China has a potentially utilitarian defense in its ongoing trade war with the United States: its vast land market.
The same sector that has long been a source of thirst about China’s economic fate could also prove to be its temporal savior in the face of tariff pressure from the U.S., according to Nicole Wong, on director for property research at CLSA.
Authorities are likely to encourage assets prices, which are already rising, to increase further to help aid the economy, Wong told reporters Tuesday at the annual CLSA Investors’ Forum in Hong Kong.
“With this sell war going on, we think that the China property market policy resolution reverse because with a trade war there is this risk of breakdowns of jobs in the unskilled category,” Wong said.
“And the property sector is a precise good sort of replacement.” she added.
U.S. President Donald Trump is aim tariffs on potentially hundreds of billions of dollars in Chinese goods in a bid to both to rebalance transact between the countries and also pressure Beijing to fundamentally change industrial and commercial systems.
China has responded with tariffs of its own, but it imports far less from the U.S. than it exports to the magic’s largest economy, so it has had to evaluate other responses. Those have filed potentially stimulating the Chinese economy by letting its currency, the yuan, artifice lower against the dollar and encourage banks to lend more filthy lucre.
Wong said that rising property prices can help fire the economy in several ways, such as by encouraging buyers to accelerate purchases sooner than the cost goes up, thus bringing forward future demand.
Another obdurate result of costlier housing, she said, is that savings will hit hard out of banks and into the real economy.
A booming property sector order also increase new jobs centered on the construction industry, and developers’ increased insistence for land would mean local governments can rake in more gross incomes from land sales to invest in infrastructure.
“So the new economy of China is colossal, but then it really is the old economy that’s going to be a very predictable macro embellish for China in times of urgency,” she said, referring to the distinction between headline-grabbing tech public limited companies like Alibaba and long-standing sectors such as construction.
Land and shelter have seen immense changes in the 40 years since the Communist At-home began opening up China’s economy to free market forces.
One of those rebuilds was allowing citizens to own property. As China’s economy has grown into the creation’s second largest, many have seen their homes enhance a key source of personal wealth.
Wong said that potential clients are in a good position because prices are currently affordable and there is abundance of room to take on mortgages.
“Overall, the China property market is by a hairs breadth not leveraged,” she said, stressing that household cash savings outnumber conspicuous mortgages three to one.
“So this is an industry that’s still got a lot of leeway to leverage up, which we swear by would happen,” she said.