China's economy is likely to experience a hard landing, as the nation's property sector is close to bursting due to excessive investment over the past years, a Morgan Stanley economist said in Taipei yesterday.
The remarks came as Beijing tightens its grip on credit in an attempt to steer China's overheated economy to a soft landing.
"The development of China's property market is the determining factor for a hard landing or a soft landing, rather than the government's policies," Andy Xie (
"Beijing's current measures only put a lid on land use, but scarcely have any effect on slowing the expansion of China's property sector," Xie added.
The huge investment in the property sector has been one of the major forces driving China's economic growth over the past few years, and the crash of the housing industry could cause a setback for the economy, the Hong Kong-based economist explained.
Xie, 44, known for his straightforward attitude, said in late April that Asian equities markets had peaked following the announcement by Chinese Premier Wen Jiabao (溫家寶) that Beijing may "take effective and very forceful measures" to rein in China's economy.
Taiwan's benchmark TAIEX has fallen 18 percent since then, closing at 5368.02 points yesterday.
At yesterday's seminar, Xie maintained his downbeat perspective, saying Asian stock markets "have not hit the bottom yet," as the interest rate hike by the US Federal Reserve on Wednesday will attract hot money back to US stock markets.
Xie said that Asian stock markets could rebound after the Fed completed its series of interest rate hikes this year.
Once again, the Morgan Stanley economist went against the grain by predicting that the weakening housing market would put a sudden brake on China's economic growth, despite the hopes of Chinese officials to fine-tune the overheating economy.
"Yes, there are numerous rich people who can afford luxury apartments, but the number is not big enough to level off the surfeit," he said.
This year, around 650 million square meters of real estate are waiting for buyers, compared to 550 million square meters last year, according to Xie.
To spur demand, a drastic 20 percent to 30 percent drop in prices will likely occur, whereas a drop of 10 percent or less would be necessary to give China its much anticipated soft landing, Xie said.
"In that case, [property developers] will stop investing as the profits will be squeezed," he said.
China's possible hard landing will have a severe impact on Japan and South Korea due to a reduction in equipment imports, which is happening now, Xie said.
As for Taiwan, Xie said "the impact will be very limited, as Taiwan is gradually relying on private consumption, not exports, for growth."
When asked which sector would be a good investment target, Xie suggested investors shift from tech firms to companies which can cater to customers' needs through intensive networks, or that have brandname products with high growth. He also cited Wal-Mart Stores Inc, the world's biggest retailer, as a good example.
"Tech shares no longer enjoy a high return, as the sector is maturing," Xie said.
MORE VISITORS: The Tourism Administration said that it is seeing positive prospects in its efforts to expand the tourism market in North America and Europe Taiwan has been ranked as the cheapest place in the world to travel to this year, based on a list recommended by NerdWallet. The San Francisco-based personal finance company said that Taiwan topped the list of 16 nations it chose for budget travelers because US tourists do not need visas and travelers can easily have a good meal for less than US$10. A bus ride in Taipei costs just under US$0.50, while subway rides start at US$0.60, the firm said, adding that public transportation in Taiwan is easy to navigate. The firm also called Taiwan a “food lover’s paradise,” citing inexpensive breakfast stalls
TRADE: A mandatory declaration of origin for manufactured goods bound for the US is to take effect on May 7 to block China from exploiting Taiwan’s trade channels All products manufactured in Taiwan and exported to the US must include a signed declaration of origin starting on May 7, the Bureau of Foreign Trade announced yesterday. US President Donald Trump on April 2 imposed a 32 percent tariff on imports from Taiwan, but one week later announced a 90-day pause on its implementation. However, a universal 10 percent tariff was immediately applied to most imports from around the world. On April 12, the Trump administration further exempted computers, smartphones and semiconductors from the new tariffs. In response, President William Lai’s (賴清德) administration has introduced a series of countermeasures to support affected
CROSS-STRAIT: The vast majority of Taiwanese support maintaining the ‘status quo,’ while concern is rising about Beijing’s influence operations More than eight out of 10 Taiwanese reject Beijing’s “one country, two systems” framework for cross-strait relations, according to a survey released by the Mainland Affairs Council (MAC) on Thursday. The MAC’s latest quarterly survey found that 84.4 percent of respondents opposed Beijing’s “one country, two systems” formula for handling cross-strait relations — a figure consistent with past polling. Over the past three years, opposition to the framework has remained high, ranging from a low of 83.6 percent in April 2023 to a peak of 89.6 percent in April last year. In the most recent poll, 82.5 percent also rejected China’s
PLUGGING HOLES: The amendments would bring the legislation in line with systems found in other countries such as Japan and the US, Legislator Chen Kuan-ting said Democratic Progressive Party (DPP) Legislator Chen Kuan-ting (陳冠廷) has proposed amending national security legislation amid a spate of espionage cases. Potential gaps in security vetting procedures for personnel with access to sensitive information prompted him to propose the amendments, which would introduce changes to Article 14 of the Classified National Security Information Protection Act (國家機密保護法), Chen said yesterday. The proposal, which aims to enhance interagency vetting procedures and reduce the risk of classified information leaks, would establish a comprehensive security clearance system in Taiwan, he said. The amendment would require character and loyalty checks for civil servants and intelligence personnel prior to
RSS