Will the Current Property Market Downturn in China Lead to a Financial Crisis?

Will the Current Property Market Downturn in China Lead to a Financial Crisis? There appears to be no end in sight to China’s property downturn. The crunch is likely to continue given that Chinese authorities are not relenting in their drive to deleverage the sector. Even with the ongoing relaxation of property purchase restrictions and reduced mortgage rates, we expect that real estate investment and other core real estate indicators will remain weak. While the risks of a financial crisis are real, the likelihood of such a scenario is low. China has the necessary tools to manage and avoid a financial crisis—and is using them. But the economic pain is likely to increase. READ »