China’s Broken Dreams: Turmoil In The World’s Factory
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  • Economy: China’s growth was fueled by its manufacturing sector. Cheap labor, abundant raw materials, and lax pollution controls earned it the title of ‘the world’s factory’. But, overcapacity and over-production have flooded domestic and international markets with cheap goods with few takers. It has led to falling prices and decreased profits.

  • Indusrty: China’s growth was fueled by its manufacturing sector. Cheap labor, abundant raw materials, and lax pollution controls earned it the title of ‘the world’s factory’. But, overcapacity and over-production have flooded domestic and international markets with cheap goods with few takers. It has led to falling prices and decreased profits.

  • Real estate: Oversupply extends to sectors beyond manufacturing. About 70% of the wealth and savings of millions of Chinese households are tied up in property. Homeownership is a status symbol and is perceived as financial security. However, many real estate developers, large and small, have filed for bankruptcy in the past few years. The meltdown has wiped out the investments of thousands of Chinese citizens and put local governments under tremendous financial strain.

  • Local government debt: The massive debt carried by the local governments is a ticking time bomb. In China, local government bodies are in charge of implementing Beijing’s policies. To meet the national targets, local governments set up companies called local government financial vehicles (LGFVs) and borrow from Chinese banks to fund infrastructure, real estate, and other projects. The borrowings of such entities have skyrocketed over the decades, and many are now unable to service their debts. According to some estimates, local government debt is in the region of $7 trillion to $11 trillion.

The citizens are growing resentful of the establishment. The country witnessed rare public protests against the prolonged lockdowns. Unemployment and discontent among the youth are creating a generation of Chinese disillusioned with the Party and the authoritarian regime.