January 13, 2006

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When 20% Growth is a Correction

An article today about the state of China's property market that I found more worrying than breathtaking. The National Development and Reform Commission has said that it expected property sales in China to only increase 20%, and that the market had been in a correction since mid-2005. Allow me a quote:

It expects the growth in property investments in China to slow to 16 percent this year, compared with a projected growth of 21 percent in 2005 and an actual growth of 28 percent in 2004.

The value of property investments in China was 1.316 trillion yuan (US$163.11 billion) in 2004, and was forecast at 1.592 trillion yuan in 2005, it said.

The agency attributed the slowdown to the government's macroeconomic controls and an overinvestment in the property sector in recent years.

It expected this 'correction' to cause non-performing loans to rise, liquidity pressure, and for weaker property players to be weeded out.

Yet 20% is very respectable almost anywhere else in the world. What's going to happen to China when it faces a real correction?

posted by HK Dave on 01.13.06 at 12:37 PM in the China economy category.


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