China may have a housing bubble only in “some cities,” an issue that is difficult to resolve with a single nationwide policy, People’s Bank of China (PBOC) Governor Zhou Xiaochuan (周小川) said.
China is a big country with multiple housing markets, many of which are still drawing new inhabitants from the countryside, Zhou said on Thursday in an interview in Kigali, Rwanda, where he was attending the African Development Bank’s annual meeting.
“China is still in the process of urbanization, so there may be some kind of volatility in the supply-demand relationship,” Zhou said. “But if you look at the medium-term of urbanization, I think we still have a very good market for home sectors.”
While 12 of 18 economists say China has some national oversupply of housing, only seven say there is a housing bubble natiowide, according to a Bloomberg News survey conducted from Thursday last week to Tuesday. Half see bubbles in some cities, and a majority say they expect restrictions on home purchases and loans to be loosened at a regional level.
New construction in China has fallen 22 percent and sales have slumped 7.8 percent this year, testing the government’s four-year commitment to curbs that aim to make homes more affordable, and its reluctance to enact broader economic stimulus.
The slowdown’s depth will have implications for everything from demand for Australian iron ore to land sales that help local governments repay their US$3 trillion debt.
Zhou said he expects China’s economy “can still manage something around a 7.5 percent growth rate” and there are “no clear signs that show significant decline.”
“The economy has slowed down a bit, but not very much,” Zhou said. “We should keep vigilance on whether it continues to slow down.”
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