Our China Investment Strategy service doubts that the housing slowdown will cause a major slump in overall economic activity.
C apital spending in the Chinese real estate sector has slowed sharply in the past two months, spurring concerns that the Chinese “housing bubble” has finally begun to burst.
At a time of increasing uncertainty globally, a sharp deterioration in the domestic housing market increases the vulnerability of the Chinese economy. However, a new round of public infrastructure investment is gathering momentum and an acceleration in infrastructure spending should offset any slowing investment in the housing sector in the near term. Moreover, current difficulties in the housing sector are largely due to excessively restrictive policies, which will inevitably be reversed in coming months.
Already, monetary easing has allowed banks to offer favorable interest rates for qualified mortgage borrowers and some cities are contemplating measures to provide subsidies for first-time home buyers. Also, some large and financially solid developers are reportedly beginning to bid for new land again.
For these reasons, our China team does not expect the housing slowdown to be the trigger for a major slowdown in China.