The Asia Global Payment Summit. Bali, Indonesia. 10-11 October 2019

51% of Economists Surveyed Say China’s Real Estate Bubble is Severe

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A new report indicates that more than half of 100 Chinese economists surveyed believe there is a severe bubble in China’s real estate market, alongside significant financial risk.

The “2018 China Macroeconomic Conditions and Policy Survey” (2018年中国宏观经济形势与政策问卷调查) was jointly released by the state-run Economic Information Daily and the Macroeconomic Research Centre of Xiamen University on 27 February.

With regard to the biggest risks currently confronting the Chinese economy, the report indicates that 75% of 100 economists surveyed believe that “the problem of state-owned enterprise and local government debt risk is severe, leading to an increase in the level of banking sector non-performing loans that could trigger systemic financial risk.”

51% of economists surveyed believe that “the real estate price bubble is severe” and that there exists “quite large financial risk.”

44% also believe that “private investment growth continues to be lower than investment by state-owned enterprises, and the rebound in private investment growth lacks sustainability.”

With respect to efforts by Beijing to shore up financial inclusion and ensure that the finance sector focuses on servicing the real economy, 72% of survey participants said that the recent record level of RMB lending in January would “fail to change the current state of financing being difficult and expensive for private investment.”

52% of economists said that the record level of credit extension “had not entered the economy, leading to a decline in investment growth,” while 56% said that it had “accelerated state-owned enterprise and state share-controlled enterprise investment growth.”

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