The Pulse Global Economic Summary - September 23, 2024

Plunging Faster: China's property sector remains in deep trouble. Facing mounting debt problems, this sector, which has long represented a core driver of China's growth, continues to feel the pressure. Earlier this month, Country Garden, the largest property developer by sales in China, came dangerously close to defaulting after failing to make payments on a bond due this month. As Bloomberg reported on 9 August: 'The virus of Evergrande's collapse has spread across the real estate sector …, dragging down everything from property sales and investment to the entire economy. Home buyers have become wary of buying and pulling back on 100 million dwellings teetering on the knife-edge between officially sold and unsold.' Fitch's ratings agency warned of widespread 'mortgage and deposit stress' (FT). Between January and August 2024, property investment decreased by 8.8 percent, the lowest level since 1999, while investment in real estate development dropped a staggering 25.3 percent for the first six months of 2024; local government revenue from land sales (their primary revenue source) plunged by 30 percent (Reuters): Country Garden nearly defaults after failing to pay up on due bond It's a sign of deep trouble. China's‘ junk wasteland' is filled with rising property costs. The spillover effects on the economy are severe. China's real estate market is massive – accounting for more than 50 percent of global new home sales and construction (Reuters). Real estate is crucial in China's construction, manufacturing, and services sectors (Reuters). It is also a core driver of the economy. 'But the tragicomic Evergrande crisis has far-reaching consequences because real estate is simultaneously one of the owners, consumers, and drivers of China's economy,' wrote Wenchuan Zhu and Sony Pippala of Brookings on 12 August. Recent economic data worldwide remain a dangerous mix. Ever-increasing inflation, rising interest rates, and unresolved geopolitical tensions between the US and China – all dampening economic growth and investor confidence – weigh heavily on the world economy. Deflationary pressures, weak domestic demand in China, and high inventories across the global supply chain add to the worldwide recession risk.  

Sources: https://www.reuters.com/graphics/CHINA-STOCKS/byprkdgenve/,https://www.reuters.com/graphics/CHINA-PROPERTY/SCALE/znpnzjdqapl/,https://www.reuters.com/graphics/GLOBAL-MARKETS/RECESSIONRISK/mopanaabnva/

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