China’s real estate sector is a heavy burden on the economy; contracts for the 4th quarter in a row

China’s housing slowdown showed little sign of improvement in the three months to June, with output falling for a fourth straight quarter and growth prospects for the rest of the year clouding.

Output in the real estate sector, a key economic contributor, fell 7% in the second quarter from a year earlier, the National Statistics Office said in a report on Saturday. It remained the biggest drag on the world’s second-largest economy among all sectors, performing worse than in the first quarter of 2022 when it slumped 2%, the report said.

New pressures have recently emerged in the sector, with households in dozens of cities defaulting on their mortgages due to developers’ inability to complete construction of their homes. State media quoted analysts as saying it could damage the stability of the financial system if buyers in multiple locations followed suit.

In June, home sales fell 23.4% from a year earlier and property investment fell 9.4%, official figures showed on Friday.

China’s economy grew 0.4% in the second quarter, data showed, missing economists’ forecast of a 1.2% expansion and the slowest pace since the country was first hit by the coronavirus two years ago.

Hotels and restaurants, one of the worst-hit industries, saw production fall 5.3% last quarter, making it the second-worst performing sector. Compared to a 0.3% decline in the previous three-month period. Covid shutdowns and the suspension of restaurant services in several major cities have dealt a heavy blow, while fears of contagion have also discouraged consumers.

Transport, storage and mail decreased by 3.5% compared to the same period in 2021, while the production of industrial enterprises increased by 0.4%.

Elliot Frost

"Pop culture maven. Analyst. Writer. Wannabe food evangelist. Organizer. Friendly internet lover. Incurable troublemaker. Entrepreneur."

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