According to Hao Hong, an economist at GROW Investment Group, China has about 6 million square meters of real estate under construction.
“At the current pace, it could take more than 10 years to clear this backlog. So it could take many years to clear all the problems in this area,” Hong told CNBC .
Home sales and prices remain weak as real estate businesses have been in crisis since 2020, when Beijing implemented its three red lines policy.
Evergrande and Country Garden have become the two most notable "lords" of China's debt reduction campaign. The real estate and related sectors contribute one-third of China's economic activity.
An apartment project under construction in Jiangsu province, China (Photo: CNBC).
"China may need a long time to deal with the inventory. At the same time, they also have to find new growth drivers to boost the economy, instead of relying too much on real estate," Mr. Hong shared.
In previous economic downturns, the real estate sector responded quickly to stimulus packages and recovered within just a few quarters.
"This time, it seems that the real estate sector's downtrend will be prolonged. The market is not prepared for a prolonged correction because they are used to quick recoveries like in previous periods, so they feel surprised," Mr. Hong shared.
Despite a series of support measures, the real estate crisis has severely impacted consumer confidence and put enormous pressure on the economy. Therefore, a series of experts called for the Government to stimulate the economy more strongly to prevent the risk of a deeper recession.
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