A weekend topic starting with South China Morning Post. "The catastrophic crash in Country Garden Holdings, once the gold standard in China's property industry, has cost stock and bond investors steep losses. Nearly half of Country Garden's liabilities at the end of last year were presale deposits from homebuyers, according to Barclays. 'This not only means that nearly a million households could be affected by Country Garden's debt issues, but also indicates that Country Garden would need to invest four times the amount Evergrande has done to ensure project completion and prevent pre-sold homes being undelivered,' Nomura analysts including Lu Ting said."

"The confidence hit to homebuyers and investors if Country Garden defaults could be even harder than that delivered by Evergrande, according to S&P Global Ratings, given that the macro environment is very different from three years ago and confidence among homebuyers is very fragile. 'They will think twice when buying,' said Lawrence Lu, senior director and analytical manager of S&P's China properties and conglomerates team. 'Why not wait for a bigger discount? Will I get into trouble if I buy now? Can they deliver homes on time? Why don't I wait for a sale of existing projects.'"

The New York Times. "Once a beneficiary of China’s property boom, Lan Mingqiang is an unwitting casualty of its unravelling. The financial troubles at one real estate company, Country Garden, have left him unable to pay the school fees for his son, who is starting seventh grade. Country Garden owes US$21,000 to his company, which makes fences and billboards on construction sites. Now, with Country Garden days away from a default, this money is more out of reach than ever. 'Nowadays, real estate is hard,' Lan said. He recently gave up on the business and left his family in the southern city of Chongqing to try to make a living selling snacks to tourists in Zhengzhou, a city in the north of China."

"Lan is just one in a long line of people waiting to get paid by Chinese property developers. A move by regulators to deflate a property bubble and China’s slowing economy have accelerated a crisis that is spreading to all corners of life. As a group, suppliers are waiting on at least US$390 billion in payments, according to the research firm Gavekal Research. And that’s a conservative estimate; the number is probably larger."

"At first, some developers were able to keep going, even as they failed to make good on their obligations. They found other ways to compensate suppliers. China Evergrande, the behemoth that defaulted on hundreds of billions of dollars of debt in 2021, repaid some of its suppliers with unfinished apartments instead of cash, on the theory the suppliers could sell them to reclaim the money they were owed. These days, even bartering is no longer an option. 'Such apartments have run out; we can’t get them,' said Han Tao, a manager at a landscaping company that is owed US$1.4 million from property developers. For Han, apartments wouldn’t have been that useful anyway; no one is buying them right now."

"Liao Hongmei spent years in a legal battle to try to get US$690,000 from China Evergrande. She even won. But Evergrande still hasn’t paid her and, in her view, businesses the size of hers will probably never get the money they are owed. Liao said that she hoped that once Evergrande finishes the apartments it owes homebuyers, there would still be something left for people like herself. 'A little money,' Liao said, is her only request. 'But it doesn’t seem like that is going to happen.'"

From Newsweek. "The Chinese property sector is in such a state, currently, that cities across the country are now waiving credit reports ahead of mortgage lending, according to state media reports. Max J. Zenglein, chief economist at the Mercator Institute for China Studies (MERICS), said: 'The Chinese economy is currently facing a broad, cyclical, and structural downturn. The leadership underestimated how the combination of diminishing economic prospects and geopolitical risks weighed down consumer sentiment. In contrast to past downturns there is little appetite for shoring up economic growth by rolling out a massive stimulus. The government is trying to provide a floor for the real estate sector as it must cushion the financial impact on highly leveraged real estate developers and local governments. The move should not be seen as a return to old habits. The real estate sector is currently painfully but purposely being downsized.'"

From The Print. "When university students in China donned their graduation robes this summer, many did not pose for the usual photos depicting jubilation and victory. Instead, they flooded social media platforms with snaps hinting at dejection and despair. Some posed as corpses, others appeared to bin their graduation theses. These viral photos were the result of one of China’s most pressing economic challenges: the alarmingly high youth unemployment rate, which soared to 21.4 per cent in June, when the 11.6 million newly minted college graduates were poised to enter the job market. The Chinese government responded to the students’ despair by suspending the public release of unemployment data from July. Similarly, vital economic reports, such as for exports and cement production, have also either disappeared or become 'corrupted,' reported Insider."

"'The government in Beijing has always come out with a stimulus package in the event of an economic crisis. But this time there is no bazooka of sorts, further dampening business sentiment,' said Sriparna Pathak, an associate professor of Chinese studies at O.P. Jindal Global University."

