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By Ellen Zhang, Liangping Gao and Ryan Woo
BEIJING (Reuters) – Continued weakness last month in China’s housing market and production sector, which together account for part of the country’s gross domestic product, renews the dangers to its recovery already threatened by disruptions caused by widespread COVID restrictions.
Nearly 70 Chinese cities reported a drop in new home prices in August, since the beginning of the COVID-19 pandemic, according to China Index Academy on Thursday, one of China’s largest independent real estate research firms.
Also on Thursday, a survey of the personal sector showed that Chinese factory activity for the first time in 3 months in August amid weakening demand, while power shortages and new COVID-19 outbreaks disrupted production.
The world’s largest economy right now slowed sharply in the current quarter due to widespread COVID-19 lockdowns. Mounting evidence suggests that the incipient recovery in the third quarter is likely to run out of steam due to COVID surges and an extended weak outlook for the real estate sector, prompting economists to lower their GDP forecasts.
“Given the influence of unforeseen electricity rationing, as well as the resurgence of COVID, the slowdown in real estate and low consumption, I have brought back GDP expansion in the third quarter to 3. 5%-4% of five percent,” said Nie Wen, an economist at the Shanghai-based Hwabao Trust.
“The cabinet has expressed a massive and serious fear about the current state of the economy,” he said.
China said it would publish detailed steps of recently announced economic policy measures in early September, state media quoted it as saying on Wednesday, after an assembly chaired by Premier Li Keqiang.
FALLING HOME SALES
New home costs in a hundred cities studied through China Index Academy fell 0. 01% from last month, unchanged from July, reflecting the continued cooling of the housing market.
Of the hundred villages, 69 reported a drop in monthly prices, up from 47 villages in July.
Nationwide, new home sales through land-based domains fell 32% in August from a year earlier, down from a 33% drop in July and marking the thirteenth month of double-digit declines, according to another report by Shanghai-based E-house China Research. and the progression was shown on Thursday.
The knowledge may put more pressure on local governments to temporarily implement more measures for homebuyers and developers, after lawmakers on Wednesday suggested local governments use special loans flexibly to ensure home delivery.
The real estate sector, which accounts for about a quarter of China’s economy, has gone from crisis to crisis since the summer of 2020 after regulators stepped in to reduce top debt, forcing some developers to default on their debts and fight for entire projects. , which caused buyers to threaten to prevent payment.
Analysts say weakness will continue to weigh on customer confidence, prolonging the housing slowdown and suggesting a further loss of economic momentum.
SOFT FACTORY ACTIVITY
The strangely weak reading of Thursday’s Caixin PMI personal survey echoed the official PMI released on Wednesday, which is also in contraction territory.
The resilience of China’s production industry, which accounted for 27. 4% of China’s GDP in 2021 since the beginning of the COVID-19 pandemic, has allowed global supply chains to function.
But the COVID brakes prevailing in China this year with the emergence of the transmissible variant of omicron threaten to destabilize the sector.
On Thursday, Chengdu announced the lockdown of its 21. 2 million inhabitants, the city with the largest population to be confined from Shanghai earlier this year.
“The economy is likely to experience a double low due to persistent real estate weakness, power shortages amid heat waves and local COVID outbreaks,” Xiangrong Yu, Citi’s lead economist in China, said on Thursday.
It expects China’s year-on-year GDP growth to be 3. 9 for the third quarter, faster than 0. 4 in the current quarter, and 3. 5 for the full year.
(Reporting via Ellen Zhang, Liangping Gao and Ryan Woo; editing via Simon Cameron-Moore and Ana Nicolaci da Costa)