Washington / Beijing – A dip in manufacturing due to the Evergrande bankruptcy, a crisis in the real estate sector and power outages once again signal a fallout in China’s economy. Leading financial companies like Goldman Sachs and Nomura, including World Bank, have made predictions in this regard. While the global financial firms are claiming jolts to the Chinese economy, Chinese media turns around. The Global Times, under the government flagship, has snapped that the US economy looms in the crisis and not the Chinese economy.
Earlier this year, China’s debt burden saw a sharp rise, whereas the credit ratings of the private sector faced a fall. However, the Chinese regime does not seem to materialize any measures to reduce the debt burden and the associated risks. Instead, China‘s ruling communist regime has been trying to tighten its grip on the private sector for the past few months. With the execution of strict rules, banks are banned from allocating arbitrary loans.
Since the severe consequences of this are coming forth, the Evergrande crisis of the real estate sector is believed to be a part of it. The company has an outstanding debt of about $305 billion and fails to repay it. Consequently, the stock markets of Asia, Europe and the United States, including China, face a hard hit. Warnings are issued that as a consequence of a jolt to the construction sector and other companies, steel and other sectors would also get affected.
Besides, in the past few days, power outages in many Chinese provinces have forced several foreign and domestic factories to shut down across the country. The manufacturing sector has faced a worse hit. Moreover, its impact can be seen on some of the biggest companies globally, including China. Against this backdrop, the world’s top financial firms have begun to predict fallout in China’s economy.
Leading media outlets, including Bloomberg in the United States, have cited analysts and economists saying that the power crisis will hit China’s economy hard. Thereafter, Nomura, a leading financial firm, has forecast a 0.5% decline in China’s GDP. Goldman Sachs, another leading US financial firm, has also claimed that China’s GDP would fall by 0.4%.
It is believed that although the World Bank reports claim that China’s economy would recover, the process could suffer jolts. The World Bank has also stated that China’s GDP has slowed down. While the claims of various financial institutions are coming to the fore, the profits of companies in China’s industrial sector have also slumped. For six months in a row, the company’s profit fell by 6% in August compared to July. It is said that the rising raw material prices, power outages and corona lockdowns have led to a steady decline in profits.
Chinese media howls over the exaggerated predictions about a jolt to the Chinese economy. The government mouthpiece, the Global Times, has claimed that the US economy would face a catastrophe. Citations from the US Treasury Secretary and other think tanks on the debt ceiling have been marked. A Chinese newspaper has also mentioned the ongoing political struggle in the parliament over the related bills.
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