A dramatic building boom helped China to develop the world’s second largest economy. But now, economists say, a runaway real estate sector poses the greatest risk to growth.
Eight out of 10 economists say the property market poses the biggest threat to the economy, according to a new survey conducted by CNNMoney.
That’s a shift from the previous three quarters, when most economists identified credit growth as the primary hazard.
“The major concern is oversupply — property construction has been growing at an unsustainable rate, with the pace of urbanization having peaked,” said Qinwei Wang of Capital Economics. “With developers’ inventories of unsold property still increasing, real estate looks set to remain a drag on the economy.”
It’s easy to see why economists are concerned. JPMorgan estimates the sector and related services make up about 20% of GDP, and property investment alone accounted for more than 15% of economic growth last year.