Front-loaded property boom makes outlook in 2017 more stressful
Residential sales to slow down from October, but China must maintain the right balance between supporting growth and restraining prices
Chinese policymakers are focused on maintaining economic stability ahead of a crucial Communist Party meeting next year, but economists are warning about too many support policies being front-loaded into 2016, and predicted more pressure in 2017, especially as the all-important property market weakens.
Andrew Batson, China research director at Gavekal Dragonomics, and also a senior non-resident fellow at the Paulson Institute, said three factors still formed the pillars of Chinese economic policy this year: the end of commodity deflation, loosened credit, and the property market’s recovery – and it’s the last of those that look to him as becoming “shaky first”.
“Many now expect October’s sales to have slowed noticeably, though sales growth should still remain fairly rapid for the rest of the year,” Baston wrote in a research report issued last week.
“The issue is more next year: so much has been front-loaded into 2016 that it is difficult to see how sales can continue to grow significantly next year, particularly as credit growth is no longer accelerating.
“A decline in residential sales in early 2017 is likely, though the most probable scenario is for construction and investment to slow only moderately, as falling inventories in coastal provinces still provide some incentive for new building, and policy curbs remain loose,” he added.
According to a recent media briefing by the National Bureau of Statistics (NBS), the property boom helped support gross domestic product (GDP) by roughly 8 per cent in the third quarter of 2016.