China’s Own Trap – 90 Million Empty Homes: The Great Population Fall and Demographic Crisis

The Wall Street Journal article entitled “China falls into its own trap” analyzes China’s current economic problems in detail, emphasizing that the country has fallen into a deep crisis due to its growth model. The economy is too dependent on the real estate market, exports and large-scale infrastructure investments, while structural reforms are too risky for the Communist Party.

The real estate market in China is a particularly critical point. According to the article, “up to 90 million apartments are empty” in the country, while the population is decreasing. Local governments, which for decades built on revenue from land sold to developers, are now struggling with huge debts. Chinese households invested 80% of their savings in real estate, but house prices have fallen by as much as 30% since 2021 in some markets. This has held back consumer spending, and industrial profits have fallen by 17.8% over the past year. Unemployment, especially among young people, is rising as the United States and Europe plan to impose new tariffs against what are expected to be dumped Chinese exports.

Instead of dealing with structural problems, China is trying to maintain the economy with temporary measures, according to the article. For example, instead of deflating the housing bubble, the government is looking to boost demand for housing and encourage banks to extend additional loans to struggling factories and indebted local governments. In addition, instead of “meaningless infrastructural expenditures”, the focus is again on job creation, despite the fact that the programs do not provide long-term solutions.

The country’s long-term economic model is increasingly unsustainable. According to the article, China’s biggest challenge is the demographic crisis: due to the one-child policy, the country’s population is shrinking, while the development of the economy has turned into a “giant real estate pyramid scheme”. It is vital for the Communist Party to keep the economy and society under control. As the article states: “Xi Jinping and his colleagues are not stupid, they are aware that over-reliance on housing, exports and large infrastructure investments is a dead end.”

China’s foreign policy is also causing increasing opposition from the international community. Maintaining an export-led growth model is leading to increasing conflict as nationalism and geopolitical tensions rise, particularly over rhetoric over Taiwan and action against the Philippines.

A quote from the article sums it up well: “They can’t reform China’s economy, but they can force churches to replace pictures of Jesus with portraits of President Xi.”

The original article was extracted and translated into Hungarian using AI.

Source: https://www.wsj.com/opinion/china-falls-into-its-own-trap-economic-model-unstable-but-reform-politically-risky-eeebeab6