For a decade, the ruling
Finally, Xi’s government is confronting the problem by clamping down on borrowing by a real estate industry that supports millions of jobs.
That is sending shockwaves through the economy. Businesses and households are jittery as housing sales and construction slump. That is chilling auto and retail sales. It has possible global repercussions as
“Many customers would like to wait and see,” said Liang Qiming, a salesman for online real estate broker 5i5j.com in
Xi’s government appears to be willing to accept a politically painful slowdown to get that debt under control and achieve the longer-term goal of self-sustaining, safer growth.
Financial markets are on edge about whether one of the biggest developers,
Depressed by the building slump, the economy expanded just 4.9% over a year earlier in the three months ending in September much weaker than the previous quarter’s 7.9% growth. Compared with the previous quarter — the way other major economies are measured — growth in the three months ending in September fell to 0.2%, among the weakest of the past decade.
Housing sales fell 32% in September from a year earlier. Buyers were put off by curbs on mortgage lending and anxiety about whether developers might fail to deliver apartments paid for in advance. That means less spending on furniture and appliances.
With no sign
This quarter's growth might fall as low as 3% over a year ago, according to Nomura.
The total owed by companies, households and the government rose to almost the equivalent of three times annual economic output last year from 270% in 2018 — high for a middle-income country.
Xi affirmed his priorities at an August planning meeting, calling for “high-quality development” and “forestalling major financial risks,” according to the official
“China is in the middle of a transformation from growth driven by blind investments to high-quality growth,” said
Regulators tightened control over use of debt by real estate developers last year. Hundreds already had gone bankrupt following other restrictions imposed since 2017.
Tightening control,
A midsize developer,
It failed to make a bond payment due
“The risk of a sharper slowdown in real estate activity can’t be ruled out,”
Meanwhile, the economy also faces headwinds from power rationing imposed in major manufacturing areas to meet official efficiency goals. Automakers and other factories have been disrupted by shortages of processor chips.
Auto sales plunged 16.5% in September from a year earlier, according to the
Buyers are uneasy about the pandemic and economic outlook, said Chu Xianwu, who sells Jeeps at Shandong Xinju Auto trading Co. in the eastern city of
“I really hope the situation will improve in the near future,” Chu said.
AP researcher
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