China’s economic successes fail to defend its real estate sector

It was the year 1978 when China, after spending a number of decades under the sway of a
Soviet-style centrally planned economy, adopted the market-oriented mixed economy under one-party rule. From that time the whole of China has experienced unprecedented economic growth that has made economists (even of the capitalist school of economics) term it as “the world’s manufacturing center”. There is no doubt in it that this growth has made China attain position of a major economic power in the whole of Asia. It is to be noted that, in respect of economic power, the position of China is next to Japan only and a little bit behind the United States in purchasing power.

On the other hand, in world rankings, China happens to occupy the enviable position of the sixth largest merchandising nation in the world, the twelfth largest exporter of commercial services, and the largest beneficiary of foreign direct investments. It is worthwhile to mention that the entrance in the World Trade Organization in late 2001 has stimulated China’s ascendancy in the global arena substantially. However, there are some dissensions. A large section of the observers, in the international spectrum, are found to be skeptical of the Government of China’s figures, which depict the country’s economic position. However, there is no doubt that China has emerged, of late, as a major economic player in the globe.

Here are some demerits. The successes are noteworthy but have failed to provide a stubborn resistance against the ongoing worldwide recession. The whole country is shivering under the impact of the global economic crisis and the worst affected sector has been the real estate. Take for instance China Vanke, which is the country’s biggest listed property developer. The company has experienced almost 9 percent reduction in real state sales only in the year 2008. Only in the month of December sales dropped 13.8 percent in terms of area from a year earlier to 661,000 square metres, while in value terms they fell 13.5 percent to 5.34 billion yuan, according to the company’s statement.

Both the figures and trend are dreadful and exemplify a steady decline in China’s real estate market. Is there any chance of revival? Everyone is trying to find out this answer.