Commentary: Why Real Estate Is Still So Important to China’s Economy

Although consumption and tech innovation are still China’s policy priorities, stabilizing the slumping real estate market remains crucial, especially in light of the recent cooling in both sales and prices.

Real estate’s contribution to China’s economy has declined over the last few years, but that doesn’t mean the sector is no longer important. The economic fallout from the real estate slump has been masked in part by strong overseas demand for Chinese goods. If foreign demand takes a turn for the worse, it will become clear just how important real estate is to stabilizing China’s economy.

China’s Exports Cushion Blow From Property Slump

The key to stopping the property decline and bolstering the market lies in stabilizing home prices, as they reflect household wealth and the value of banks’ collateral, creating the bedrock for consumer confidence and credit expansion. Purely relying on lower prices in the hope of boosting sales is unlikely to lead to full market rebalancing.