Property crunch will be followed by lasting decline

The root of Evergrande’s troubles – and those of other highly-leveraged developers – is that residential property demand in China is entering an era of sustained decline. Relaxation of regulatory controls on the sector wouldn’t change this fundamental constraint. Construction, a key engine of China’s growth and commodity demand, will slow substantially over the next few years, whether or not the economy escapes the current crunch unscathed.
Mark Williams Chief Asia Economist
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China Economic Outlook

Cyclical trough, tepid rebound

China will be buffeted in the first half of 2022 by COVID outbreaks and a further slowdown in property construction. Policy support should improve the picture later in the year, but mounting structural headwinds will limit the extent of any rebound. Drop-In (08:00 GMT/16:00 HKT, 27th Jan): China Outlook – Cyclical trough, tepid rebound. Join Mark Williams and Julian Evans-Pritchard for a discussion about China’s economic and policy outlook this year. Register here.

26 January 2022

China Activity Monitor

Starting 2022 on the back foot

Our China Activity Proxy (CAP) suggests that China’s economy was still struggling to regain momentum at the end of last year amid troubles in the property sector and recurrent COVID outbreaks which continue to depress service sector activity. We think these headwinds will continue to hold back activity during the first half of this year.

24 January 2022

China Economics Weekly

Some relief for property developers

This week’s cut to policy rates is one of a succession of recent moves designed to stabilize residential property sales. Developers have also been given a little more breathing room in terms of their access to financing. These steps may not feed into a recovery in project starts, given the poor structural outlook for property demand. But they improve the immediate outlook for many developers. Meanwhile, Tianjin’s Omicron outbreak appears to be under control and COVID cases nationally have dropped to a two-month low. That appears to be encouraging slightly more people to make the trip home for Lunar New Year than a year ago. We’ll be discussing our expectations for policy, zero-COVID and the economy on Thursday (08:00 GMT/16:00 HKT) in an online briefing timed to coincide with publication of our next Outlook report. Please register here to join us and let us know in advance of any questions you’d like us to address.  

21 January 2022

More from Mark Williams

China Economics Update

Evergrande circling the plughole

Evergrande’s collapse would be the biggest test that China’s financial system has faced in years. Policymakers’ main priority would be the households that have handed over deposits for properties that haven’t yet been finished. The company’s other creditors would suffer. Markets don’t seem concerned about the potential for financial contagion at the moment. That would change in the event of large-scale default, though the PBOC would step in with liquidity support if fears intensified.

9 September 2021

China Economics Weekly

Regulatory crackdown or ideological campaign?

What looked like a tech crackdown, broadened to a crackdown on large private firms, then to a wider regulatory push. This week it started to resemble a society-wide ideological campaign aimed at fortifying the nation’s people and economy. K-Pop fandoms are out. Xi Jinping Thought is in. Meanwhile, there’s growing talk that property tax plans are being revived.

3 September 2021

China Economics Weekly

Delta wave may have peaked but it won’t be the last

Aggressive containment measures, mass testing and quarantine appear already to be bringing China’s Delta outbreak under control. The economic cost should be fleeting – but it will be felt beyond China’s shores due to the closure of another major port terminal. And it won’t be the last bout of disruption. Meanwhile, the People’s Bank is likely to deliver a policy signal early next week in the form of an MLF operation.

13 August 2021
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