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Real estate's high growth about to cease
A vice-minister of the Development Research Center of the State Council (DRC) Liu Shijin said recently that the change in China's economy from a high growth rate to a medium-to-high one is not finished and the downward pressure is still there. China's economy can hardly maintain a growth of 7 - 8 percent when investment falls, so the growth rate is more likely to be around 6 percent.
Liu Shijin made the remarks at the 2014 Environmental Protection Industry Summit Forum, in Yancheng, Jiangsu province, on July 19, where he commented that China's economy saw slower growth over the past two years and rarely saw consecutive rise in GDP growth for quarters, and he attributed it to the ongoing change in economic growth speed and said the key is in real estate.
In the past, he went on to point out, China's economy was driven by exports and investment, mainly in infrastructure and real estate, and, it slows when investment in real estate and exports stop. The growth in exports is currently around 7 percent, compared with more than 20 percent in the past, and will be around 5 - 10 percent over the next few years. Infrastructure investment hit its peak around the year 2000 and it has been in decline over the last several years. If we can get an idea about when real estate bottoms out, we’ll know more about the economy's mid-to-high growth.
This could take one or two years, said Liu, the demand will hit a peak in housing this year, around 12-13 million sets, which accounts for 70 percent of real estate, and the demand could drop. Real estate will face difficulties in investment, maybe around 5-percent or less over the next few years, a historical shift, and China's economy will be unable to keep its 7 - 8-percent growth without the investment, so, it is likely to be around 6 percent.
China's GDP in the first half year rose 7.4 percent, just below the target of 7.5 percent, so, Liu said, the downward pressure is still there, and there are no optimistic predictions for the economy in the second half.
Source: Shanghai Securities News, July 21, 2014
