For years, economists and political scientists studied the relationship between government institutions and economic growth – mainly the association between democratic institutions and economic development within a state. The general consensus was that although democracy does not directly lead to economic development, higher human capital accumulation, lower inflation, lower political instability, and higher economic freedom usually were prerequisites for development. Furthermore, economic sources of growth, like education levels and lifespan, through improvement of academic institutions as well as healthcare were all present in democracies. Read for more on how in recent years, China has challenged these conventional political norms greatly.
At the time of writing, whispers grow that Evergrande, the Chinese real-estate developer, will default on $82.5 million in interest payments. Al-Jazeera notes how the failure to make the payments on a public bond would “trigger cross-defaults on all the company’s about $19 billion of bonds on the international capital markets” earning Evergrande a place in the history books as China’s largest ever defaulter to date, obviously sending ripple effects across the economy. This article unravels why the Chinese real-estate market poses a stern challenge to local, national and monetary officials.