From Vox. "Vox called up Stephen Morgan, a professor emeritus of Chinese Economic History at the University of Nottingham, who wrote a book on the Chinese economy. 'Investment is largely going into, as I said, infrastructure, real estate. At present, probably about 40 percent of that is unproductive. One way to think of that is “bridges to nowhere.” The thing about investment is it doesn’t matter whether the bridge goes to nowhere or it actually serves a purpose. It produces GDP growth.'"

"'When I was living in China, between 2013 and 2020, in Ningbo, I used to take the bus to work every day. The bus stops between my apartment and the university were rebuilt three times — three times in about six years. The first time they needed rebuilding. The second time, there were some nice improvements, like electronic boards that told you when the bus was going to come. The third time they rebuilt all the bus stops with so much steel you would need a tank to knock them down. Other than that, there was very little welfare benefit. That’s wasted investment.'"

"'This increase in investment means that local government has to get the money from somewhere. Basically, it gets that through loans and bonds and so on. Debt levels have gone up. They don’t really matter, unless they have to be settled. And that’s the problem. They haven’t been settled. They just keep on being pushed out. The Chinese investment-led model ran out of steam quite a few years ago but it’s been kept going because there’s been a reluctance to try to shift from investment to consumption. The reason for that is what it will mean. You’ve got to transfer assets and cash from the corporate sector and the government sector to the household. That means that corporations, like big property developments, local governments, and so on, are not going to have the resources they previously had. There’s no evidence that Xi and the party are listening and engaging in imaginative policies to shift resources from corporations and the government sector to the household sector. '"

From CBC News. "'We could possibly be at a crossroads where things could turn in a direction we haven't seen for a while,' said Steve Tsang, director of the China Institute at the University of London's School of Oriental and African Studies. Most China watchers, including those I spoke to, stop short of expecting anything like a new Chinese revolution. But as Gordon Houlden, director emeritus at the University of Alberta's China Institute, told me, accidents can happen. After 30 years of spectacular market-led economic growth that raised living standards, based partly on a glut of public spending, the country is suffering from financial indigestion."

"And while the whole world may have a similar malady, as outlined by commentator Martin Wolf in his recent book on the important links between politics and business, what he calls 'China's form of despotic capitalism' may be dangerously brittle. 'The move towards an Orwellian 'Big Brother' society, in which surveillance technology is employed by the party-state down to the very last individual, may work. But it is terrifying, threatening to crush the human desire for autonomy and self-expression,' Wolf wrote in The Crisis in Democratic Capitalism, published earlier this year."

From Defence News. "In the wake of China’s plummeting economic indicators, economists have been debating the 'economic collapse' of China. Paul Krugman, in an opinion column in the New York Times, posits that China’s economic stumble is systemic and holds China’s resistance to reforms responsible for it. However, he argues that even if the 'Chinese leadership seems to be growing more autocratic and more erratic with each passing year,' he believes that they will push through those reforms and 'put more income in the hands of families, so that rising consumption can take the place of unsustainable investment.'"

"This argument has been trashed by John Ross, a senior fellow at Chongyang Institute for Financial Studies, Renmin University of China. Ian Johnson, in a recent article in Foreign Affairs, prefers to call it Xi’s Age of Stagnation or 'new national stasis,' or involution (内卷). Unlike Krugman, he sees the root cause for China’s economic troubles in 'political ossification and ideological hardening.'"

"This perspective matches that of Liu Mengxiong, former member of China’s CPPCC, who in an attack on Chinese leadership said that the reason for China’s recent 'downward economic spiral' lies in economy, “but the root cause is the politics.” He argued that the three engines of investment, consumption and exports of China’s growth story have run out of steam (动力不足) and even could come to a grinding halt (死火). Citing the figures of the National Bureau of Statistics (NBS) for July 2023, he said these showed deflationary trends. According to Liu, in the second quarter, the amount of foreign investment in China touched only US$4.9 billion, down 87% compared to the previous year. Now the 'new three engines of growth' according to him are the NBS, the Central Publicity Department of the CPC and the Xinhua News Agency. Adam Posen, in an article in the Foreign Affairs also argued that it was the 'end of China’s economic miracle.'"

