Austria     Belgium     Brazil     Canada     Denmark     Finland     France     Germany     Hungary     Iceland     Ireland     Italy     Luxembourg     The Netherlands     Norway     Poland     Spain     Sweden     Switzerland     UK     USA     

Roaring Back, Part 2: China’s Real Estate Woes and Economic Strategies

China’s once-thriving economy has been grappling with a series of challenges, contributing to a growing lack of confidence in its future trajectory. At the forefront of these problems lies the real estate crisis, with major developers like Country Garden and Evergrande at the epicenter, shaking the country’s economic stability.

The real estate market downturn has been a persistent issue, exerting a significant influence on the broader economy. A two-year decline in home prices has left families feeling financially insecure, dampening their willingness to spend. Consequently, weak demand for goods and services has pushed the economy towards the brink of deflation, with consumer prices remaining stagnant in September compared to a year earlier, and wholesale prices for producers actually experiencing a decline.

Falling apartment prices have triggered a wave of insolvencies among real estate developers and have severely depressed the construction sector, a key industry for the nation. The statistics bureau reported a 9.1 percent decline in real estate development investments during the first nine months of the current year compared to the same period in the previous year. Conversely, investments in infrastructure and manufacturing capacity witnessed an increase of 6.2 percent each during the same timeframe.

Average prices for existing homes across 100 Chinese cities have plummeted by 16 percent since August 2021, according to the Beike Research Institute in Tianjin. To counteract this slowdown, the government has permitted local governments to issue more bonds for financing infrastructure projects. State-controlled banks have also facilitated loans to manufacturers, encouraging investment in additional factories.

The goal of these measures has been to stimulate job creation, in turn fostering increased consumer spending. Despite high youth unemployment earlier in the year, overall urban unemployment showed signs of improvement in September, decreasing to 5 percent from 5.2 percent in August.

Amidst the economic struggle, China’s top leader, Xi Jinping, displayed signs of potential policy shifts, expressing a desire to promote the healthy development of the private economy. Additionally, the country’s robust manufacturing sector continues to export goods, particularly vehicles, to overseas markets, such as Europe, where China is exporting nearly four containers of goods for every container imported. However, this export surge has sparked concerns and investigations by European officials regarding trade imbalances and subsidies.