(TheLibertyRevolution.com)- The collapse of Evergrande, the gigantic property developer that was revealed to have $304 billion in debt that it may not be able to pay back, is expected to have an impact all over the globe. But, according to new reports, the crisis is weighing down on Chinese property investment even more than originally expected and hurting the economy too.
According to two banks, the looming default of the Evergrande property empire is causing a squeeze in the Chinese property sector, which is one of the biggest sources of growth in the Chinese economy.
ABS analysts headed by chief China economist Tao Wang revealed on Monday that offshore and onshore bond markets are effectively closed for property developers while sales continue to drop.
Barclays Bank’s analysts, including chief China economist Jian Chang, also said that there is a “rapid deterioration” of the housing market and sentiment around the market as the Evergrande crisis continues.
The UBS has cut its growth forecast for China this year from 8.2% growth to 7.6%. Barclays also cut its forecast from 8.5%, a prediction made earlier this year, to 8%.
Analysts from both banks say that Evergrande is one of two major problems facing the Chinese economy right now, with the other being the rapidly increasing costs of energy all over the world. It has caused a slowdown of manufacturing in the country, with some manufacturing plants only operating one day per week.
If China can’t rely on its property development market, and it also can’t count on manufacturing products for much of the rest of the world, then what can it count on?
This is bad news for China, and potentially a great opportunity for the Western world to start relying more on domestic manufacturing, or manufacturing services from Western allies instead of China.