Will China's Economy Affect Us?

1. Real estate. There's been a developing real estate crisis in China for about two years. First, a real estate juggernaut called Evergrande defaulted on debts that funded a massive number of housing units that Chinese workers had already paid for and were expecting to live in. That kicked off the crisis, and more recently another developer and a trust company have both missed interest payments. People aren't getting the homes they bought, jobs are being lost, and it isn't looking like there's a quick or easy solution to the problem.

2. Supply issues. Everyone was a little surprised to see how quickly China recovered in the wake of the pandemic, and now it's looking like they roared out of the gate too quickly. Trade issues have caught up with Chinese industry and the yen recently dropped to its lowest level in nearly two decades. As other countries have gotten back on track, China has seen a big drop in exports. When an economy cools off too quickly, it becomes really hard to figure out international trade deals and how, when, and where to move existing products. That stuff is complicated enough and becomes extra confusing when things take an unexpected turn for the worse.

3. International effect. China's economy is enormous, so it's always worth monitoring what's going on over there. If giant Chinese firms can't pay debts, that means companies here and elsewhere aren't getting the money they're owed. Nevertheless, our economy isn't expressly dependent on theirs. The real estate problem over there might be felt lightly outside of China, but not to a major extent. Depending on how bad China's exporting woes get, it might make room for other countries to create new commercial relationships and experience a little bit of growth.