China’s economy (CNGDPYOY) won’t have a hard landing this year, and the nation’s housing prices are unlikely to collapse, said Yu Yongding, a former central bank adviser.
“China has yet to hit the rocks this year,” said Yu, a member of the Chinese Academy of Social Sciences, a top government-backed policy research institute. “People are worried about a housing market collapse. This is not warranted.” Yue spoke at a forum in New York yesterday.
The world’s second-largest economy expanded 9.1 percent in the third quarter from a year earlier, the slowest pace in two years, down from 9.5 percent growth in the second quarter. The government may say on Jan. 17 that fourth-quarter growth slowed to 8.7 percent, according to the median estimate of 23 economists surveyed by Bloomberg.
Annual growth of “8 percent or even 7 percent is OK,” Yu said. “A pace of less than 7 percent means crisis, economic and perhaps political crisis.”
The biggest concern this year is any “dramatic” fall in real estate investment, which accounts for 9.9 percent of China’s gross domestic product, Yu said. That proportion is “way too high,” compared with countries like South Korea and Japan, he said.
China’s home prices fell for a fourth month in December, dropping 0.25 percent from the previous month, after the government reiterated plans to maintain curbs on development and purchases, SouFun Holdings Ltd., owner of the nation’s biggest real estate website, said on Jan. 4. Prices slid in 60 out of 100 cities tracked by the company.
“Real demand for housing is still very strong,” Yu said, adding there is a consensus among economists that if housing prices drop by 20 percent, potential buyers, such as white- collar workers, will enter the market. That wouldn’t be “disastrous” for China’s banking system because the down- payment ratio for mortgages in China has risen to 60 percent from 40 percent since 2009, Yu said.
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