China to withstand housing slowdown: Goldman

The Goldman Sachs said in a research report on Thursday that China's economic growth will not be jeopardized by a slowdown in its property sector, which Beijing is now determined to cool down and make housing more affordable.

The investment group said in the report that Chinese households borrowed much less from the banks whole clinching mortgage deals than families in the developed countries. The big lenders, considered key to economic stability, are less exposed to property price risks.

"The housing slowdown is unlikely to cause a much broader significant slowdown in activity due to low leverage," the Goldman report said. "It seems unlikely that even a fairly large fall in prices would create the kind of negative equity we saw in the U.S.".

China has a relatively under-leveraged household sector, as the minimum deposit for buying first homes is at least 20 percent, while second-home purchases need the least 40 percent.

Now that Beijing has launched a much trumpeted drive to rein in property prices, which rose more than 40 percent in 2009 and early this year in most Chinese cities, more in China and abroad are increasingly concerned about the negative impact of the clampdown on China's overall economy.

As China's central government has hiked the down payment of a second housing, and halted bank lending to third and more housing, sales have slumped by more than 60 percent in cities including Beijing, Shanghai and Shenzhen. Analysts predict that prices will drop by as much as 40 percent in some cities.

The People's Bank of China, the central bank, raised lenders' minimum reserve requirement three times this year, while it has yet to raise benchmark interest rates to stem rising inflationary pressure. The consumer price index for April, due out next week, is expected to reach 2.8 percent or higher.

People's Daily Online