Hot real estate market 'unlikely' to damage real economy
China's economy saw stable growth in the third quarter and is expected to have grown by 6.7 percent, experts forecast on Monday.
Growth was stable in the third quarter as it was backed by several rising economic indicators, and the growing producer price index (PPI) in September was also a promising sign, Tian Yun, director of the China Society of Macroeconomics Research Center, told the Global Times on Monday.
China's PPI, which measures the cost of goods at the factory gate, ended a 54-month cycle of decline in September, according to data released on Friday by the National Bureau of Statistics (NBS).
"The rise of the PPI is a signal that aggregate supply and demand is regaining its balance. And we estimate that the PPI will keep growing in the next few months," said Lian Ping, chief economist at Bank of Communications.
Lian told the Global Times on Monday that relatively fast growth in investment in infrastructure in the first eight months will also help to have ensured the stable performance of the country's economy in the third quarter.
"Investment in infrastructure saw 19.7 percent growth year-on-year from January to August and the growth is forecast to exceed 20 percent in the fourth quarter this year," he noted.
NBS data released in September showed that the total retail sales of social consumer goods in August approached 2.75 trillion yuan ($408.6 billion), an increase of 10.6 percent on a yearly basis.
When consumption sees stable growth, it makes it less likely that overall economic growth will slow, experts said.
The central government set the GDP growth target for 2016 in a range from 6.5 percent to 7 percent.
Tian said that the country's economic growth will at least be able to meet the target of 6.5 percent.
The NBS is scheduled to release the country's GDP growth data for the third quarter on Wednesday.
Challenges remain
Although the whole-year growth target is likely to be reached, many problems and challenges still remain, experts warned.
"Many State-owned enterprises (SOEs) have high leverage ratios, which places a heavy burden on the country's economy," noted Tian, the expert with the China Society of Macroeconomics Research Center.
By the end of 2015, China's total debt reached 168 trillion yuan, and the total social leverage ratio stood at 249 percent of GDP, of which non-financial enterprises accounted for 131 percent, domestic news portal business.sohu.com reported on October 11, citing a report released by the Chinese Academy of Social Sciences.
What should be noticed is that about 65 percent of the debt in the non-financial enterprises comes from SOEs, according to the report.
Thus, SOE reform should be further pursued to help those companies deleverage and effectively reduce their debt, Tian said.
The State Council, China's cabinet, announced guidelines aimed at cutting company debt levels on October 10.
Encouraging mergers and acquisitions, bankruptcies, debt-to-equity swaps and debt securitization are some of the measures that will be applied to improve credit allocation and prevent wasteful spending in the economy.
"Also, the overheated real estate market is indeed an issue, but from my perspective, it will not smash the real economy, despite the predictions in foreign media reports," Tian said.
"This is because the soaring housing prices have been primarily in first-tier cities, and the central bank's move to rein in housing loans means there will not be a subprime crisis of the kind that occurred in the US."
Lian, the economist from Bank of Communications, said that the yuan will be under considerable pressure in the coming months, which is quite a large risk as a weakening of the yuan would cause many negative effects such as capital outflows and fluctuations in the stock markets.
The yuan ebbed to a six-year low against the dollar on Monday, with the central parity rate of the yuan declining 222 basis points to 6.7379 against the dollar.
The central government is expected to continue to adjust the country's economic structure and deepen supply-side reforms, Lian said.
He noted that efforts should also be made to keep expanding domestic demand.
