Just about every review of growth in China — of steel prices or of iron ore demand — contains reference to China’s property market.
Few countries in the world have a property sector that plays such a large and dynamic role in the country’s GDP. Furthermore, few have one that causes such concern among a minority of economists that obsess over the risks the sector poses.
So, a detailed analysis in The Economist is a welcome insight into the scale and scope of the market that underlines why it is such a significant driver of not just GDP but raw material prices and seaborne trade.
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China’s property market and its massive scope
To cite The Economist, every year China starts building about 15 million new homes.
That’s more than quintuple the number in America and Europe combined.
The property sector, both the direct impact of all the construction and its indirect effect on everything from concrete to curtains, accounts for a quarter of China’s GDP. That explains: a) why a runaway property market is such a driver of growth and b) why Beijing is at such pains to progressively control the market. Left unchecked, it poses a huge potential risk.
Chinese real-estate developers are on the hook for more than $100 billion in bond repayments during 2021 alone, according to Moody’s. For the world as a whole, roughly one-tenth of outstanding bank loans to non-financial clients has gone to China’s property sector, whether as financing for developers or mortgages for homebuyers.