China’s Property Crisis Dragging the Economy Down

China’s economic activity slowed in the previous month because of the worsening situation in the property sector and consumption.

According to the median estimate in a survey of economists, growth in fixed-asset investment likely depleted in November, pulled down by slow property investment.

The economy’s slowdown drove Beijing to redirect policy direction in December. The central bank reduced monetary policy while the Communist Party ordered more fiscal spending in the following year. However, it is unclear whether that support can switch the effects of the crackdown on the property sector. This situation triggered defaults at Evergrande Group, and other developers resulted in a drop in sales.

Director of China markets research at Rhodium Group, Logan Wright, said in an interview on Bloomberg that the worst of the policy tightening is yet to come. However, he added that he is unsure if the worst of the financial or economic fallout is probable in the future. He also said there would be more focus on easing monetary instead of fiscal policy.

Last week, officials maintained the fundamental view that homes are to live in, not speculate. At the same time, analysts expect Beijing to make additional credit available.

What Bloomberg’s Economists Express

Economists conclude that the economy of China stabilized in November. This was around the time more robust exports provided support but stayed stuck in a lower gear. Reducing activity in the property sector might have dragged investment.

According to a survey of economists, retail sales increased at a slower pace of 4.8% in November compared to a 4.8% upgrade in October. Besides, there were strong sales during the shopping festival last month. Also, restaurant and catering sales and purchases at shops might have changed because of the covid outbreaks during November. Passenger car sales also declined.