China’s is debt ridden and the traditional remedy is to spend on infrastructure, but this fiscal strategy will arguably risk a rapid descent into an internal debt trap limiting China’s power.
China is dealing with an economic slump and is dealing with it by pumping money into the economy, mainly through infrastructure projects. But this could result in Chines businesses and people carrying an unsustainable debt level of debt.
This article makes the following points:
- China’s economy is suffering repeated lockdowns, a real estate downturn, and peaking oil prices hampering growth targets.
- Xi Jinping is spending 2.3 trillion (US Dollars) on infrastructure to boost the economy.
- TFI Global News desk argues that China’s feasible economic investment options are limited because:
- It already has twice as much high-speed rail as the rest of the world combined, and only unviable development remains.
- It has the world’s most extended expressway network, and only unviable development remains.
- Massive real estate stimulus has created ghost cities full of apartments that nobody wants to buy.
- China’s manufacturing sector cannot sustain growth because cheap labour is getting expensive, and its population is ageing and contracting.
- The Chinese economy is already suffering a heavy debt burden of official debt and ‘hidden debt’ contracted by local and provincial governments.
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