China has the savings to deal with property crisis, with no global spillover: economist

S&P Global Ratings global chief economist Paul Gruenwald says China is under no external or market pressure to deal with the property market

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Paul Gruenwald, global chief economist at S&P Global Ratings. Photo: K.Y. Cheng

Published: 7:30pm, 11 Sep 2024

China’s property market remains the biggest downside risk to its economic growth target this year, with policymakers seemingly not in a hurry to make significant changes because its impact is mostly confined to the world’s second-largest economy, according to the chief economist for a global ratings agency.

“China has the savings to deal with this. It’s not really spilling over too much to the rest of the world,” said Paul Gruenwald, global chief economist at S&P Global Ratings.

“So they’re not going to be forced into dealing with the property excesses by any external or market pressure. They can do it at their own time, but we are not at the bottom yet.”

In May, China unveiled wide-ranging measures to stabilise its property sector, which has been in contraction since the debt default by Evergrande Group in 2021, but analysts believe bolder steps are still required to turn the tide.

Average prices for new homes across 100 cities rose by just 0.11 per cent in August from July, slowing from the previous month’s 0.13 per cent rise, according to property researcher China Index Academy.

China, by design, is not very dependent on the rest of the world for financing

Paul Gruenwald, S&P Global Ratings

And despite China’s growing influence in trade globally, the impact of its local government debt woes and property crisis are still very much isolated from the rest of the world largely because of its investment-heavy development model that counts on state capital, Gruenwald said.