%
Monthly year-overyear price increase for new residential buildings in China ’ s 70 largest cities ( in percent ).
Source : National bureau of statistics of China via Tradingeconomics . com and Statista
PHOTO : CHINA PHOTOS / GETTY IMAGES thus exposing themselves to the housing crisis . As of mid- 2024 , the number of banks that had failed was four times the figure in all of 2023 , according to industry insiders cited by Chinese financial news agency Yicai Global .
In some cases in the past , shocks originating in China had even larger spillover effects on commodity markets than those of shocks originating in the United States
WHAT NEXT ?
The possibility of direct or indirect effects on the global economy from the Chinese property and banking crises cannot be ignored .
“ The potential impact of a banking crisis in China could be exponentially greater than even the US subprime mortgage crisis of 2007-08 , given the size and interconnectedness of Chinese banks with the global financial system ,” warned Arturo Bris , professor of finance and Director of the IMD World Competitiveness , in a February 2024 article .
Since the four biggest banks in the world by total assets are all Chinese — led by the Industrial and Commercial Bank of China with assets totaling $ 5.4 trillion ,— the global financial system could hardly remain immune to a major issue in the Chinese banking system , the expert explained .
Moreover , global supply chains could be disrupted , since many multinational companies outsource production to Chinese manufacturers . “ This could impact industries ranging from technology to automotive to consumer goods , all of which rely on China as ‘ the world ’ s factory ,’” believes Bris .
The potential global repercussions might not stop here . Should the country ’ s economy decelerate , exporters to China would certainly be hit , Euromonitor International underscored in a 2023 note . The country is among the largest consumers of machinery , hi-tech goods , luxury goods , as well as commodities , which China imports massively from Latin America and Australia .
In some cases in the past , shocks originating in China had even larger spillover effects on commodity markets than those of shocks originating in the United States , the European Central Bank observed in 2022 . “ China consumes a similar amount of energy goods to the United States and yet a significantly higher share of global non-energy commodities , such as metals ,” noted the ECB analysts .
GROWTH PERSISTS
So far , however , these risks have remained more theoretical than practical , as China ’ s property crisis and banking instability have not brought the economy to collapse . In May 2024 , following a " strong " first quarter , the IMF even upgraded its GDP growth forecast for 2024 by 0.4 percentage points — to 5 % in 2024 and 4.5 % in 2025 .
The economy ' s resilience in the face of the crisis has been strongly bolstered by government support . In May 2024 , the authorities unveiled a historic $ 138 billion package in funding to stabilize the property sector , coupled with an easing of mortgage rules and even some local governments buying over-supplied apartments .
In the banking sector , stability is maintained through substantial state ownership , with the government holding majority stakes in the five largest commercial banks . This represents more than half of the country ’ s banking system , notes Bris , who nonetheless points out a “ systemic risk ” tied to this significant reliance on state support .
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