WSJ: Affordable-Housing Delays Threaten China’s Economy
By BOB DAVIS
BEIJING—China acknowledged it was falling behind schedule on ambitious plans to build low-income housing, a delay that could add to concerns around its economy.
The low-income housing push is crucial, not only as a way to help ordinary Chinese buy homes, but to provide an economic cushion at a time when signs of a real-estate downturn are emerging. Prices of new apartments and the volume of construction have begun to fall in some cities. A big spurt in low-income housing construction has been seen by the government and markets as important to reduce the depth of a real-estate downturn in an economy heavily dependent on construction for growth. Beijing Friday pressed local governments to pick up the pace of construction.
A failure to meet the construction goals would add to risks of a sharp decline in Chinese property market, which in turn could slow Chinese growth more than expected and harm a global economy leaning heavily on China amid tepid recoveries in the U.S. and Europe.
China’s real-estate problems come at a time when the country’s foreign-trade figures also suggest a slowing economy. “Slowdown, not meltdown,” read a headline on a report by HSBC on Friday after China reported a trade surplus of $13.05 billion. Although the surplus was 14.5% higher than in April, the numbers fell short of analyst estimates and suggested a weakening of domestic demand, according to some analysts.
Imports grew 28.4% in May compared to a year earlier, but Goldman Sachs argued that the big increase was largely because imports were weak in May 2010. Over the past three months, Goldman Sachs said, imports were down 4.6% on an annual basis, when adjusted for seasonal variations in demand. HSBC forecast that import growth would “moderate” due to slowing domestic demand and a “downshift” in international manufacturing.
Export growth, meanwhile, decelerated to 19.4% in May from a year earlier, compared to 29.9% in April.
During the past few years, China’s turbo-powered economy has depended on a real-estate boom to power the construction, steel, cement and other industries and to act as an investment vehicle for Chinese looking for higher yields. But soaring housing prices have produced a real-estate bubble, and its collapse could batter the Chinese economy. Chinese economic planners have been trying put restrictions on purchasers to let prices decline gradually.
To make sure the restrictions don’t crimp growth too much—and to make sure that housing remains affordable for many of China’s 1.34 billion people —China committed in its latest five-year plan to building 36 million units of what it calls social housing by the end of 2015, including starting construction on 10 million units this year. If the plan works, 20% of urban households would have access to low-income rentals in 2015, according to UBS.
On Friday, though, the Ministry of Housing and Urban-Rural Development said that local governments must start construction on the units by November, pushing back by a month the date that construction was required to begin. By the end of May, work had begun on only 30% of the 10 million units, reported state-run Xinhua news agency recently……Read More
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Posted by Jose Reyes
on Jun 11 2011. Filed under Current News, Economy, Post To Slider.
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