Producer price inflation created rising prices in 2021 without heavily impacting consumer price inflation.
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The government has also encouraged banks to help healthy developers acquire distressed developers’ projects.Įnjoying this article? Click here to subscribe for full access. Meanwhile, it appears unlikely that the government will directly bail out indebted developers, choosing to use monetary tools in order to ease the accompanying credit crunch. The government has signaled that it is willing to ease financial terms to some extent in order to reduce fallout in December, the central bank lowered the loan prime rate and reserve requirement ratio in order to increase bank lending to creditworthy customers. The question surrounding China’s real estate downturn is the extent to which debt defaults will impact the rest of the financial sector as well as domestic investors. Get briefed on the story of the week, and developing stories to watch across the Asia-Pacific. At the same time, consumers often face challenges in purchasing new homes due to the higher prices, which the government attempts to address by encouraging the construction of affordable housing. This industry represents a key investment channel for consumers, and falling home prices are quickly shored up by local government policies. The economic work meeting laid out the need to promote the construction of affordable housing and adjust the commercial housing market to better meet buyers’ housing needs. Debt among property developers will continue to pose a barrier to achieving financial health in this sector. Commercial sales and real estate investment growth have slowed down. However, risks are likely to be tightly controlled due to the upcoming 20th Party Congress in the second half of the year, as Xi Jinping is widely expected to notch a third term in office.Ĭhina’s real estate developers suffered through 2021 due to increased financial restrictions, which led some developers, most famously Evergrande, to default on some debt repayments. These include combating the real estate downturn and inflation, as well as bringing about common prosperity. While the economy may continue to suffer from the ongoing trade war and possible COVID-19 resurgences, new issues are likely to rise to the forefront of economic problems in 2022. trade war, COVID-19 restrictions, and power shortages. China’s economy has faced major disruptions through 2021 due to the ongoing China-U.S.