Nowadays, China is suddenly faced with a multiplicity of chronic problems. These problems are social, economic, environmental, financial, political, and international. After being permitted to enter the World Trade Organization in December 2001, China proceeded to dump as many of its products as possible in the economies of member countries. After multiple warnings, Europe and the USA started pushing back against these unfair trade practices by imposing steep tariffs on goods imported from China. The most recent scuffle has to do with Chinese EVs and the duties that they are attracting in Europe and North America. Another massive problem in China is the collapse of its real estate industry.
“A Hong Kong court has ordered the liquidation of the Evergrande Group, China’s giant and massively indebted real estate developer, after the company was unable to restructure the $300 billion it owed investors. Just six years ago, Evergrande was riding high, preselling apartments to middle- and upper-income Chinese. In 2018, it was listed as the world’s most valuable real estate company. But just three years later, it was on the financial ropes. Massively overleveraged and unable to complete some existing projects, Evergrande has become symbolic of a Chinese economy that faces some major near-term obstacles: slowing growth, increasing debt and a shrinking workforce.” NATIONAL PUBLIC RADIO: Here’s what to know about the collapse of China’s Evergrande property developer, JANUARY 30, 2024 By Scott Newman.
China’s next big problem is disinvestment. Multinational corporations and other businesses are pulling their capital out of China at an alarming rate. What a contrast to the years when foreign investment was pouring into China and reached a peak of 344.07 billion in 2021?
Foreign businesses have been pulling money out of China at a faster rate than they have been putting it in, official data shows. The country’s slowing economy, low interest rates and a geopolitical tussle with the US have sparked doubt about its economic potential. All eyes will be on a crucial meeting between Chinese leader Xi Jinping and US President Joe Biden this week. But businesses appear to be already erring on the side of caution. “Anxieties around geopolitical risk, domestic policy uncertainty and slower growth are pushing companies to think about alternative markets,” says Nick Marro from the Economist Intelligence Unit (EIU). China recorded a deficit of $11.8bn (£9.6bn) in foreign investment in the three months to the end of September – the first time since records began in 1998. This suggests that foreign companies are not reinvesting their profits in China, rather they are moving the money out of the country. BBC: Why businesses are pulling billions in profits from China. 14 November 2023, By Annabelle Liang.
Another serious problem is that wealthy Chinese citizens are voting with their feet by leaving China and taking their money with them to what they perceive to be greener pastures. It is estimated that approximately three trillion US dollars have been clandestinely ferreted out of the Asian economy. A vast amount by any standard and a loss from which China might never recover.
“China, with the world’s second-largest economy and the second-highest population, will again see the biggest exodus of millionaires this year, according to new research. According to a report by investment migration consultancy Henley & Partners, China is expected to lose the largest number of dollar millionaires this year due to migration, when compared to any other country. Data from the firm showed that a net 10,800 high-net-worth individuals migrated out of China in 2022, and another net 13,500 are expected to leave this year. This is not an issue that started with the coronavirus pandemic, and has been going on for the last 10 years. China has seen the biggest departure of millionaires each year for the past decade, causing general wealth growth in the country to slow down, Andrew Amoils, head of research at global wealth intelligence firm New World Wealth which helped create the report, said in an accompanying statement.” CNBC: China to see the world’s biggest millionaire exodus this year, new study shows. Published Thursday, June 15, 2023. By Charmaine Maria Jacob
(TO BE CONTINUED)
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