Breathe
By Stephanie Henaro
What is in Chinese is the next crisis. Because if China gets the flu, the world gets pneumonia, and the Asians have already been sneezing for some time.
China's financial system is not going through its best times and unless radical measures are taken to prevent the virus from spreading in the banks and stop the contraction in demand, the country of pandas could run out of liquidity.
In fact, some investment banks have cut their economic growth forecasts for the Asian giant to below 5%. At a time when consumer prices are falling, the real estate crisis is worsening, exports are plummeting and youth unemployment could be above 20%. Meanwhile, the government has stopped publishing these data.
No more fear should be caused to the market. Foreign investment could be further hurt and it is in that sense that experts such as Cai Fang of the Chinese Academy of Social Sciences (CASS), have called on the government to inject $550 billion into the economy to stimulate spending and this is something Xi Jinping is urging.
The smooth functioning of the economy assures him political stability and that is why comparisons with what happened in the United States after the collapse of Lehman Brothers worry him and the world.
The defaults of Country Garden, once the country's largest real estate developer by sales, and Zhongrong Trust, a major trust company, are ruffling the market's feathers.
Indeed, news that Country Garden had defaulted on interest payments on two U.S. dollar bonds spooked investors and rekindled memories of Evergrande, whose debt default, in 2021, marked the beginning of the real estate crisis.
It is in this sense that the yuan's fall to its lowest level in 16 years should not be ignored. For it forced the central bank to make its biggest defense of the currency to date, setting an exchange rate with the dollar much higher than the estimated market value. That's the size of the rush.
So, it seems that the sacrifice of the Chinese population in times of pandemic has been exceeded, the non-payments of real estate developers threaten what has been achieved in the last three years.
Just to get an idea, developer debt is approaching $5 trillion and this is 6 times more than what was owed in the United States.
The world is approaching another wave in the tsunami that caused the pandemic and that, it seems, is not yet over in a world that, even if it does not like it, still remains interconnected with nationalisms that are advancing and that will gain more strength with the next crisis.
Blame will need to be sought, and that for many will be in Chinese.
This is what is coming.
The opinions expressed are the responsibility of the authors and are absolutely independent of the position and editorial line of Opinion 51.
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