Property crisis haunts China investment, consumption

The growth of China’s fixed-asset investment (FAI) and retail sales has remained slow so far this year as falling home prices continue to suppress property investment and people’s spending.

The country’s FAI increased 3.6% to 28.7 trillion yuan (US$4 trillion) in the first seven months of this year from a year ago, according to the National Bureau of Statistics (NBS). Investment made by state-owned-enterprises (SOEs) grew 6.3% year-on-year but there was no growth in private investment.

Private investment was stagnant as a 10.2% decline in property investment offset the growth in other sectors.

If property investment is excluded, China’s private investment rose 6.5% year-on-year in the January-July period while the country’s FAI would have gained 8%.

For the same period, retail sales, a key indicator of China’s domestic consumption, increased 3.5% to 27.4 trillion yuan, the NBS said Thursday.

Sales of convenience stores, shops and supermarkets rose 5.2%, 4.5% and 2%, respectively. But sales of department stores and branded shops decreased 3.8% and 1.6%, respectively.

Online sales with physical goods rose 8.7% to 7 trillion yuan, representing 25.6% of total retail sales. Online sales of food and clothes surged 19.7% and 6.3%, respectively.

“People now have a lower expectation of their assets’ returns as they cannot make money from the property and stock markets,” a Guangdong-based writer using the pseudonym “Dahuzi” says in an article on Thursday. “It’s normal that they don’t want to spend money.”

“To be more willing to spend money, people need to see that the property and stock markets or inflation are going to surge,” he says. “It all depends on whether the United States Fed will start the rate cut cycle in