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.
The CIA has a message for Chinese government officials worried about their place in Chinese President Xi Jinping’s (習近平) government: Come work with us. The agency released two Mandarin-language videos on social media on Thursday inviting disgruntled officials to contact the CIA. The recruitment videos posted on YouTube and X racked up more than 5 million views combined in their first day. The outreach comes as CIA Director John Ratcliffe has vowed to boost the agency’s use of intelligence from human sources and its focus on China, which has recently targeted US officials with its own espionage operations. The videos are “aimed at
STEADFAST FRIEND: The bills encourage increased Taiwan-US engagement and address China’s distortion of UN Resolution 2758 to isolate Taiwan internationally The Presidential Office yesterday thanked the US House of Representatives for unanimously passing two Taiwan-related bills highlighting its solid support for Taiwan’s democracy and global participation, and for deepening bilateral relations. One of the bills, the Taiwan Assurance Implementation Act, requires the US Department of State to periodically review its guidelines for engagement with Taiwan, and report to the US Congress on the guidelines and plans to lift self-imposed limitations on US-Taiwan engagement. The other bill is the Taiwan International Solidarity Act, which clarifies that UN Resolution 2758 does not address the issue of the representation of Taiwan or its people in
US Indo-Pacific Commander Admiral Samuel Paparo on Friday expressed concern over the rate at which China is diversifying its military exercises, the Financial Times (FT) reported on Saturday. “The rates of change on the depth and breadth of their exercises is the one non-linear effect that I’ve seen in the last year that wakes me up at night or keeps me up at night,” Paparo was quoted by FT as saying while attending the annual Sedona Forum at the McCain Institute in Arizona. Paparo also expressed concern over the speed with which China was expanding its military. While the US
SHIFT: Taiwan’s better-than-expected first-quarter GDP and signs of weakness in the US have driven global capital back to emerging markets, the central bank head said The central bank yesterday blamed market speculation for the steep rise in the local currency, and urged exporters and financial institutions to stay calm and stop panic sell-offs to avoid hurting their own profitability. The nation’s top monetary policymaker said that it would step in, if necessary, to maintain order and stability in the foreign exchange market. The remarks came as the NT dollar yesterday closed up NT$0.919 to NT$30.145 against the US dollar in Taipei trading, after rising as high as NT$29.59 in intraday trading. The local currency has surged 5.85 percent against the greenback over the past two sessions, central
RSS