MNI POLICY: Property Investment To Cushion China Slowdown

--Land Sales Strong, Construction Investment to Follow

--Trade War Effects to Worsen Next Year

--Easing Policies May Help Maintain Growth

     BEIJING (MNI) - Strong investment in China's property industry should help

counter downward pressures on the economy in 2019 while the government prepares

other measures to support growth, a well-known economist said.

     Sales of land were particularly high in the first half of 2018, and

investment in construction and installation tends to follow land acquisitions in

subsequent months, Wu Ge, senior fellow at the China Finance 40 Forum, said in

CF40 quarterly Macro Policy Report briefing

     "While real estate investment has been deficient in the fourth quarter, the

resilience may last through next year," until policymakers are able to respond,

said Wu, a former official in the People's Bank of China's monetary policy

department, although he conceded that the economy may slow further before any

recovery.

     The trade war with the U.S. has exacerbated a slowdown due to declining

investment and consumption, partly resulting from the government's deleveraging

campaign.

     The slide in infrastructure investment has slowed, but the sector's outlook

may depend on government policies next year, Wu said. China lays out annual

spending at the National People's Congress in March.

     The central bank's decision to allow the yuan greater flexibility,

especially to depreciate, may also help absorb the impact of punitive tariffs

imposed by the administration of U.S. President Donald Trump, Wu said.

     In August and September, exports registered double-digit growth, as

importers rushed to get their orders in before the new tariffs take effect, Wu

said. But the effect may not last, and deals made at the biggest annual trade

expo, Canton, Fair plunged 30% from last year.

     Overall, the trade war may not undermine China's strength in exports, Wu

said, citing Germany and Japan, which have both endured conflicts with the U.S.

and remained competitive. "The shift of a whole production chain is not

something that can be done that fast," he said.

     Fiscal, monetary and supply-side reform policies also provide "some

strength offsetting the downward pressure," he said, noting that the official

deleveraging campaign which made have hit investment and private financing can

be eased.

     The government should also be able to keep employment stable, its top

priority.

     "The labour market is pretty good," Wu said. While university graduates

have trouble finding work, there are large shortages of skilled and migrant

labour in China, he said.

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

--MNI Beijing Bureau; +86 (10) 8532 5998; email: marissa.wang@marketnews.com

--MNI London Bureau; +44208-865-3829; email: Jason.Webb@marketnews.com

[TOPICS: MAQDS$,MMQPB$,M$A$$$,M$Q$$$,MI$$$$,MT$$$$,MGQ$$$]