China’s urbanization drive may be reaching its conclusion, which could further harm the struggling property sector, as noted by China economist Hao Hong.
“Fixing the property sector may require several years, or even a decade, of work. This is because we have constructed an excessive amount of housing for the Chinese population,” stated the chief economist of Grow Investment.
Hong added, “The rapid progress of the Chinese urbanization process over the past 10 years is coming to a halt.”
The Chinese property market has been plagued by weakening consumer confidence, particularly due to the financial troubles faced by property giants Evergrande and Country Garden.
Not having an overbearing Chinese property sector is actually beneficial for the Chinese economy in the future.
Evergrande, which defaulted in 2021 following a liquidity crisis, recently announced a delay in its debt restructuring meeting. Country Garden is also on the brink of default.
Hong highlighted that two years ago, Chinese properties worth 18 trillion yuan ($2.46 trillion) were sold. Managing 10 trillion yuan this year, or five to six trillion yuan in future sales, would be considered fortunate.
In August, China experienced a further decline of 0.3% month-on-month in new home prices, exacerbating the real estate slump. This figure also marked a 0.1% decrease compared to the previous year.
Shanghai’s city skyline as seen from the observation deck at Shanghai Tower in China.
Qilai Shen | Bloomberg | Getty Images
Over the weekend, a former Chinese official cautioned that 1.4 billion people in China would not be able to fill the unoccupied apartments across the country.
He Keng, a former deputy head of China’s statistics bureau, stated, “There is currently an oversupply of real estate… 1.4 billion people may not be able to live in them.” He made these comments at a conference, according to local media reports.
China’s post-Covid economic recovery has been underwhelming, although August retail sales and industrial production data showed accelerated growth that surpassed expectations.
“Once people adjust their expectations and the economy diversifies its growth sources beyond the property sector, we will experience a stronger and healthier Chinese economy than before,” said Hong.
“Not having an overwhelming Chinese property sector is actually beneficial for the Chinese economy moving forward.”
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