Will the aftershocks of the real estate recession in China reach Iran? – Tejarat News

According to Tejarat News, the information published by news agencies around the world from China shows that the economy of this country, in the position of the second economy in the world, is not in ideal conditions like in the past.

Economic activities and related matters in this country almost stopped at the beginning of 2023, at the same time as the cancellation of the Corona quarantines. The real estate sector is practically paralyzed due to the recession and exports are not doing well either. On the other hand, the youth unemployment index of this country has grown to such an extent that the government censors the publication of statistics in this regard. An incident that has also happened in Iran’s housing market.

The reason for the stagnation in the Chinese housing market

The clue of the current crisis of China’s housing market goes back to the way of privatization and its expansion in this country. In order to meet market demand and create mobility in the housing market, the government considered construction facilities for mass construction companies, which were welcomed by builders and led to a significant increase in construction in China.

In this way, market demand was largely met, but the cycle of loan payments to builders and increased housing construction continued to such an extent that supply outstripped demand and marked the stagnation of China’s real estate sector. As a result of this stagnation, capital entering the housing market was locked and lost its liquidity.

This process eventually continued until the builders had difficulty repaying the loans, and as a result, they took new loans to pay for the previous facilities. This was a warning sign of a severe recession in the Chinese real estate market.

China’s economy went through a different process compared to other countries in the crisis caused by Corona. During the period when other economies were in recession, China’s production chart was on an upward path.

At the same time as the end of the Corona epidemic, China’s economic troubles also showed its face to the society. The oversupply in the housing market showed its signs, and as a result, the government prevented the payment of loans to companies as much as possible in order to control the spread of the debt problem of real estate developers to banks.

The builders who were faced with these restrictions stopped construction and the demand from the buyers fell due to the saturation of the supply, and finally the shadow of the recession cast a shadow on the Chinese housing market day by day, but this was not the end of the crisis.

The spread of the housing recession also caused builders’ debt to skyrocket due to bond issuance, companies unable to repay debts, and ultimately unable to complete their half-finished properties; An issue that put the recession in China one step ahead of the recession in other countries. Now this has spread to the extent that people no longer trust the government to invest and are not willing to invest their money in the financial and investment markets, including housing.

The failure of large Chinese companies

In the meantime, there are other news about the bankruptcy of large and international companies in the field of housing construction, which can put the current crisis in a worse situation and result in the unemployment of a large number of their employees and workers.

Evergrande Group, a Chinese construction giant operating in America, officially announced its bankruptcy last week. Also, Country Garden, one of the other big companies in the field of housing, also reports the possibility of a loss of 7.6 billion dollars.

About two years ago, when rumors of Country Garden’s bankruptcy swirled, financial markets related to the construction industry reacted negatively, but a promise by Chinese government officials to help pay off the group’s debts quelled the whispers, a move that could not last forever. and finally, last week, this group suffered the fate of Evergrande Group and declared bankruptcy.

At an unfinished Country Garden housing complex on the outskirts of China’s northern metropolis of Tianjin, construction has slowed rapidly, and a few unemployed workers roam the nearly empty grounds, Reuters wrote.

“They haven’t paid us since Chinese New Year (in January),” said a 50-year-old worker who stopped working at the Yunhe Shangyuan site last week. We are all worried.

China’s financial woes have added to a debt crisis in China’s real estate sector, a market that accounts for nearly a quarter of the world’s second-largest economy and is already losing steam amid a housing slump and weak consumer spending.

The impact of China’s economic crisis on Iran

A century ago, Marshall McLuhan used a new term that had not been officially mentioned before, nor was it widely seen. With the global change in international relations and the new arrangement of countries, he mentioned a phenomenon called the global village.

In the modern global village, borders between countries were breaking down, and every impulse in every corner of the world could have an impact, however small, on other people who live in another corner of the world.

This issue is more noticeable now and in the next century than at any other time. Extensive commercial, cultural and political relations have caused the economy and destiny of each country to be tied to others more than before, in the meantime, some can be more influential in the village than the rest of the countries in accordance with their military, political and economic status; China is one of these global pillars.

In recent years, this Asian country has been able to occupy the position of the second world economy with its extensive production and strong commercial relations, and naturally, its every impulse can have various effects in different parts of the world; Countries like Iran, which are more dependent on this country in terms of trade, are also ultimately more affected; One of these countries is Iran, after the tightening of international sanctions, China is now considered one of its main trading partners.

Steel is one of the main metals used in construction, and a downturn in construction can greatly reduce the use of this base metal. In particular, the construction industry and the housing market cover almost a quarter of China’s wide economy, which is effective on both production and job creation.

On the other side of this story, China is considered one of the main steel buyers in the world, and the decrease in steel purchases from this country due to the construction stagnation will reduce the global price of this metal. As a result, the price of Iranian steel will also fall in this cycle.

Now we have to wait and see if China’s crisis continues and its leaders are unable to think of a solution for this crisis, where will the fate of the country’s business partners end up.

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