China's Property Market Continues to Lack Rebound Momentum in the New Year
Despite a series of government interventions to stimulate growth, China's crucial real estate market remains sluggish, contrasting with signs of stabilization in other economic sectors.
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Despite various efforts by the government to support the real estate market, China’s key real estate sector continues to struggle while other areas of the economy show signs of stability.
New property sales in the first two months of this year totaled 1.06 trillion yuan ($147 billion), as reported by the National Bureau of Statistics (NBS) on Monday. This shows a 29.3% decrease compared to the same period in 2023.
This decline represents a sharper drop from the previous year, where new property sales only decreased by 0.1% during the same period.
Property investment dropped by 9% from January to February, a faster decline compared to the 5.7% decrease seen in the same period last year.
According to Capital Economics analysts, the correction in property construction is just beginning. They anticipate a 50% reduction in property construction in the next few years, which will have a negative impact on economic growth in the medium-term.
Tourists snapping a group selfie in Kunming, capital of China's Yunnan province. Tourism spending was robust in February.
Tourists snapping a group selfie in Kunming, capital of China's Yunnan province. Tourism spending was robust in February.
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Consumer prices in China have increased for the first time in six months. However, it is still premature to conclude that deflation has been completely eliminated. On the bright side, other aspects of the economy such as consumption, industrial production, and infrastructure investment seem to be on the rise. This positive trend can be attributed to a surge in holiday spending, robust exports, and the government's efforts to boost infrastructure development.
Retail sales saw a 5.5% increase in January-February compared to the same period last year, slightly surpassing the anticipated 5.2% growth from analysts polled by Reuters.
Among the sectors, catering services, telecoms, cigarettes and tobacco, as well as sports and entertainment services experienced the highest growth in sales.
It is unclear if the improvement will be sustained. According to Louise Loo, China economist at Oxford Economics, consumers were temporarily uplifted by spending on festivities at the beginning of the year.
Industrial output saw a significant increase of 7% in the first two months of this year compared to the same period last year, surpassing the 5% growth forecast in the Reuters poll.
In line with the recent strong Caixin manufacturing Purchasing Managers Index released by S&P Global, the index for export-oriented manufacturing firms in mainland China increased to 50.9 in February from 50.8 in January. This marks the fourth consecutive month of expansion.
The growth in factory output could be attributed to robust demand for exports. According to separate customs data, China's exports surged by 7.1% in the January-to-February period compared to the same period last year, surpassing market forecasts.
In an aerial view, a container ship sits docked at the Port of Oakland on August 7, 2023, in Oakland, California.
In an aerial view, a container ship sits docked at the Port of Oakland on August 7, 2023, in Oakland, California.
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China's exports have seen a significant boost, mainly due to increased demand from countries like India, Russia, and other emerging markets.
Investment in fixed assets, including factories, roads, and power grids, has risen by 4.2% in the first two months of this year, exceeding what analysts had predicted.
This is mainly driven by state-led investment, the NBS data showed.
Still, the property downturn and weak domestic demand call for more policy support to sustain growth.
Loo mentioned that without significant stimulus for consumption this year, it would be challenging to maintain a strong pace of consumer spending.
She also highlighted the government's efforts to boost consumer spending, such as encouraging the replacement of old durable goods like cars and home appliances with new ones, which she believes will have a significant positive impact.
Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, stated that the economic outlook for the second quarter remains uncertain. He mentioned that although exports have provided some relief for the sluggish domestic economy earlier in the year, a stable recovery will need additional policy support, especially from the fiscal side.
Editor's P/S:
Paragraph 1:
The article presents a mixed picture of China's economy, with the real estate sector facing significant challenges while other sectors show signs of resilience. Despite government efforts to support the property market, new property sales and investment have declined sharply. Analysts predict a further correction in property construction, which could negatively impact economic growth in the medium term.
Paragraph 2:
On the positive side, consumption, industrial production, and infrastructure investment have all seen growth. Retail sales have increased, driven by holiday spending and government stimulus measures. Exports have also surged, providing a boost to the economy. However, the sustainability of these improvements remains uncertain, and economists emphasize the need for continued policy support to sustain growth. The government is encouraging the replacement of old consumer goods to stimulate spending, while fiscal measures may be necessary to support a stable recovery in the coming months.
