The Chinese property sector is in a recession.
Optimists insist it is going through an “adjustment” similar to previous property downturns. But a more sober view is that because of overbuilding and leverage nurtured by shadow banking, this downturn is more serious and systemic. China is probably in the first stage of a denouement of the property- and construction investment-led growth model of the past 15 years. Financial markets are having trouble pricing the implications.
Property accounts for 25 per cent of capital investment and 13 per cent of gross domestic product. Incorporating associated industries, such as steel, cement, and construction machinery and materials, would raise the investment share of GDP to about 16 per cent.
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