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Economics

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Global Economics - Is China's economic model broken?

Graham Watson

17th October 2021

This new video from the Financial Times is a fantastic look at China's economic model.

It focuses on the centrality of real estate to the Chinese economy, the importance of housing policy to past and future prosperity, and the Evergrande crisis.

Can China make the transition to a new economic model driven by green tech rather than real estate?

The brilliant George Magnus writes here about the Evergrande crisis and what this means for both the Chinese economy, and, by definition, the global economy.

There's some eye-watering stuff in the article - the size of Evergrande's debt - around $300bn - and the contribution that the sector makes to the Chinese economy - the property market is worth four times Chinese GDP, and the housing sector annually accounts for nearly one-third of economic activity.

However, the alarming thing is what a collapse of the sector could mean more generally., not least if house prices in China start falling. The real estate bubble cannot last indefinitely.

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