Chinese real-estate firms report drop in confidence

Bloomberg

Sat, Sep 08, 2018 - Page 10

China’s developers are at their gloomiest in eight years, adding risk to the world’s second-largest economy as it faces pressure from a potentially protracted trade war.

A sentiment index of the property market compiled by Standard Chartered PLC dropped to 38.5 last month, the lowest since it started in 2010. The readings are based on a twice-yearly survey of 40 senior managers at property firms in nine cities, ranging from Shanghai to the little-known inland town of Huangshi in Hubei Province.

Deteriorating financing conditions, housing purchase curbs and a looming property tax, which could hurt the long-term prospects of the sector, all contributed to the index’s decline, Standard Chartered economists Shen Lan (沈蘭) and Ding Shuang (丁爽) said.

China’s real-estate sector has been the most robust pillar of investment this year as the economy slows; if it also falters, that threatens the nation’s resilience at a time when the trade war with the US is intensifying.

US President Donald Trump’s administration is ready to move ahead with a next round of tit-for-tat tariffs on US$200 billion of Chinese imports, after a public comment period ended at midnight in Washington on Thursday, but the timing is uncertain, people familiar with the administration’s plans told Reuters.

“Property investment will probably slow later this year, adding to downward pressure on the economy,” said Ding, the bank’s chief economist for greater China and North Asia. “If this seriously threatens economic growth, policymakers will consider easing their grip.”

In the first seven months, the value of property sales in China jumped 14.4 percent from a year earlier, while real-estate development investment rose 10.2 percent.

Signs of the risks in the offing showed up elsewhere, too.

Although Chinese developers reported impressive earnings this season, the firms’ ability to service their debt dropped to the weakest in three years, Bloomberg data showed.