Business / Economy

China to expect lackluster external demand in years to come

(Xinhua) Updated: 2014-07-18 11:09

Guy Stear, head of research at Societe Generale Asia, said he expects a growth of slightly below 7 percent for China next year.

Hu said that the support factors of growth for China in the coming years would still be investment in infrastructure.

"It is not necessarily real estate. It can be investments to build or upgrade airports, high-speed trains and subways, as well as efforts to upgrade the environmental system," she said.

"Of course, the driver has to be consumption in the long run, but it takes time and a lot of reform efforts in areas such as urbanization, income distribution and services sector development. Whether these reforms will be successful or not will determine the future of China," she added.

Hu also said that she thinks it is only the early "winter" for China's real estate sector, given that the current round of cooling measures target the supply side, while measures in the past had targeted the demand side. The banks are also starting to be cautious in lending money to developers. The long-term measures such as property tax are also being considered.

However, she said that the real estate markets in different cities might experience different levels of adjustment.

Nevertheless, the adjustments in the real estate sector will not necessarily lead to a major slowdown in the Chinese economy, as public housing projects will make up for some of the losses in investment.

The economists are divided on whether consumption growth will slow down in the case of a real estate sector correction, with Hu saying that it might help consumption as people do not need to save so much to buy houses. Stear, however, said that the correction might be disastrous as consumers are more likely to panic than spend.

Shen said that the housing prices in China has peaked and that the correction might last between 2 and 4 years, with 2015 being probably the most challenging year for real estate developers.

 

 

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