China's economy grapples with hurdles following the transition away from its zero Covid policy in 2022.
With growth at 5.2% in 2023, the nation's performance appears sluggish compared to its historical benchmarks, albeit an improvement from the modest 3% growth observed in 2022.
Persistent weaknesses in consumer demand and challenges in the domestic property market characterise the current landscape.
New data from the ASEAN+3 Macroeconomic Research Office forecasts a 5.3% expansion in China's economy this year, driven in part by the resurgence of its real estate market and improved external demand.
This development not only fuels growth within the region but also carries significant weight in the broader global economic landscape.
The size of China’s economy, which accounts for almost one-fifth of global GDP, means a major slowdown could still have a serious impact on global growth.
By some estimates, real estate accounts for 30 percent of GDP – about twice the equivalent share in the United States.
China's property sector plays a pivotal role in driving economic activity. A steady recovery in this sector, supported by ongoing policy measures, has the potential to stimulate real estate investment, creating a ripple effect that reaches neighbouring countries and beyond.
The interconnectedness of economies within the region means that any upswing in China's property market can generate spillover effects, amplifying growth prospects for other nations.
However, the sheer magnitude of China's economy also underscores the risks associated with a potential slowdown in its property sector. Real estate accounts for approximately 30% of China's GDP, a figure double that of the United States.
Concerns about the health of China's property market have become increasingly pronounced, with a Bank of America survey highlighting it as the primary credit risk to the global economy.
Thirty-three percent of respondents expressed apprehension about the sector's stability, reflecting the broader anxieties surrounding its impact on global economic stability.
A 2019 study conducted by the United States Federal Reserve estimated that an 8.5% decline in China's GDP could lead to a 3.25% contraction in advanced economies and a nearly 6% downturn in emerging economies.
Such projections underscore the significance of China's economic health in shaping the trajectory of global growth.
Moreover, the World Economic Forum has highlighted the direct correlation between China's GDP and global economic output. For every 1 percentage-point decrease in China's GDP, there is an estimated 0.3 percent reduction in global GDP.
5 ways China's property sector can impact global economies:
Commodity Demand: China's property sector is a major consumer of commodities like steel and cement. Changes in demand can affect global commodity prices and impact exporting countries.
Financial Stability: Instability in China's property market can lead to broader concerns about financial stability, causing volatility in global financial markets.
Manufacturing and Supply Chains: China's property sector influences global manufacturing and supply chains as it drives demand for construction materials and consumer goods.
Investor Sentiment: Developments in China's property market can influence global investor sentiment, leading to shifts in investment flows and market dynamics.
Economic Growth: Changes in China's property sector can have significant implications for global economic growth, particularly in regions closely tied to China's economy.
The property sector in China serves as a barometer of global economic health, with its fluctuations sending reverberations throughout the world.
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