>China's economic situation is about as bad as one can imagine for a major world economy.
>First of all, the Chinese real estate market is the biggest Ponzi scheme that's ever been. Real estate companies rely on a mixture of bank loans, bond sales, and pre-purchases of completely-nonexistent houses to fund the construction of the houses they've already sold, which means that if demand collapses as is now happening, they can't afford to continue normal operations, meaning they can't deliver on their present sales, which is the main driver of the growing mortgage boycott movement. This is already worse in scale and magnitude than the 2008 financial crisis at least as far as real estate is concerned. Real estate alone accounts for 1/10 of China's GDP, while its associated industries account for perhaps as much as 1/3, all of which is threatening to grind to a near-halt.
>But it gets worse, actually, because China's middle class is basically fully-invested in real estate. Between an unreliable stock market and tight restrictions against moving money out of the country, real estate is the only reasonably safe worthwhile investment option, which means that basically everyone who isn't a billionaire has their entire fortunes and life savings invested in uninhabitable concrete boxes in cities halfway across the country. And this is not touching on notoriously low quality - and so inherent value - of the houses people actually live in.
>But it's actually so much worse even than that. You see, the central government in Beijing collects all taxes for itself and assigns local governments a budget. Naturally these budgets are hilariously inadequate to meet even the basic functions of administration, let alone Beijing's absurd economic growth targets, so local governments are left to their own devices to make up the difference.
>Lacking independent tax authority, the one source of revenue the provinces have ready access to is control of land. As China is still at least nominally communist with market characteristics, the state owns all land, and citizens are entitled to their properties only on a theoretically temporary basis (as of now no one really knows how permanent long-term leases really are). So, local governments utilise what are called Local Government Financing Vehicles (or Platforms) (LGFVs/LGFPs) to lend out land to real estate developers and banks, and use the bond sales from development projects to fill out as much as one-third or more (!) of their normal operating budgets. This practice is a massive engine for official corruption, puts Chinese society at the mercy of the international real estate bond market, and hamstrings local governments during crises (such as the tremendous expense of mass covid testing in the midst of a lockdown-induced financial crisis).
>It also makes the already enormous problem of lies, damned lies, and statistics that plague most authoritarian societies and China especially even worse. Local governments use debt to inflate their apparent growth numbers while pushing their real liabilities off their own books and into the private sector, and the central government, seeing good results, pushes for more, deepening the crisis. So confident in their society are Beijing's apparatchiks that they think nothing of spending trillions on pointless infrastructure like high-speed rail lines no one uses, trying to engage in a naval arms race with the US, and lending hundreds of billions in the Belt & Road initiative out to third-world countries that can't afford those debts to build ports and highways and skyscrapers nobody needs and which fall apart as soon as the construction companies leave, even as half the Chinese population lives on less than $200 a month* and local governments can't afford to govern.
https://www.reddit.com/r/China/comments/wq3l3g/comment/ikkv5ut/