"The Chinese economy is quickly falling apart."
"China already collapsed!"
-Youtube
In June 2022, a country that usually tolerates dissent in small doses faced a surprisingly strong revolt. People from all around the country were protesting; some walked to the streets, while the majority took to social media, both of which are often tightly monitored and censored by Chinese officials. Within just a month, the protests had extended to people in 100 cities.
So what really happened in China? The protests were not political, as one might guess. But it was essentially economic in nature. Apartment buyers, real estate investors, and angry homebuyers were all boycotting mortgage payments, as property developers across the Great Wall were on the brink of construction failures. S&P estimated that the boycotted loans could total $145bn, or it could be even higher as other analysts said.
To say that this is a problem would be an understatement. The property industry in China is one of the biggest contributors to the country's economy, accounting for around one-third of total economic output. This comprises housing, leasing, and brokerage services, as well as enterprises producing white goods for apartments and building materials.
Aside from the big industry, this crisis affects a large consumer base as well. Based on a crowd-sourced estimate on Github, people have purchased homes in roughly 320 projects across the nation. And according to banking giant ANZ, more than $220bn in loans could be linked to incomplete projects.
All of these issues can be disseminated into three aspects: the real estate developer, the lending system, and the homebuyer behavior. The essay's central question is not about the spillover impact from China to Indonesia, but the pattern in all three aspects would indicate a concerning trend towards similar issues.
The Real Estate Developer
The crisis first started in September 2021, when Evergrande, the biggest developer in Mainland China, became the world's most indebted property developer. It has been struggling to make payments on its more than $300 billion in liabilities, and even missing a major repayment date on its foreign debt in December 2021.