Contrary to what people may think, China's biggest risk isn't from the fallout of the US-China dispute. It's the property, or at least, they should be aware of the property market in the next 12 months. This is according to China economics head at Macquarie Larry Hu.
That the market has been doing great so far belies this fact. According to CNBC, the sale for an average house has risen by about 28.1 percent. This was covered for the period of January 2016 to May 2018, where newly-built, non-governmental housing has been measured. This has also been made to look false by the fact that property prices are on the rise, a hot streak that started since the data was gathered dating back to 2008.
Real estate investment, according to CNBC, has actually been the secret in Chinese household assets. So far, it's been the backbone of investments and has a big part in shoring up the economy. This is part of the problem why the property market's slowdown is being monitored closely. A drop in prices and the market is in danger of collapsing way beyond recovery.
The signs have been started appearing only this month. Construction companies like Zhonghong Holding Co. and Wuzhou International Holdings had problems with debts and borrowing; Wuzhou, for its part, had already defaulted on debts. Credit rating agencies have rated the month as a negative following the downfall in the trend being shown by these companies.
There are ways to re-boot the economy and construction company's finances. Some companies, Bloomberg reports, have begun to be creative. China Vanke had resorted to floating rate dollars; it is an answer to maturing debt as well as problems in slowing economic growth. Policy makers have been trying their best to find ways but to no avail.
To analysts, the government wouldn't just turn a blind eye to the worsening economy. It would counter that with policies and stimulus packages and other processes. However, there's also the trade dispute; it's difficult to face enemies on two fronts, and China's policies-if they'll work remains to be seen.
China could just let the property market flourish rather than stifle the money flowing into it. It's the soundest process, considering manufacturing, tourism, and other areas will have the dispute to contend against.
