- Fixing China’s property sector is an effort that could take up to a decade, said Hao Hong, chief economist at Grow Investments.
- China’s property market has been hit by faltering consumer confidence in real estate companies as property giants Evergrande and Country Garden run into debt crisis.
According to Chinese economist Hao Hong, China’s urbanization drive may be coming to an end – and that could cause further damage to an already ailing property sector.
“Fixing the property sector may be a task ahead of us for many years or even a decade. This is because we have built a lot of housing for the Chinese people,” said Grow Investment’s chief economist.
“In addition, China’s urbanization process, which has been progressing very rapidly over the past 10 years, is stalling,” Hong said.
China’s property market has been thrown into crisis by faltering consumer confidence, with property giants Evergrande and Country Garden facing debt problems.
The Chinese property sector not being dominant is actually good for the Chinese economy going forward.
hao hong
increase investment
Evergrande, which faces default in 2021 after a liquidity crisis, announced on Friday it would delay a debt restructuring meeting scheduled for Monday. Country Garden is also floundering on default.
Hong said Chinese assets worth 18 trillion yuan ($2.46 trillion) were sold two years ago. He said it would be considered “fortunate” to manage sales of 10 trillion yuan this year or five to six trillion yuan going forward.
New home prices in China fell 0.3% month-on-month in August, extending the real estate slowdown. This figure registered a decline of 0.1% compared to a year ago.
Shanghai city skyline seen from the observation deck of Shanghai Tower in China.
Qilai Shen | Bloomberg | getty images
Just over the weekend, a former Chinese official warned that China’s population of 1.4 billion will not be able to fill the vacant apartments across the country.
“Real estate is now oversupplied… 1.4 billion people may not be able to live in them,” said He Keng, former deputy head of China’s Bureau of Statistics. According to local media reports, he was speaking at a conference.
China’s post-Covid economic recovery story has been disappointing, although retail sales and industrial production data picked up pace in August with better-than-expected growth.
“Once people reset their expectations, and the economy too [restructures] “Reinvigorate growth from other industries instead of relying mostly on the property sector for growth, then we will actually have a better, more healthy Chinese economy than before,” Hong said.
“The Chinese property sector not being dominant is actually good for the Chinese economy going forward.”