China’s property crisis has regional knock-on effects, Asean body says

Asean office revises growth forecast for China as property market slump continues to drag on broader economy

Concerns about China’s prospects can be applied to region, as deceleration also affects trade, tourism and investment

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Tourists shopping at Ubud Market in Bali Island Indonesia. Tourism, a large sector in Southeast Asian economies, is one of several fields being affected by China’s property crisis. Photo: Shutterstock

Published: 8:00pm, 4 Oct 2023

A regional macroeconomic surveillance body predicted on Wednesday that China’s economy will grow at a rate lower than expected three months ago, and warned its property crisis is spilling into other parts of Asia.

Growth in the world’s second-largest economy should reach 5 per cent, below a July forecast of 5.5 per cent, the Singapore-based ASEAN+3 Macroeconomic Research Office said. The office covers 10 major Southeast Asian countries plus China, Japan and South Korea.

The property crisis, China’s chief growth obstacle, worsened in the second quarter, the body’s chief economist Hoe Ee Khor said at a news conference.

A pre-pandemic property surge has imploded over the past few years, exposing developers’ debts and sending home prices into a tailspin.

“It’s a real balance sheet problem and there needs to be a real work out between the developers and creditors,” Khor said.

The research body’s forecasts dovetail with those of international banks and other multilateral financial organisations. Before official August data showed signs of rebound after being published in mid-September, at least six institutions had lowered annual growth forecasts for China this year to below the government target of roughly 5 per cent.

China’s US$18.1 trillion GDP grew 5.5 per cent in the first half of 2023 and 3 per cent last year.

Beyond the real estate sector, manufacturing investment is holding up and consumer spending is starting to get back on track

Hoe Ee Khor, AMRO

Financial markets in Southeast Asia and surrounding countries were pressured in the third quarter by concerns about China’s economic growth prospects, the research body said in its Quarterly Update of the ASEAN+3 Regional Economic Outlook released on Wednesday.