The mainland housing market will pick up next year, and that will drive the overall economy, said Stephen Green, head of greater China research at Standard Chartered Bank.
"The Chinese economy is picking up, especially real estate. Developers are coming back to buy land. Construction will come back in March or April," he said at a Hong Kong General Chamber of Commerce seminar yesterday.
The three main leading indicators of China's future economic activity are infrastructure projects, credit and real estate, Green said.
Property is very important for the country's economy, because it drives consumption of items like cars, he said.
"Developers are going to start building next year, which has huge implications for demand for cement and building materials," Green said.
Housing inventory has been dropping in China's tier one to tier three cities, which indicates a need to build more units, he said.
In recent months, housing transactions on the mainland have been rising, with housing prices on an upward trend in second tier and third tier cities.
The latest data indicates roughly 15 per cent year-on-year real credit growth on the mainland and 10 per cent growth in cement production, which suggests investment will pick up next year.
Infrastructure spending has picked up, with big projects like high-speed rail and metro lines being approved, Green said.
Growth in gross domestic product will be 7.7 per cent this year and 7.8 per cent next year, slower than the 9.2 per cent last year, he predicted.
"China's economy is going to recover in the next two to three quarters," he said. "It will be a slow recovery."