by The coming property correction is inevitable, and the extent of the impact on the overall economy depends highly on how it is managed. Just as the Chinese government has managed Evergrande’s default process, we implicitly assume that Beijing will demonstrate relative competence in mitigating systemic risks as part of the property correction.As such, our baseline scenario is reasonable if not deliberately more aggressive on the downside. For instance, our projection does not account for property demand from replacement of aging property nor factors like monetary easing. Even without accounting for those positive offsets, the overall growth impact is actually similar to that during the US-China trade war.Therefore, so long as Beijing manages this process well, the Chinese economy will
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The coming property correction is inevitable, and the extent of the impact on the overall economy depends highly on how it is managed. Just as the Chinese government has managed Evergrande’s default process, we implicitly assume that Beijing will demonstrate relative competence in mitigating systemic risks as part of the property correction.As such, our baseline scenario is reasonable if not deliberately more aggressive on the downside. For instance, our projection does not account for property demand from replacement of aging property nor factors like monetary easing. Even without accounting for those positive offsets, the overall growth impact is actually similar to that during the US-China trade war.
Therefore, so long as Beijing manages this process well, the Chinese economy will manage through the property correction. Of course, a hard landing is possible if this correction is mismanaged or spins out of control. We will examine the financial risks associated with a hard landing in a future analysis.
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