90 Miles From Tyranny : Trumped: Property bubble fears rise in China as it struggles with losing the trade war

Tuesday, November 13, 2018

Trumped: Property bubble fears rise in China as it struggles with losing the trade war

China is facing property bubble trouble just at a time when the economy is starting to cool and the trade war with the United States enters a crucial phase.

A research report from one of the China’s largest state-backed investment banks has warned that 2019 could be a “year of recession” for the real estate sector.

The China International Capital Corporation, or CICC, pointed out in the study that sales, investment and new construction starts would decline significantly.

“In response, the Chinese government should alter policies that were put in place to cool the market,” CICC researchers stressed.

Indeed, years of booming growth appear to be over with property investment slowing to 8.9% in September from 9.2% in August while home sales fell 3.6% from a year earlier.

To put that into perspective, one the country’s biggest developers China Vanke confirmed that “survival” was the ultimate goal for the next three years as a “turning point” had arrived for the industry, Chinese media website Caixin reported.

Concerns are also growing about the number of empty apartments and houses across the world’s second-largest economy.

Data from a nationwide survey, which has yet to be released by the Chengdu’s Southwestern University of Finance and Economics, showed that about 50 million homes were unoccupied, which was about 22% of retail properties.

Nightmare scenario

Many were bought as investments and the nightmare scenario for Beijing is that if the housing bubble pops, the market could be flooded, sending prices spiraling down.

“There is no other single country with such a high vacancy rate,” Professor Gan Li, who is in charge of the study at Chengdu’s Southwestern University, told Bloomberg News. “Should any crack emerge in the property market, the homes to be offloaded will hit China like a flood.”

Yet again, this is just another statistical snapshot illustrating a broader malaise in the Chinese economy, which is showing distinct signs of slowing.

In the third quarter, GDP growth came in at a respectable 6.5% but still fell to levels not seen since the 2009 Great Recession.

Moreover, the pace of expansion in the service sector is decelerating while factory activity has dropped.

Latest data on consumer confidence has also dipped, CEIC, a global market intelligence firm, revealed, with pressure from the trade dispute fueling anxieties in China’s stock markets.

Ending this economic Cold War has now become a priority for Beijing when you factor in punitive tit-for-tat tariffs, including US President Donald Trump’s decision to slap import duties on...Read More HERE

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