JCER Warns of Impending Real Estate Crisis Impacting China & 17 Other Countries by 2027

• 21 December 2023
• Property Focus
• 2024 Views

Amidst mounting concerns over China’s real estate market, the Japan Centre for Economic Research (JCER) has sounded an alarm, cautioning that a potential burst of the property bubble could severely impede the nation’s economic growth. The repercussions of Beijing’s response to the property debt crisis could reach far and wide, with implications for the ambitious goal of doubling the country’s GDP by 2035, according to Nikkei Asia on December 19^th, 2023.

In its latest report, JCER outlines various scenarios, with a particularly grim outlook in the event of a real estate bubble burst in 2027, coinciding with the conclusion of President Xi Jinping’s third term. The report suggests that mishandling the crisis may lead to a slowdown in infrastructure and other investments, a weakened yuan, accelerated capital outflows, and a potential drop in China’s real growth rate to zero in 2027. This is a stark contrast to the baseline scenario, projecting a growth rate of 3.2%. The repercussions would extend beyond China, affecting trade and causing real growth rates for 17 other economies to plummet.

President Xi’s ambitious economic goals face considerable challenges, even without a major crisis. In the baseline scenario, China’s real growth rate is predicted to dip below 3% in 2029 and fall below 2% in 2035. The report underscores the importance of eliminating financial risks tied to real estate and local finance troubles to ensure the realization of Xi’s economic vision.

Additionally, the report explores a reform scenario where China addresses financial risks, promotes transparent systems, facilitates trade, and eases tensions with the U.S. Despite potential progress, achieving a real growth rate of 2.5% in 2035, China’s nominal GDP would still fall short of the U.S.’s. This poses a formidable challenge to China surpassing the U.S. economy, even with substantial reforms.

• Economy and Finance