Goldman Sachs highlights China's property sector negative feedback loop

<p>Goldman Sachs on China, in brief from <a href="https://www.cnbc.com/2023/11/21/chinas-property-troubles-are-getting-worse-and-need-beijings-support.html" target="_blank" rel="nofollow">a video interview on CNBC</a>, I've pulled out some points:</p><ul><li>consumption strength may be related to the singles day sales (November 11)</li><li>remains to be seen whether this is a sustainable recovery in consumption</li><li>the weakness in the property sector and also for investment outside of a property may be telling us all the headwinds in the property sector and local government financing vehicles are still strong</li><li>policy makers cannot relax … more work needs to be done</li><li>a very important aspect of the Chinese economy right now in many parts of the economy … we have a sort of self-fulfilling negative loop that's ongoing</li><li>if property prices are falling … is probably not the best time to buy … a buyer will want to wait until prices bottom to buy property and if that happens then the property price may decline further so there is a self-fulfilling negative feedback loop at work</li><li>how do we get out of that that's where we really need government policy, whether a clear road map how do we manage the property sector, how do we manage the growth slowdown … expanding central government balance sheet to concretely show the market that this is the how we're going to address these issues … that will get us out of that negative feedback loop because otherwise it can keep going</li><li> and slow growth becomes a slower growth and I think that's something the policy makers would not want to see</li><li>right now the property sector has two parts … if we're talking about the old model that the develop developer buying land and pre-sales and the sort of the commodity housing we're used to for the past 20 years, I don't think much has changed and there's still a lot negative news to come out because if you think about starts are down 60% but the total new homes under construction is only down 13% … at some point a total new home under construction should be consistent with the new starts and that should be a lot lower than where it is now … so I think there's still more deceleration or decline to come</li><li>but there's also this new part of a property sector the government is trying to leverage to smooth that slowdown this is the where public housing Urban Village renovation and the 1 trillion yuan reported PSL (supplementary lending) the central go government may provide that's where support is coming in</li><li>we have to separate the two parts, if you think about the old model and the private developers I don't think we're out of the woods</li></ul>

This article was written by Eamonn Sheridan at www.forexlive.com.