https://asiatimes.com/2021/10/china-must-lead-the-new-industrial-revolution/
The second great transformation of China’s economy is underway, and it won’t happen without some pain.
China’s meager GDP growth of 4.9% in the third quarter is both worse and better than it looks. Net of exports, GDP growth would have fallen to around 1%, mainly due to the air pocket in the property sector that comprises a quarter of GDP.
The good news is that China’s industrial supply chains rose to the occasion and compensated for disrupted manufacturing output elsewhere in the world. September exports rose 28% year-on-year.
China wants to shift investment toward high productivity outlets in manufacturing and services, away from construction. Its strategy depends on harnessing the new technologies of the so-called Fourth Industrial Revolution, which offer a high growth path for a country with a stagnating labor force.
That’s the omelet that China’s leadership has promised; what we have for the time being are some broken eggs.
Chinese monetary officials, I reported September 24, want to reduce home prices as a matter of social policy, and they used the Evergrande crisis as a blunt instrument to do so. Once the government signaled lower home prices, current sales collapsed. The top 100 developers reported that September sales fell 37% compared with the same month in 2020. Anecdotal reports have asking prices for new homes down by 30% to 40% in some third- and fourth-tier cities.
Homes in top-tier cities such as Beijing, Shanghai and Shenzhen now sell for about 50 times the average Chinese income. That number is exaggerated because employees in top-tier cities typically earn a multiple of the average income, but it still puts homes out of reach of a very large number of Chinese.
In second-tier modern cities like Chengdu or Wuhan, the ratio of home price to average income is 20:1, about the same as in Singapore. To put this in perspective, Taipei homes sell for 34 times the average income.