September 29, 2022

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The recent global financial crisis coming from China?

The recent global financial crisis coming from China?

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The People’s Bank of China cut interest rates by 10 percentage points. Al Qaeda, which international investors treated as an attempt to counteract the recession threatening this country’s economy.

– This cut is symbolic, but it is also symbolic that the bank is going against the direction of the most important central banks, which are raising interest rates and tightening monetary policy – says Maciej Lechors, an expert at CMC Markets, in an interview with MarketNews24.

New statistics show that the Chinese economy is panting more and more. Domestic demand, which the Chinese government wanted to boost, is declining. The most worrying thing in the labor market is that the level of unemployment in the age group up to 24 years is rising and has reached 20%.

However, bigger tensions emerged in the real estate market. New home prices have fallen the most in six years. The problem is the housing sector’s share of China’s GDP. The construction and housing sectors account for 30%. Gross domestic product, and housing only up to 13 percent. 30% of the loans granted by Chinese banks are mortgage loans.

Some consumers cannot afford to repay their loansreal estate is incomplete, a financial pyramid is created, because the credit system is set there and $370 billion in loans may not be repaid – Explains a CMC Markets expert. – This may deepen the troubles of the Chinese banking sector, and foreign investors have already incurred losses in bonds estimated at 100 billion US dollars due to the bankruptcy of more than thirty private development companies. EvergrandeThis is it The biggest developer in the world.

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The slowdown in the Chinese economy reduces the demand for raw materials, especially oil and copper. In the short term, this is useful in the context of anti-inflation by Western central banks. However, in the long run Increases the risk of a global recession.

The risk of recession has been exacerbated by military conflicts, although the significance of the tariff wars between China and the United States has diminished. The conflict in Ukraine hits Europe first of all, the escalating conflict between China and Taiwan will affect the entire world economy, for example because two-thirds of the advanced processors are supplied to the world market by Taiwan.