Why Chinese real estate still worries
What will happen to the real estate sector in China? The comment by Christoph Siepmann, senior economist of Generali Investments
The October data on activity in China showed a moderate improvement, except for the real estate sector. Industrial production rebounded, not least helped by still strong exports, while retail sales were less affected by the recent lockdowns. The overall growth of social financing has also ceased to decline. However, the real estate sector remains a concern, with investment and real estate sales declining further. Home price inflation has softened to its lowest level since early 2016. While overall real estate investment is still expected to advance 5% this year, the sector could become a major drag on growth next year.
However, as China's deleveraging policy is at the heart of the industry's current downturn, the policy would also be able to prevent a full-blown recession. The first steps to facilitate access to mortgages have been taken. We continue to see a weak but positive real estate investment growth rate in 2021. Looking more broadly towards the future, the real estate sector, energy controls, new outbreaks of Covid-19 and soaring PPI inflation ( producer price index) continue to represent headwinds for the economy. Therefore, we expect some easing, with monetary policy cutting the RRR (reserve requirement ratio) by 50 basis points. We expect GDP growth to drop below 5% next year, after 7.8% in 2021.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/perche-il-settore-immobiliare-cinese-preoccupa-ancora/ on Sat, 11 Dec 2021 07:36:13 +0000.