Wondering why the property market in China is in trouble with huge number of empty completed units? Well, in Q4 2015, China’s economy grew just 6.8 percent. This should be a growth envied by many but based on statistics, this is the slowest growth since Q1 of 2009. Remember the 2008 mortgage crisis? Well, fortunately we are nowhere near that but this 6.8 percent meant that Beijing will now do even more to support and to manage fears of investors turning into panic. It did happen in the first trading week of 2016 and everything remain volatile currently.
As per reported in Reuters, China has been growing strongly in recent years but has now entered a slowdown, weighed down by weak exports, factory overcapacity, slowing investment, a soft property market and high debt levels. According to a poll of analysts by Reuters, the economy is expected to lose more momentum and will cool down to 6.5 percent even if Beijing increases fiscal spending and cuts interest rates. The silver lining is that this slower growth is expected to be sustainable and would not have any hard landing which all investors are fearing. There were further signs of improvement in the property market. Home prices continued to rise in December 2015 but a huge overhang of unsold homes means any full-blown recovery would not be seen in 2016.
Let’s also take note that China has by far the largest foreign reserves of the world. Due to its population, the investments into China is not likely to stop. To be honest, if I have a manufacturing concern and I want to target some of it on the local population, I will put my factory in China and not in the US. When we look at some of the recent news, I think China is looking to build up its investments overseas because this is the best time to do so. Not many countries in the world can still say this today, ‘I will increase my investments in your country.’ From some of the largest developers with the biggest projects to ports and trains, the flurry of new investments would be continuing. Happy growing my dear China, for the world’s sake, including Malaysia.
written on 21 Jan 2016
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