Fitch cuts China’s economic growth forecast due to real estate

Credit rating agency Fitch cut China’s economic growth forecast for 2021 and 2022 as a slowdown in the housing market weighs on domestic demand.

Gross domestic product is expected to grow by 8.1% quest’year, in decrease from a previous forecast of 8.4%, while the forecast for 2022 was reduced to 5.2% from 5.5%, the rating agency said in a statement Thursday, based on its global report released this week past.

He said stagnation in real estate sector He is the main driver of the planned cuts, although the epidemic-related restrictions imposed in July and August have also affected China’s recovery.

The debt crisis of Evergrande, the country’s second largest real estate developer, is expected to slow China’s economic growth, but is likely to have little impact on the world’s second largest financial system, according to a former adviser to the Chinese Central Bank.

Evergrande is the most indebted real estate developer in the world, with a total debt of nearly $ 300 billion. The company struggled to pay its suppliers and warned investors it could default on its debt.

Financial market concerns have been in somewhat attenuated, after a vaguely made statement by Evergrande in on the repayment of the coupon by the yuan on its domestic bonds.

Evergrande’s real estate unit said that interest payments due today, September 23, on one of its bonds denominated in yuan, was settled through negotiations outside the clearinghouse, without specifying the amount due or the date of payment.

“The impact will be on the real economy because with Evergrande faltering, there will be a slowdown in the development of many projects,” Li Daokui, former People’s Bank adviser, told CNBC. of China.

Residential investment directly accounts for around 10% of China’s GDP and real estate activity has significant implications for other sectors. The economic slowdown has already prompted a reassessment of macroeconomic policy approaches, such as a demand to speed up bond issuance private, but these moves will take some time to gain ground.

While rating agency Fitch is not expecting cuts in key interest rates, China’s reserve requirement ratio is likely to be reduced again by the end of the year, following a 50 basis point cut in July.

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