Experts Identify 5 Signs of Significant Monetary Shortfalls in China’s Economy

Experts have pointed out five major signs that indicate the communist regime in China is experiencing a severe monetary shortfall as the economy continues to decline.

Gong Shengli, a researcher at China Financial Think Tank, mentioned that 2024 could mark the beginning of the worst financial shortfall for China. He emphasized the importance of understanding various monetary shortfalls, especially in terms of government and real estate industry debts.

After the Chinese Communist Party (CCP) lifted restrictive control measures and lockdown policies at the end of 2022, the expected economic rebound did not occur. Instead, structural issues accelerated the economic downturn, leading to a significant debt crisis in China.

Goldman Sachs estimated in April 2023 that the CCP’s government debt had reached 156 trillion yuan ($21.56 trillion) in 2022, nearly three times the country’s GDP.

Debt Nearly Three Times GDP

In 2023, China’s debt reached 287.8% of its GDP, a record high indicating a substantial increase from the previous year.

Mr. Gong also highlighted hidden capital, finance, banking, and real estate “black holes” that contribute to China’s monetary shortfall.

Henry Wu, a macroeconomist in Taiwan, emphasized the need to find alternative funding sources to address the debt problem, especially as Wall Street begins to withdraw from China. He expressed concerns about the severity of the central government’s fiscal crisis and the urgent need to address multiple crises simultaneously.

12 Provinces Halt Large-scale Infrastructure Projects

Concerns about debt risks prompted 12 provinces and cities in China to halt major infrastructure projects, excluding those essential for people’s livelihood. The General Office of the CCP’s State Council issued a directive to reduce debt risks and manage existing financial obligations effectively.

Issuing 50-year National Bonds

Addressing the monetary shortfall, the CCP’s Ministry of Finance announced the issuance of 230 billion yuan ($32 billion) 50-year government bonds with a coupon rate of 3.27 percent. This issuance highlighted the severity of the financial situation in China.

Observers, like Sun Kuo-hsiang from Nanhua University in Taiwan, warned that long-term bonds could create debt burdens for future generations if China’s economic decline continues.

Huge Financial Shortfall in the Real Estate Industry

China’s real estate industry faced significant debt challenges, with many companies defaulting on loans. The large number of unfinished housing units and the debt crisis at companies like Vanke, the largest developer in China, raised concerns about the industry’s stability.

Mr. Gong stressed the reliance of real estate companies on debt financing and the potential implications of defaults on the market.

M2 Approaching 300 trillion

The latest financial data showed that China’s M2 money supply reached 299.56 trillion yuan ($41.5 trillion) by the end of February 2024, indicating a substantial increase. This raised concerns about debt risks, especially when credit money issuance surpasses GDP growth rates.

Mr. Gong highlighted the excessive spending and large-scale projects draining funds, leading to historical peaks in currency issuance and monetary shortfall in China. This trend signifies a critical monetary crisis in the country.

Huang Yun and Luo Ya contributed to this report.