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China’s housing crisis could take a decade to resolve: Economist

  • Resolving China’s housing crisis could take up to a decade, economist Hao Hong told CNBC.
  • Hong, a well-known economist, said there are simply too many empty houses in China.
  • Hong’s social media accounts WeChat and Weibo were suspended last year after a series of pessimistic posts about the Chinese economy.

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It could take up to a decade to resolve China’s housing crisis, a prominent economist said on Tuesday.

“Rehabilitation of the real estate sector could be a work of several years or even decades ahead. The reason is that we have built far too many housing for Chinese people,” Hao Hong, chief economist at Grow Investment, told CNBC on Tuesday.

“And the Chinese urbanization process, which has progressed very quickly over the past decade, is also coming to a standstill,” Hong said.

Hong’s comments are significant as he is known for his accurate assessments of China’s stock markets.

His views on China’s beleaguered real estate market also echo those of He Keng, a former top Chinese official, who said over the weekend that there could be enough vacant houses in China to house up to 3 billion people – nearly 10 times that number of the population of the country US.

The experts’ comments came amid a housing crisis in China that many investors fear will spread throughout the economy and even beyond its borders.

Hui Ka Yan, the billionaire founder and CEO of debt-ridden real estate developer China Evergrande, is currently under police surveillance, Bloomberg reported on Wednesday, citing unnamed sources with knowledge of the matter.

China’s economy is struggling for a convincing recovery after the COVID crisis, as GDP growth fell short of expectations in the second quarter and youth unemployment hit a record high. The real estate sector, along with related industries, contributes up to 30% of the country’s GDP.

And experts told insiders that while China is trying to revitalize its real estate sector by stimulating consumer demand, consumers are unlikely to demand new homes given record high youth unemployment rates and slower economic growth.

“There is no major impact so far,” Hong told Insider on Wednesday, citing Beijing’s stimulus measures.

Real estate investment in China fell about 19% in August from a year earlier, the 18th consecutive month of decline, according to Reuters calculations based on official data released on September 15.

Still, China’s economy could see an upturn once problems in the real estate market are resolved, Hong told CNBC.

“Once people’s expectations are reset and the economy restructures itself to differentiate itself from other industries rather than relying primarily on the real estate sector for growth, we will actually have a better, much healthier Chinese economy than before,” said he to the network.

Hong’s social media platforms WeChat and Twitter-like Weibo were suspended in late April last year after a series of pessimistic comments as China’s stock market faltered. It was unclear which of Hong’s posts triggered the suspension, but he had been critical of China’s temporary pandemic lockdowns and slowing growth at the time, according to Nikkei. Other analysts and economists were also targeted.

A few days later, he quit his job as head of research at the state-owned Bank of Communications International. The broker said at the time that he resigned for “personal reasons.” Last September, he resurfaced at Grow Investment Group, a Shanghai-based investment firm.

Hong’s verified WeChat and Weibo accounts are now back online.

Another expert – Li Daokui, a former adviser to the People’s Bank of China – told Bloomberg on Tuesday that when China’s real estate market recovers, it will return as the country’s key growth engine. However, he said the sector’s impact on the wider economy would be “much smaller”.

Evergrande did not immediately respond to Insider’s request for comment.

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