Manila, Sep 20 (EFE).- The Asian Development Bank (ADB) on Wednesday warned that the ongoing property crisis in China could weigh down its economic growth in 2024, although the impact could be mitigated through the implementation of appropriate policies.
“The analysis shows that further property market weakness may slow the domestic economy, but policy action could soften or even erase the impact on growth,” ADB said in a report.
The Manila-based lender also clarified that in case China’s property crisis continues, its effect on other developing Asian economies and other parts of the world would be “limited,” except for a few China’s closest trading partners, such as Mongolia.
ADB explained that the property crisis would not affect China’s projected Gross Domestic Product (GDP) rate of 4.9 percent for this year, but could have an impact in the following year when the GDP is anticipated to grow by 4.5 percent.
ADB attributed the crisis in China to policies initiated in 2020 aimed at reducing the sector’s significance in the economy and subdued demand caused by the COVID-19 pandemic.
“The property market in China is undergoing an adjustment as investment, sales, and prices are contracting,” it said.
To address the real estate crisis, the ADB has proposed a range of measures, including reducing loan interest rates, implementing regulations to enhance mortgage availability, and introducing fiscal stimulus to bolster domestic demand and the property sector.
“Policymakers should aim to engineer a soft landing, providing a floor to the market adjustment to avoid a more significant contraction in the short term, while continuing to pursue the longer term goal of a more structurally balanced property sector,” it underlined.
The report highlighted that the real estate industry accounts for approximately 21-24 percent of China’s GDP.
Moreover, it serves as a significant savings asset for Chinese citizens and is closely intertwined with the financial sector, with roughly a quarter of loans allocated to the real estate sector.
China’ real estate crisis has had adverse effects on major housing developers in the country, such as Evergrande and Country Garden, which have experienced substantial losses, accumulated debts, and defaults on lenders in recent months. EFE