Recently, China’s financial system has continuously suffered from difficulties. The banking system came to a standstill. In addition, tax revenue dropped significantly, and the financial deficit skyrocketed. All are warning signs of China’s economic turmoil growing louder. In a troubled financial situation, Beijing authorities even controlled the price of mooncakes.

On August 10th, China’s National Development and Reform Commission released a notice on the management of moon cakes. They said that moon cakes are costly and need to promote the healthy development of the industry.

Accordingly, moon cake prices are controlled at under $74. The mooncake gift boxes launched by five-star hotels and well-known pastry companies across the country have appeared neatly and uniformly.

Under the wave of refusal to pay off unfinished home loans, housing businesses continuously collapsed, putting the Chinese banking industry in a difficult position. Typical is the collapse of Minsheng Bank.

On August 11th, hundreds of people gathered in front of the Minsheng local Bank in Shenzhen, shouting, ‘Minsheng Bank pay back the money!’ Compared with the minor issue of high-priced moon cakes, the protesters in Shenzhen threatened the overall stability of the financial market.

The mass protests in Shenzhen on August 11th highlighted bank failures from small rural banks to large private commercial banks across the country.

China Minsheng Commercial Bank is a financial giant. However, in recent years, Minsheng Bank has collapsed at an alarming rate. According to Citibank’s report, Minsheng Bank’s loan amount to high-risk real estate companies was as high as $20 billion, accounting for 27% of the tier 1 capital. The loan amount mainly focuses on Evergrande and Kaisa and a series of default companies. It is the second largest commercial bank in China that is most likely to be dragged down by the real estate storm.

The predicament of Minsheng Bank is by no means an isolated case. Many Chinese banks are in the same situation. As of August 12th, 88% of China’s A-share listed banks’ stock prices fell below their net worth.

Under the problematic pressure of the financial system, China almost fell into a vicious circle.

The Beijing regime has used all kinds of policy measures to avoid the wave of bank failures. For example, the local authority proposed four models to save housing enterprises in Zhengzhou, Henan Province. The four programs have different levels and are all handled by local authorities.

However, in the first half of 2022, the total budgetary revenue was only $1.9 trillion, down 14.8% from the same period of the previous year. As a result, the tax revenue from Beijing to the local authority has been dramatically reduced. 

Tax revenue fell sharply, and spending increased significantly, leading to a fiscal deficit for local authorities amounting to $821 billion in the first half of this year, nearly doubling yearly.

NetEase, a Chinese internet technology company, pointed out that it is necessary to be vigilant in the period when the local finances cannot meet their expenditures and try all legal and illegal means to ensure income and maintain expenditure.

China is caught in a vicious circle with falling house prices, consumption crunch, the central authority desperately borrowing, cutting interest rates, forcing banks to lend, and expanding public construction, but failing to stimulate bank loans.

An expert said that, before the 20th National Congress of the Communist Party of China takes place, the Beijing regime will use all its might to cover up the financial turmoil. However, the reality is difficult to control.

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