Amid all the recent news about the downturn in China’s economic growth, Dr. Clifford Lee, who heads up Townsend Solutions’ market studies and strategic projects area, offers some interesting comments and insight.
“When you look at China’s current gross domestic product (GDP) of $11.3 trillion, the 7 percent growth rate, which amounts to $791 billion, is by no means small,” says Lee. He stresses that it should be recognized that the reduction of China’s GDP growth was done to a certain extent by “design” and is not necessarily indicative of China’s economic performance. Lee agrees that a change of GDP growth from double digit (circa 2010) to the current 7% is somewhat painful because it was associated with job losses; however, he believes 7% has been the approximate growth level targeted by China’s government as a “healthy” and “sustainable” level. “This was clearly spelled out in China’s economic mandate, The Five-Year-Plans (FYP), which includes the 11th FYP, 12th FYP, and 13th FYP which just started this month.”
During China’s double digit growth years, many issues were introduced, notably environmental pollution, excessive energy consumption, and concerns over potential widespread inflation.
“I recall people were so worried about the possible burst of Beijing’s housing market when prices kept climbing higher and higher around 2010-2012”, says Lee, “but luckily that did not happen because there are so many government owned buildings in Beijing and this helped stabilize housing prices and the economy.”
Residential real estate together with construction accounts directly for more than 10 per cent of China’s gross domestic product.