A slowdown in China’s economy would have “global consequences”, Yellen says
According to Treasury Secretary Janet Yellen, the Biden administration is keeping a close eye on the situation in China with the world’s most indebted property developer, whose inability to repay billions in loans might have global ramifications.
Evergrande, China’s second-largest real estate developer, owes creditors more than $300 billion.
“The Chinese economy relies heavily on real estate. “It accounts for around 30% of demand,” Yellen said on “Face the Nation.” “Margaret Brennan, moderator of “The Nation,” in an exclusive interview. “And, of course, a slowdown in China would have worldwide consequences. China’s economy is huge, and if it slows down faster than expected, it will undoubtedly have consequences for many countries that trade with China.”
Evergrande has borrowed a lot of debt to fund the development of apartments, office buildings, and shopping malls over the years. In any case, lately, the organization has gone under financial strain and struggled to pay down its debt.
Concerns that the organization’s collapse could slam Chinese banks and rattle the country’s tremendous estate market have roiled worldwide financial markets.
The Federal Reserve cautioned of direct risks to the U.S. in its latest financial stability report. “Financial pressures in China might put a strain on global financial business sectors by lowering risk sentiment, posing hazards to global financial development and affecting the United States, according to the report.
Market analysts say Beijing can prevent a Chinese credit crunch yet needs to avoid seeming to organize a bailout while it attempts to force other organizations to reduce reliance on debt. For the present, the Chinese government has stayed quiet with regard to whether it may intervene to rebuild Evergrande’s debt.
Yellen recognised that companies like Evergrande are a problem for Chinese authorities.
China has an overleveraged real estate sector, which the Chinese government is attempting to regulate, Yellen added.