Will China’s property sector revive in 2023?

CHINA FINANCIAL - Report 20 Jan 2023 by Michael Pettis

Special points to highlight in this issue:

* After a terrible Year of the Tiger, the year of the Rabbit should be a year of recovery for the Chinese economy, driven by a partial reversal of last year’s contraction in consumption. I’ve been saying this for several months, however, and while I still believe it to be the correct analysis, I worry that in recent weeks this has become so much the consensus that if it’s wrong, it will matter a lot more than if it’s right.

* The most recent data release by the National Bureau of Statistics reinforces the narrative that has emerged over the past several months. Last year was a bad year for consumption and household income, both of whose share of GDP declined. It was a good year for export growth, and a bad year for import growth, although by the end of the year both were declining rapidly. It was also a bad year for property sector investment, although this was more than balanced by infrastructure investment, which did most of the heavy lifting for the economy in 2022. And finally, China’s debt burden continued to surge.

* Probably the most important question for 2023 will be whether or not a partial revival of the property sector is at all possible.

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