The recent surge in China's consumer spending, notably attributed to the annual Singles Day shopping event, has caught the attention of analysts at Goldman Sachs. However, they express skepticism about the sustainability of this uptick against the backdrop of the country's struggling property sector.
The analysts highlight a troubling cycle within the real estate market: declining property prices are causing prospective buyers to delay purchases, which could further exacerbate price drops. This negative feedback loop has raised concerns about the broader economic impact and the need for decisive action from policymakers.
To combat these challenges, Goldman Sachs suggests that a clear strategy from the government is essential. They recommend an expansion of the central government's balance sheet as a potential remedy to stabilize the market.
Despite efforts to support new housing development models through initiatives like a 1 trillion yuan supplementary lending program, Goldman Sachs anticipates a continued slowdown in private development. This projection is based on an imbalance observed between high numbers of construction starts and actual construction activity.
The Chinese property market currently presents a dichotomy: while traditional pre-sale developer models are suffering, there is growth in sectors supported by public housing and urban upgrades. However, even with governmental measures in place, the outlook remains cautious due to the underlying issues affecting private sector developments.
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