Over the years, Fathom Consulting has created a wealth of proprietary indicators, many of which originate from bespoke consultancy projects and provide unique insight into an economy. Over the course of this year, a handful of those proprietary indicators will be released in the Chartbook on Datastream from Refinitiv, supplementing those already available, such as our measure of China’s underlying growth rate, our China Momentum Indicator 3.0.
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Some of those scheduled for release relate to China’s housing market, highlighting that true vacancy rates in China are far higher than is implied by the official vacancy statistics. Indeed, we believe that China is mothballing properties in the construction phase, as well as failing to declare them as ‘vacant’ even when they are complete. Consequently, properties listed as being ‘under construction’, as well as ‘vacant’, should be considered when monitoring overcapacity in China’s housing market.
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Another indication of Beijing’s reluctance to declare properties as ‘vacant’ is the rising time taken to finish building a residential property in China, which we find to be a staggering seven and a half years. In several provinces, such as Shaanxi and Guizhou, it is double that!
Despite this, in testing economic times, China’s policymakers lean on state-sponsored infrastructure expenditure, such as increasing residential property construction, in a bid to support the economy. This keeps resources (such as labour) tied up, helping to keep a lid on social unrest and labour strikes, but it is not a sustainable solution, weighing on productivity and aggravating China’s non-performing loan problem, while adding to excess capacity. And with house price inflation already cooling (albeit still high), policymakers have a careful juggling act to perform in order not to flood the market with supply. With that in mind, it is of little surprise that the construction phase of properties in China is lengthening.
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With growth set to slow further from here, the cracks in China’s policy are likely to widen, piling pressure on officials to find a ‘new growth model’ that works rather than leaning on old-model tactics. But even this comes at a cost, with the average experience of emerging market economies that have managed to rebalance pointing to weaker economic growth — even in the medium term.
The charts in this article have been created using Chartbook on Datastream. The Chartbook, created and maintained by Fathom Consulting, is a library of over 9000 charts, containing up-to-date macro and financial market data for over 170 countries. Whether it is a particular topic, country or variable you are interested in charting, the Chartbook has everything you need. Simply type search ‘cbook’ into your Eikon search bar or click the ‘Chartbook’ tab on Datastream to find out more.
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