The collapse of the Chinese real estate market could bring relief from inflation in the United States

In 2020, President Donald Trump signed the Holding Foreign Companies Accountable Act. This law was designed to pressure Chinese companies to submit to audits or be delisted from our capital markets.

According to Treasury Department, in May 2021, there were 248 Chinese companies with a total market capitalization of $2.1 trillion on the New York Stock Exchange, NASDAQ and NYSE American, which are the three largest stock exchanges in the United States. In March 2022, there were 260 Chinese companies with a total market capitalization of just $1.3 trillion.

In August 2022, five Chinese state-owned enterprises announced that they would withdraw from the New York Stock Exchange.

In August, Alibaba officially applied on the Hong Kong Stock Exchange to be their primary listing. They don’t want to leave New York, but they’ll probably be written off.

As more Chinese companies are pushed out of the United States, Chinese companies will have to rely on China’s banking system, which is facing a systemic crisis in China’s real estate sector.

Chinese banks have $9.2 trillion of exposure in its real estate sector.

Economist George Magnus wrote“In China, the real estate market is a $60 billion industry – four times the GDP – which accounts for about a quarter to a third of annual growth.

This housing growth has sent hundreds of millions of people from the countryside to urban areas. According to world BankChina’s urban population has grown from 200 million in 1980 to 900 million in 2020.

From 1978 to 2008, the Chinese economy grew by investing in infrastructure, real estate and manufacturing. According to economist Michael Pettis, who is a professor of finance at Peking University’s Guanghua School of Management and Senior Fellow at Carnegie:

“That started to change ten to fifteen years ago, by which time China had largely closed the gap between the investment it had and the investment the economy could productively absorb. is produced, China should have drastically reduced the share of production it reinvested, but to do so without causing a sharp drop in the growth of economic activity, the economy had to be rebalanced towards greater consumption, which in turn meant transferring income from previously prosperous parts of the economy to the household sector.

In the United States, a person usually buys a house after it is built. In China, people make payments on houses before they are finished.

When China’s economy was booming, it took years for some of these apartment buildings to be completed. Understandably, some Chinese homeowners fear these homes will never be built as China’s economy slows due to COVID Zero policies and Evergrande’s default.

This year, hundreds of thousands of Chinese in nearly 100 cities have joined a movement, via WeChat and Douyin, to stop paying their mortgages until their apartments are finished.

According Keyu Jinwho is Professor of Economics at the London School of Economics:

“What is needed now is a bulwark against the self-fulfilling crisis: the belief that property developers will be insolvent is causing buyers to delay purchases and finance to dry up.”

According to Bloomberg columnist Michael Brooker:

“If buyers lose confidence and house prices drop significantly, it would erode the main reservoir of Chinese household wealth, sending multiplier effects rippling through the economy, stock market, global commodity prices and global demand.”

The Chinese people should demand that the government help these developers complete their projects. The problem is that it is difficult for people to trust a government that does not respect the rule of law.

In the best-case scenario, the Chinese economy could have a lost decade like Japan. From a political perspective, this mortgage boycott also has the potential to be China’s solidarity movement.

In June 1979, Pope John Paul II spent 9 days traveling all over Poland. About 10 million Poles have seen him speak.

According to Victims of communismduring this trip, “the Poles began to realize how much they outnumbered the Communists in charge”.

If these hundreds of thousands of Chinese homeowners want their homes built, they must stage a massive protest in Tiananmen Square and demand that the government stabilize the housing market.

During the Civil Rights Movement, blacks and whites rode buses together through the Jim Crow South to protest segregation. In 1961, the freedom riders encountered violence, but their courage forced the government to end segregation in bus stations.

The Freedom Riders also inspired others to join the civil rights movement. Holding a protest in Tiananmen Square would show the Chinese government and the world that these protesters are not afraid.

Slower growth in China would also lower gasoline prices and inflation in general.

Robert Zapesochny is a researcher and writer whose work focuses on foreign affairs, national security, and presidential history. It has been published in numerous media, including The American Spectator, The Washington Times, and The American Conservative. When not writing, Robert works for a medical research company in New York. Read Robert Zapesochny’s reports – More here.

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