China’s Economy Plummets and Oil Prices Slow

Caixin news service released a poll showing China’s economy continues to decline.

The communist country faces reduced manufacturing, unemployment, and a sluggish real estate market.

With China’s weaker economy, its oil demand decreased as well. Combined with less manufacturing, oil prices went down by four percent.

The poll also found that since July, Chinese manufacturing has significantly slowed. The country implemented another stringent round of coronavirus lockdowns that ended in June. After the lockdown was lifted, a surge in production was seen.

“Retailing is in the most trouble. Firm death is almost certainly occurring in the sector now,” CBBI chief economist Derek Scissors said.

He also pointed out that more lockdowns could happen at any time.

At the end of the June lockdown, real estate rose by 89%. But now it has slipped 33%. Poor factory output and layoffs are most likely decreasing consumer spending. Some are using the real estate bubble to receive cash offers for their houses. This combats income loss due to the increasing layoffs.

In 2015, China faced prominent market clashes and several banking scandals. Experts hope 2022 doesn’t follow in the same direction and focuses on increasing the consumer economy.

Chinese real estate giant, the China Evergrande Group, fell through on a deal to do a $300 billion reconstruction plan. According to analysts, this move alone can create a “negative feedback loop” that brings down the rest of China’s economy.

Homeowners are currently refusing to make their housing payments over fears that construction will not be completed on their projects.

“If this problem is not handled properly, it will have a profound impact on the economy, including the government balance sheet, the banks’ balance sheet as well, and households,” Standard Chartered economist Shuang Ding told CNBC.

Ding also discussed how Chinese government finances are in trouble due to the real estate crisis. Most of the government’s revenue comes from taxing land sales which are drastically decreasing.

To make matters worse, China is becoming increasingly hostile to Taiwan and war rumors are circulating.

With China’s economy floundering and a possible war on the horizon, it is unknown how this will affect the United States.