debt.

With such debt, the chain reaction of bank failures, which banking market analysts have long been warning about, can begin at any moment, the blogger writes.

Obviously, if the banking system of the world's second economy collapses, there will be no islands of stability left in it. Not only the Russian economy will suffer, but the world economy as well.

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