What does China’s slow real estate crisis mean for the global economy?

China’s real estate industry is collapsing in slow motion.

Major developers such as Evergrande and Country Garden remain stuck in mounting debt problems. So-called “ghost towns” are widespread in the Chinese countryside. And now International Monetary Fund It just lowered its global growth forecast for 2024 and named China’s real estate crisis as the main reason behind it.

““It’s important to recognize that there is a long-term challenge here, which is that we have a very large construction sector in China, and we have a very large real estate sector because the underlying demand for apartments is declining,” said Frederic Neumann, of HSBC. “We have a slowdown in urbanization. We have a deterioration in demographics,” Asia’s chief economist said in an interview with CNBC.

China’s overall economic recovery after the pandemic has been less than stellar. Youth unemployment has reached record levels, GDP forecasts have been lowered, and the ongoing real estate crisis has hurt consumer confidence and foreign investment in the country.

Beijing is now trying to ease pressures on the sector through several policy moves, such as lowering minimum down payments and allowing mortgage rates to adjust. Newman said the spillover effects on the global economy could create headwinds for years to come.

“The contraction of China’s real estate sector in the coming years will have a truly significant impact on heavy industry and commodity markets globally,” he said. “There will be less demand for steel. There will be less use of cement – ​​less glass, for example. This impacts within the heavy industrial areas in China that already produce these raw materials.”

Watch the video above to learn more about where the sector is headed from here.