The latest real estate market boom in China hints that a property bubble may burst any time soon in China, posing a threat to the world’s second largest economy that is also expected to slow down below 6 percent, warned Zhiwu Chen, renowned economist and finance professor at Yale University, the U.S.
Residential mortgage loans comprised 70 percent of total debt market in the past three months in China, rising at unprecedented rates, Chen said during the session discussing on 2017 global economic look at the 17th World Knowledge Forum in Seoul, Korea where he is attending as a guest speaker. He added at a debt-fueled home-buying frenzy looks similar to the one that had driven the country’s stock market before its crash last summer. Beside the housing property bubble, the country is also facing other challenges - mounting debts and sharp appreciation in the Chinese currency, but the debt bubble seems to be manageable for quite some time if bank loans are strictly controlled, Chen said.
After maintaining the country’s growth rate in the 6 percent range in the last few years despite rising challenges, China is expected to see its growth rate fall below that level, the professor warned, adding that he would be amazed to see if China maintains its annual growth rate of between 3 percent and 4 percent in the next three years.
But before the election of the new state head at the 19th National Congress of the Communist Party of China that is scheduled to take place in November 2017, the Chinese government is expected to take every possible measure to sustain the growth rate at around 6.5 percent before 2018 by putting the economic stability as the top priority.
By Lee Sang-duk
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