New Indian Express. "The Great Wall of China—its economy—is in tatters. Analysts of all hues and colours are busy writing epitaphs of the Chinese economy, which was hitherto considered unstoppable. By now, all of us would have heard about China’s ‘ghost cities’ and ‘ghost factories’. According to many reports and estimates, around 65 million homes in different Chinese cities remain unoccupied. The vacancy rate in China is 12 per cent, second only to Japan (with a 13 per cent vacancy rate). Large parts of many Chinese cities with connected roads, public spaces, and skyscrapers remain uninhabited. A Wall Street Journal report cited an example of the country’s excessive infrastructure overspending. The report talks about one of China’s poorest provinces Guizhou, which boasts 1,700 bridges, and 11 airports. The province has a total debt of USD 388 billion, and in April it asked for more finances from the Central government."

"More than its decreasing population, its ageing population is a bigger concern for the country. Those in the working age population (15-64 years) account for 69 per cent of the country’s population, which according to Moody’s is likely to drop 6 percentage points by 2040."

"China followed the one-child policy from 1980 till 2016, and while it helped the country keep its population in check, it also created a demographic crisis. It junked the policy in 2016 but it was probably too late. The country’s working-age population, which had peaked in 2011 at 900 million, has been shrinking ever since. By 2050, China’s working-age population might fall to 700 million. According to Brookings, these 700 million working-age population might be supporting 500 million Chinese aged above 60 years, who are currently estimated at 200 million."

The Globe and Mail. "On a recent afternoon, 24-year-old Sharon Guan joined a sea of people queuing outside Yonghe Temple, a Tibetan Buddhist monastery in central Beijing, just north of the Forbidden City. Dating to the Qing dynasty, the temple has always been a popular tourist site for those visiting the Chinese capital. But Ms. Guan had not flown an hour from her home in Shanxi province to admire the ornate architecture or golden statues – she had come to pray for a job."

"'I don’t believe in God, but the current environment forces me to,' she told The Globe and Mail. 'I read a lot of people’s posts online saying that after they worshipped at the temple, they not only found a job but a high-paying one.'"

"Ms. Guan, who graduated from a master’s program this year, is not alone in struggling to find work. In July, the government revealed the unemployment rate among 16- to 24-year-olds had hit a record 21.3 per cent the previous month; in August, it stopped publishing joblessness data, citing a 'constantly developing and changing' economy. Even if the figures were released, they would not encapsulate the true size of the problem: Government data only cover those actively seeking work and do not take into account young people in rural areas. In an article that was later censored, Peking University economics professor Zhang Dandan estimated in July that some 16 million young people had dropped out of the rat race entirely; were they included in the government’s figures, the actual unemployment rate among the young would be closer to 50 per cent."

"'I feel like my education is useless,' Ms. Guan said. After reaching out to '200 to 300 employers' through an online hiring platform, she said, she only heard back from a handful, none of which invited her for an interview."

"Her generation is the best-educated in Chinese history. The number of young people enrolled in postsecondary education hit 60 per cent last year, double the rate of a decade ago. It is also a generation that has only known a growing – often booming – economy, in which going to a top university and getting a good degree was the ticket to a high-paying job and secure life."

"Those expectations ran into a wall in 2020. The pandemic, combined with government crackdowns on the tech and tutoring sectors, which employed large numbers of graduates, wiped out millions of white-collar jobs. Many young people were encouraged to delay entering the job market and complete advanced degrees instead, but that has only added to the glut of highly educated job seekers, with millions more due to graduate next month."

"Chinese officials, including President Xi Jinping, have offered little sympathy, entreating young people to 'eat bitter' as their parents did, while state media have profiled university graduates who have taken on menial jobs such as street sweeping or moved to the countryside. On social media, the Communist Youth League said graduates need to 'roll up their trousers and go down to the fields.'"

"Zhang Wenwen, a 23-year-old recent graduate from Xuzhou, in Jiangsu province, moved to Beijing at the start of August to look for work. Most jobs offered salaries of about 3,000 yuan ($560) a month, she said, 'which is not enough to make ends meet.' The average salary in Beijing is about 16,000 yuan, according to state media. Ms. Zhang – who lives with her aunt and doesn’t pay rent – said she found some work on Xianyu, a spinoff of Alibaba’s e-commerce platform Taobao, making a few hundred yuan a day to run errands or help people make decisions, such as where to go on holiday."

"Even low-level gig work is becoming increasingly competitive, however. Ms. Zhang said she’d heard of others making good money walking dogs or feeding pets while the owners were at work. But she hasn’t bothered offering such services on her own profile, 'as the market is saturated now.' 'I didn’t think it would be this hard to find a job while I was in college,' she said. 'We were just very unlucky to graduate at this time.'"