China’s economy is facing two possible paths: a financial crash or a few temporary rebounds.
Market veteran Ruchir Sharma has warned that China’s economy is likely headed for a financial crash due to the property bubble that has been fueled by soaring debts. He believes that the property sector, which accounts for up to a third of China’s GDP, is heavily indebted and could collapse, leading to a sharp economic downturn.
However, it is also possible that China’s economy will experience a few temporary rebounds before the bubble bursts. This could happen if the tech sector continues to grow, despite Beijing’s heavy-handed regulation. The tech sector has outperformed those of other leading economies in recent years, and it could provide a boost to the overall economy.
Ultimately, Sharma believes that the crisis scenario is more likely than a big bounce back. This is because property bubbles fueled by surging debts tend to end in sharper economic downturns. Whether China’s next step takes it for the better or worse, it is likely to be a good deal more dramatic than the muddling scenario the consensus expects.
Ultimately, it is too early to say which scenario is more likely. However, the risks posed by the property bubble are real, and the Chinese government needs to take steps to mitigate them.
Here are some additional point which must be included :
- The Chinese government has implemented a range of policy measures to contain the property market, including interest rate hikes and other measures, however, the effects of these measures have been limited.
- The financial crisis in China could have a significant impact on the global economy. China is the world’s second-largest economy, and a crisis there could lead to a slowdown in global growth.
- The Chinese government is aware of the risks posed by the property bubble, and it is taking steps to mitigate them. However, it is unclear whether these steps will be enough to prevent a crisis.