China’s Economy Is Showing 5 Signs of Major Monetary Shortfalls: Experts

An employee counts notes at a bank in Nantong, in eastern Jiangsu Province, China, on June 13, 2023. STR/AFP via Getty Images

As China’s economy continues to slump, experts have pointed out five major signs indicating that the communist regime is facing the worst monetary shortfall.

“2024 may be the year that marks China entering the era of the worst financial shortfall,” said Gong Shengli, a researcher at China Financial Think Tank.

Mr. Gong told The Epoch Times, “In the year of 2024, there are several situations of monetary shortfalls that should be grasped. The first one is debt, both central and local governments’ debts.”

After the Chinese Communist Party (CCP) suddenly abandoned its draconian “zero-COVID” policies and restrictive control measures that put China’s economy under lockdown for 3 years at the end of 2022, the country hasn’t seen the expected rebound in the economy. Instead, serious structural problems have accelerated the economic downturn.

The Chinese communist regime’s debt and the real estate industry’s debt have come together to plunge China into a debt crisis of unprecedented scale, Mr. Gong said.

Goldman Sachs estimated in April 2023 that the CCP’s government debt had increased to 156 trillion yuan ($21.56 trillion) in 2022, including the regime’s borrowings, local government financing platforms, and national policy banks.

Debt Nearly Three Times GDP

China’s debt accounted for 287.8% of China’s GDP in 2023, a record high. It’s an increase of 13.5 percentage points from 2022.

Mr. Gong said, “There are also black holes in capital, finance, banking, and real estate that are hidden.”

Henry Wu, a macroeconomist in Taiwan, told The Epoch Times that the debt problem can only be solved by finding sources of funds, but now Wall Street has already started withdrawing from China. “The CCP may not be able to come up with the money anymore. Now, the central government’s fiscal crisis is so serious with [a] huge deficit. Several crises broke out at the same time and had to be solved almost at the same time.”

12 Provinces Halt Large-scale Infrastructure Projects

Mr. Gong noted, “About one-third of China’s provinces, municipalities, and autonomous regions have halted major projects.”

At the end of 2023, the General Office of the CCP’s State Council issued a document requiring that before 2024, except for water supply, power supply, heating and other projects that support basic needs of people’s livelihood, no new large-scale infrastructure construction at the provincial, ministerial or municipal level should be started.

Projects that have been halted include highways, airport reconstruction/expansion, and urban railways. The authorities required the 12 provinces and cities, such as Liaoning, Jilin, Guizhou, Yunnan, Tianjin, Chongqing and others, to reduce their “debt risks to low to medium levels.”

Issuing 50-year National Bonds

On March 24, the CCP’s Ministry of Finance announced the issuing of 23 billion yuan ($3.2 billion) 50-year government bonds with a coupon rate of 3.27 percent.

Paramilitary policemen patrol in front of the People's Bank of China in Beijing, on July 8, 2015. GREG BAKER/AFP via Getty Images

Mr. Gong pointed out another sign of the CCP’s serious monetary shortfall. “China’s 50-year ultra-long-term national bond is about to be launched. This time it is less than 30 billion yuan ($4.15 billion), but this is also very scary. For example, for a 30-year-old person now, he can only cash it when he is 80 years old. This is the world’s first ultra-long-term 50-year national bond.”

Sun Kuo-hsiang, a professor at the Department of International Affairs and Entrepreneurship at Nanhua University in Taiwan, said that if China’s economy continues to decline, “this (issuing ultra-long-term special national bond) will definitely be a policy of creating debt for future generations.”

Huge Financial Shortfall in the Real Estate Industry

The debts of China’s large and small real estate companies far exceed the scale of China’s GDP. From January 2021 to August 24, 2023, more than 30 large real estate companies had defaulted. In addition, there are a total of about 20 million unfinished housing units across China, and it may take more than $440 billion to complete these constructions.

This aerial photograph shows a residential complex built by Chinese real estate developer Vanke in Zhengzhou, China, on Aug. 30, 2023. AFP via Getty Images

Vanke, the largest real estate developer in China, is in a serious debt crisis.

Mr. Gong said, “It is certain that Vanke’s debt is extraordinary. In this period it’s about 7 to 8 billion U.S. dollars in debt. This adds up to about $50 billion [in] debt that Vanke needs to pay. If Vanke can’t pay, that may be devastating to China’s real estate industry, and the property market may continue [to] go down.”

“[China’s] Real estate companies all run on debt. Real estate has long-term debt, which means using tomorrow’s money to pay for today. This vicious cycle may not have reached its worst yet.”

M2 Approaching 300 trillion

The latest financial data shows that as of the end of February, the scale of China’s M2 reached 299.56 trillion yuan ($41.5 trillion), a year-on-year increase of 8.7 percent.

M2 is a measure of the money supply. The more credit money is issued, the greater the scale of broad debt. When the growth rate of credit currency issuance continues to be higher than the GDP growth rate, debt risks gradually increase.

Currently, China’s M2 is 2.3 times its GDP, while the United States’ M2 is only 0.76 times its GDP.

The growth rate of China’s M2 has accelerated significantly. It was only 13 trillion yuan ($1.8 trillion) at the end of 2000, reaching 100 trillion yuan ($13.8 trillion) in March 2013. It exceeded 200 trillion yuan ($27.6 trillion) in January 2020. It only took four years to reach nearly 300 trillion yuan ($41.5 trillion) in February 2024.

Mr. Gong pointed out, “China has spent too much and the scale is too large. Many of their projects are constantly sucking money in. Therefore, currently, China’s monetary shortfall is at its peak in history. Currency issuance has reached a historical peak as well.”

Huang Yun and Luo Ya contributed to this report.