China’s Real Estate Sector Remains Sluggish Amidst Economic Improvement
Despite a flurry of government measures implemented to revitalize China’s real estate sector, the industry has yet to show significant progress. This comes as other sectors, such as consumption, industrial production, and infrastructure investment, begin to exhibit signs of improvement.
According to data released by the National Bureau of Statistics (NBS) on Monday, new property sales amounted to 1.06 trillion yuan ($147 billion) in the first two months of this year. This represents a decline of 29.3% compared to the same period in 2023. The drop also marks a faster pace of decline than the year-ago period, during which new property sales decreased by just 0.1%.
Property Investment Continues to Decline
Furthermore, property investment decreased by 9% during the January-to-February period. This decline was faster than the 5.7% decrease recorded during the same period last year.
Bright Spots in the Economy
However, other sectors of the economy are showing signs of improvement. Retail sales increased by 5.5% in January-February from the same period a year earlier, slightly surpassing an anticipated 5.2% increase based on a Reuters poll of analysts.
Catering services, telecoms, cigarettes and tobacco, and sports and entertainment services registered the highest growth in sales. Industrial output jumped by 7% during the first two months of this year compared to the same period in 2023, surpassing a predicted 5% growth forecast in the Reuters poll.
Strong Exports Drive Factory Output
The strong growth in industrial output can be attributed to robust exports demand. China’s customs figures show that exports increased by 7.1% in the January-to-February period compared to a year ago, surpassing market expectations.
State-Led Investment Boosts Infrastructure
Fixed asset investment, including factories, roads, and power grids, increased by 4.2% in the first two months of this year, surpassing analyst estimates. The majority of this growth can be attributed to state-led investment, according to NBS data.
Policy Support Needed for Sustainable Growth
Despite these positive signs, the property downturn and weak domestic demand necessitate further policy support to sustain growth. Louise Loo, China economist at Oxford Economics, stated that “In the absence of decisive consumption-related stimulus this year, we think it would be difficult to sustain a robust consumer spending pace.” Some of the government’s new initiatives aimed at spurring consumer spending, such as replacing old durable goods with new ones, could be “hugely beneficial,” she added.
Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, echoed this sentiment, stating that “the economic outlook for the second quarter is still quite uncertain.” He further emphasized that “while exports helped to partially offset the weak domestic momentum at the start of the year, a sustainable recovery requires more policy support, particularly from the fiscal side.”
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