The collapse of China’s largest property developer, Evergrande, has exposed the flaws in the communist economic model. The company had been on life support for the last two years and ultimately required state intervention to survive. However, this proved to be unsustainable, leading to a Hong Kong court ordering the liquidation of the property giant.
This collapse is just one of many that have occurred within the Chinese real estate market, resulting from an unsustainable property bubble that has led to the creation of entire cities of unoccupied multi-storey apartments. The market, which has boomed over the past two decades, now faces the challenges of oversupply and shrinking demand, alongside other economic issues such as ageing, unemployment, taxation, and productivity.
Chinese Communist Party (CCP) leader Xi Jinping’s politicization of regulation has exacerbated these existing problems. It is becoming increasingly apparent that Xi and his leadership team do not fully understand these economic challenges, nor do they have viable solutions due to their ideological pursuits.
The collapse of Evergrande and the looming economic challenges have shattered optimistic projections by the regime. While the Chinese economy is still the world’s second largest on paper, there are numerous long-term factors shaping its economy and way of life, including the real estate crisis, declining birth rate, ageing population, high levels of debt, and geopolitical tensions.
With these challenges in mind, the recent postponement of the politburo’s economic session has raised doubts about the regime’s ability to effectively respond to the economic issues at hand. As a result, bullish predictions about China’s economic future have largely disappeared, leaving the future outlook for the country more uncertain.