Reduction of indebtedness causes slowdown in China's economy

The pace of the world's second largest economy, China, in the post-pandemic period is slowing as Beijing tries to reduce corporate debt especially in real estate, the favorite investment vehicle for Chinese households.

For the last ten years China has advocated an economic model based on domestic consumption at the expense of exports and construction, but in the face of any sign of slowdown Beijing has once again stimulated growth with more construction and loans.

President Xi Jinping's government is tackling the root of the problem by reducing leverage in the real estate sector, which supports millions of jobs.

This scenario has been creating a wave of shocks in the Chinese economy. The real estate and construction sectors are going through one of the worst crises that has resulted in drops in sales, which has worried the business sector.  

"Many clients now want to wait and see," said Liang Qiming, a real estate agent in Nanchang, capital of Jiangxi province, which has prospered on the basis of real estate construction, quoted by local media.

Over the last few decades China has been reaching high levels in terms of economic growth, caused mainly by a series of constructions that still started at the end of the last century.

Meanwhile, real estate sales were down 32% in September, year-over-year.

Buyers were discouraged by restrictions on mortgage lending and anxiety about the possibility of real estate agents failing to deliver prepaid apartments.

The most glaring case is that of Evergrande Group, one of the giants in the Chinese real estate sector and on the verge of bankruptcy.

In the automobile business the data points to a decline to 16.5% in September from the same month last year, according to the China Association of Automobile Manufacturers.

Even though we "got rid" of the effects of the pandemic before the United States and Europe, the pace of economic growth is slowing.

Depressed by the decline in construction, the economy expanded 4.9% year-over-year in the third quarter of the year.

This is a much lower rate than the year-on-year growth of 7.9% achieved in the previous quarter.

Source Lusa

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