Steering a Firm Course: Real Estate Investors Should Not Be Deterred by Short-Term Events in China
Negative news and reports on the Chinese economy have emerged as the world’s growth engine shows signs of decelerating. People have started to question China’s growth pattern, which relies heavily on investment, and real estate investors are afraid of being caught in a bubble. Although it is prudent to be sceptical and cautious, investors should not be pessimistic. A more in-depth look at the risks associated with the Chinese economy and the property market demonstrates that much of the perceived risk is, in fact, overstated.
SHIFTING THE FOCUS
Growth patterns: Unlike developed western economies, where consumption is the most important driver, the Chinese economy relies heavily on investment that contributes to nearly half of the economic growth. This is shown clearly in the “Investment in China as a Percentage of GDP” chart to the right. The development model has been working well during the past decade,