China's economy is likely to experience a hard landing, as the nation's property sector is close to bursting due to excessive investment over the past years, a Morgan Stanley economist said in Taipei yesterday.
The remarks came as Beijing tightens its grip on credit in an attempt to steer China's overheated economy to a soft landing.
"The development of China's property market is the determining factor for a hard landing or a soft landing, rather than the government's policies," Andy Xie (
"Beijing's current measures only put a lid on land use, but scarcely have any effect on slowing the expansion of China's property sector," Xie added.
The huge investment in the property sector has been one of the major forces driving China's economic growth over the past few years, and the crash of the housing industry could cause a setback for the economy, the Hong Kong-based economist explained.
Xie, 44, known for his straightforward attitude, said in late April that Asian equities markets had peaked following the announcement by Chinese Premier Wen Jiabao (溫家寶) that Beijing may "take effective and very forceful measures" to rein in China's economy.
Taiwan's benchmark TAIEX has fallen 18 percent since then, closing at 5368.02 points yesterday.
At yesterday's seminar, Xie maintained his downbeat perspective, saying Asian stock markets "have not hit the bottom yet," as the interest rate hike by the US Federal Reserve on Wednesday will attract hot money back to US stock markets.
Xie said that Asian stock markets could rebound after the Fed completed its series of interest rate hikes this year.
Once again, the Morgan Stanley economist went against the grain by predicting that the weakening housing market would put a sudden brake on China's economic growth, despite the hopes of Chinese officials to fine-tune the overheating economy.
"Yes, there are numerous rich people who can afford luxury apartments, but the number is not big enough to level off the surfeit," he said.
This year, around 650 million square meters of real estate are waiting for buyers, compared to 550 million square meters last year, according to Xie.
To spur demand, a drastic 20 percent to 30 percent drop in prices will likely occur, whereas a drop of 10 percent or less would be necessary to give China its much anticipated soft landing, Xie said.
"In that case, [property developers] will stop investing as the profits will be squeezed," he said.
China's possible hard landing will have a severe impact on Japan and South Korea due to a reduction in equipment imports, which is happening now, Xie said.
As for Taiwan, Xie said "the impact will be very limited, as Taiwan is gradually relying on private consumption, not exports, for growth."
When asked which sector would be a good investment target, Xie suggested investors shift from tech firms to companies which can cater to customers' needs through intensive networks, or that have brandname products with high growth. He also cited Wal-Mart Stores Inc, the world's biggest retailer, as a good example.
"Tech shares no longer enjoy a high return, as the sector is maturing," Xie said.
US President Donald Trump yesterday announced sweeping "reciprocal tariffs" on US trading partners, including a 32 percent tax on goods from Taiwan that is set to take effect on Wednesday. At a Rose Garden event, Trump declared a 10 percent baseline tax on imports from all countries, with the White House saying it would take effect on Saturday. Countries with larger trade surpluses with the US would face higher duties beginning on Wednesday, including Taiwan (32 percent), China (34 percent), Japan (24 percent), South Korea (25 percent), Vietnam (46 percent) and Thailand (36 percent). Canada and Mexico, the two largest US trading
AIR SUPPORT: The Ministry of National Defense thanked the US for the delivery, adding that it was an indicator of the White House’s commitment to the Taiwan Relations Act Deputy Minister of National Defense Po Horng-huei (柏鴻輝) and Representative to the US Alexander Yui on Friday attended a delivery ceremony for the first of Taiwan’s long-awaited 66 F-16C/D Block 70 jets at a Lockheed Martin Corp factory in Greenville, South Carolina. “We are so proud to be the global home of the F-16 and to support Taiwan’s air defense capabilities,” US Representative William Timmons wrote on X, alongside a photograph of Taiwanese and US officials at the event. The F-16C/D Block 70 jets Taiwan ordered have the same capabilities as aircraft that had been upgraded to F-16Vs. The batch of Lockheed Martin
GRIDLOCK: The National Fire Agency’s Special Search and Rescue team is on standby to travel to the countries to help out with the rescue effort A powerful earthquake rocked Myanmar and neighboring Thailand yesterday, killing at least three people in Bangkok and burying dozens when a high-rise building under construction collapsed. Footage shared on social media from Myanmar’s second-largest city showed widespread destruction, raising fears that many were trapped under the rubble or killed. The magnitude 7.7 earthquake, with an epicenter near Mandalay in Myanmar, struck at midday and was followed by a strong magnitude 6.4 aftershock. The extent of death, injury and destruction — especially in Myanmar, which is embroiled in a civil war and where information is tightly controlled at the best of times —
China's military today said it began joint army, navy and rocket force exercises around Taiwan to "serve as a stern warning and powerful deterrent against Taiwanese independence," calling President William Lai (賴清德) a "parasite." The exercises come after Lai called Beijing a "foreign hostile force" last month. More than 10 Chinese military ships approached close to Taiwan's 24 nautical mile (44.4km) contiguous zone this morning and Taiwan sent its own warships to respond, two senior Taiwanese officials said. Taiwan has not yet detected any live fire by the Chinese military so far, one of the officials said. The drills took place after US Secretary
RSS