China GDP: how will economic growth be hit by Beijing’s new caps on real estate lending?
- The Chinese government has taken a series of steps to rein in runaway growth in the real estate sector over fears of systemic risk
- But the moves are unlikely to severely affect the wider economy, provided exports and consumption pick up the slack, economists say
China’s aggressive moves to tamp down risk in the real estate sector by curbing financing are not expected to significantly affect growth this year, provided other sectors of the economy continue to improve, economists have said.
Real estate, excluding housing construction and some residential consumption, accounted for 7 per cent of Chinese gross domestic product (GDP) in 2019, while other industries that intersected with it accounted for 17.2 per cent of GDP, according to a report released in August last year by the Evergrande Research Institute, a China-based think tank.
Another 2020 report by Harvard and Tsinghua universities estimated that a 20 per cent drop in real-estate activity could lead to a 5-10 per cent fall in China’s GDP, all other things being equal.
The slowdown in real estate may not be completely offset by the growth in exports and consumption
China’s property market recovered quickly from the pandemic, with sales of new homes and flats growing 9.5 per cent in the first 11 months of last year compared to a year earlier, while property investment increased 6.8 per cent in the same period.