CNN and NPR: China’s Economy, Too Hot or Too Cold?
Two interviews I did recently, one with CNN and the other with NPR, were broadcast yesterday. Both focused on China’s real estate market, within the context of the broader Chinese economy, and the reports themselves offer an interesting contrast in perspectives on what’s going on.
The NPR report, which you can read and listen to here, focuses on the recent “slowdown” in China’s economy (from just shy of 12% annualized GDP growth in the first quarter, to a little over 10% in the second quarter). In particular, it notes that some of China’s property developers are having trouble selling units, due to government efforts to “cool” the country’s red-hot real estate market. I note that, in many respects, a cool-down in actually welcome, given concerns about overheating and inflation.
The CNN report, which you can watch here, paints a different picture: housing prices remain quite high, and many Chinese savers are still stockpiling empty units as a store of value. In a part of the interview that didn’t air, they asked me whether I thought goverment “cooling” measure had defused the danger of a housing bubble. I said that the steps the government had taken had thrown the market into confusion — people are delaying decisions to buy or sell until they see which way the market is heading — but had not changed the underlying dynamics that cause people in China to channel so much money into real estate, particularly unproductive real estate.
So yes, developers are having trouble selling units — for the moment. But don’t expect that to last, even if the government does hold firm on its tougher policies. We’ve seen these kind of dips before. The troubling conditions in China’s real estate market aren’t just momentary speculative froth, but are based on deep-rooted distortions that have proven remarkably persistent. The big challenge China faces — to find a more sustainable growth path going forward — remains to be tackled.