Author: Edith Lu
Posted on: China Daily| Wednsday 10th January 2018
Economic growth on the Chinese mainland will reach 6.4 percent this year, financial experts predict, in line with the World Bank’s expectations last December, as deleveraging will continue which could undermine gross domestic product growth in the near-term.
Commerzbank Singapore senior emerging market economist Zhou Hao believed the central government will implement more stringent financial regulations to push forward “bubble deflating” this year.
Every sector in China has been leveraging up since the global financial crisis, and that is why the mainland needs deleveraging
Zhou Hao, economist
“Every sector in China has been leveraging up since the global financial crisis, and that is why the mainland needs deleveraging,” said Zhou.
The ratio of debt to GDP in the mainland was more than 250 percent last year; corporate debt accounted for the largest component, financial data service provider Wind indicates. Household debt has also picked up quickly in recent years because of high property prices. Mortgage loans contributed to more than 55 percent of household debt according to Bloomberg.
The mainland property market is “de-linking” from GDP growth. “Normally housing investment leads to quicker GDP growth. But now the investment is not as strong as in the past and the GDP growth remains stable these years,” said Zhou. He predicted property prices will remain stable and property sales will decline as housing is not in demand, especially in big cities.
To regulate the property market, Finance Minister Xiao Jie wrote in People’s Daily last month that a property tax based on assessable value of industrial, commercial and residential buildings will start to be implemented from 2020.
The tax policy was believed to increase the cost of home ownership, said Wang Qian, Asia-Pacific chief economist at Vanguard Investment Strategy Group.
However, Zhou said the new property tax should not be a worry and he thought the market had over-reacted to the new tax.