A stabilisation in China

domainking131

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Staff member
The most important factor behind the recent stabilisation of the Chinese economy seems to be the sharp turnaround in real estate investment. Investment in real estate was up 6.2 per cent in Q1 2016, after rising just one per cent in 2015. Coming into 2016, most analysts had predicted a decline in real estate fixed asset investment with new construction starts down 20 per cent and property sales volumes down three to five per cent. This negative view was based on the high inventories of unsold housing as well as the excesses in commercial real estate. The conventional view was that it would take another year or two of subdued real estate investment to bring inventories under control.

The question then has to be asked as to how sustainable is this turnaround in real estate investment? Has China been able to salvage growth only by inflating a housing bubble? If this growth is unsustainable does it mean that we are only postponing the economic restructuring and change in growth drivers that China so desperately needs? Are we front loading growth only to have a more severe slowdown in 2017 as the real estate investment surge invariable cools? Investors may be celebrating China stabilising, commodity prices may have rebounded, but this may all reverse in short order.


Complete article here


As Chinese economy affects the economy across the globe, this seems to be an important development.
 

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