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MNI INTERVIEW 2: China Property A Global Risk-Ex BOJ Economist

TOKYO (MNI)

China’s property market could face a deep and prolonged downturn reminiscent of Japan’s post-1980s bubble slump, depressing Chinese and global economic growth, former Bank of Japan chief economist Toshitaka Sekine told MNI,

"Data until 2019 that I gathered showed that the pattern of the Chinese real estate price rise is the like the same pattern seen in the bubble era in Japan,” Sekine, now a professor at the School of International and Public Policy at Hitotsubashi University, said in an interview.

“If the real estate markets undergo a full-scale correction, it will be prolonged and huge,” he said, adding that Beijing would struggle to mitigate the effects of a property slump on the Chinese and global economies.

“The Chinese authorities are unlikely to allow a hard landing option, but adjustment pressure will persist for a prolonged period, and it will be very difficult for the authorities to absorb the pressure,” Sekine said. “This will eventually restrict global economic growth and worsen investors’ financial positions for a prolonged period.”

Sekine noted that the BOJ’s latest Outlook Report pointed to a possible gradual decline in Chinese medium-to-long-term growth potential due to the property market drag.

“The BOJ cited the Chinese real estate markets as one risk. But I am wondering that the BOJ might have had crucial information and have been more seriously worried about them,” Sekine said. “I think that the BOJ seemed to ambiguously write the state of the Chinese real estate markets in the Outlook Report."

In the Outlook, the BOJ said that signs of a slowdown in the Chinese economy "could become clearer due, for example, to the effects of adjustments in its real estate sector, with the medium- to long-term growth potential declining gradually."

Sekine said that slower growth in China could also flow into financial markets. “If the Chinese economy has been eroded by real estate adjustments," then investors could see tough conditions "for a prolonged period,” Sekine said.

MNI Tokyo Bureau | +81 90-2175-0040 | hiroshi.inoue@marketnews.com
MNI Tokyo Bureau | +81 90-2175-0040 | hiroshi.inoue@marketnews.com

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