Property investment fell by 10.1 per cent, year on year, in the first five months of 2024, worsening from a 9.8 per cent drop from January through April and a 9.5 per cent drop in the first quarter.
We must acknowledge that it will take some time for the effects of policy measures to be shown
Floor space of new homes sold fell by 20.3 per cent in the first five months of the year compared with the same period of 2023. The total sales value of new homes plunged 27.9 per cent, year on year.
“We must acknowledge that it will take some time for the effects of policy measures to be shown, and that the real estate market is still in the process of adjustment,” NBS spokeswoman Liu Aihua said during a press conference on Monday. “The overall performance of the national economy was stable.
“However, we should be aware that the external environment is complex and severe, effective demands remain insufficient at home, and a sustained economic recovery is still confronted with multiple difficulties and challenges.”
China’s measures to support real estate will have an effect but are likely to fall short of solving the bigger problem, said Harry Murphy Cruise, an economist at Moody’s Analytics. And they are most likely to be successful in top-tier cities where populations are rising along with wages, he said.
Still, they are “just a drop in the ocean relative to the scale of China’s housing troubles”, Murphy Cruise said. “These supports aim to slow the sector’s falls and bide time until it naturally finds a floor.”
Retail sales growth, a barometer for consumption, rose by 3.7 per cent year on year last month, compared with the 2.3 per cent growth seen in April.
“Retail sales actually exceeded our expectations, reflecting reasonable household income growth,” said Xu Tianchen, senior economist with The Economist Intelligence Unit. “However, weak car sales were a big drag that precludes otherwise stronger growth.”
Automobile retail sales in China reached 388 billion yuan in May, down 1.4 per cent, year on year, according to Post calculations based on NBS data.
As for China’s property-investment dip, Xu said this “reflects the deepening downturn in the property sector, which calls for the need for further policy stimulus”.
Meanwhile, the nation’s industrial output grew by 5.6 per cent last month from May 2023, after a 6.7 per cent year-on-year rise in April.
“Economic activities were stable in May,” said Zhang Zhiwei, chief economist at Pinpoint Asset Management. “Industrial production slowed while retail sales improved moderately in May compared to April. But this may be partly driven by the fact that there were two more working days in April this year compared with last year, while the working days in May this year and last year were the same.
“High-frequency data suggests economic momentum in June has been weak. The set of policy-easing measures in the property sector has not yet boosted the demand from homebuyers on the national level. Meanwhile, external demand seems to have stayed strong to sustain industrial production growing faster than retail sales.”
Some analysts say trade tariffs proposed by the United States last month on 14 categories of made-in-China products, including semiconductors and electric vehicles, will refocus government attention on the domestic market.
“Growth is coming from a combination of exports and investment, especially in the manufacturing sector,” said Christopher Beddor, deputy director of China research at Gavekal Dragonomics. “Domestic consumption is clearly pretty weak.”
China’s surveyed urban unemployment rate stood at 5 per cent last month, unchanged from April.
Gary Ng, senior economist at Natixis Corporate and Investment Bank, said it will be “a bit difficult” for China to reach its GDP target for the year.
“And the estimation right now is that China’s economy will reach a growth level of 4.8 per cent in 2024 if we do not see more” policy measures implemented, Ng said.
“The whole situation is quite challenging because some of the problems that we see in the economy haven’t really seen much improvement,” he added. “And of course, industrial production is still growing quite rapidly, but at the same time, obviously, there’s a question about whether some of the China sectors may face overcapacity.”
Additional reporting by Alice Li