China’s latest headache: GDP growth slows as property prices soar

China’s slowdown is hardly deflating the nation’s real estate bubble.

The country’s GDP growth slowed to 7.7% in the first quarter of this year, compared to 7.9% in the final three months of 2012. This shows that government efforts to stimulate the economy via increased spending on infrastructure are not working. One reason the growth figure slowed was a worse-than-expected performance by Chinese industry in March.

Meanwhile, Beijing’s relaxed approach to credit helped lift real estate prices 20.2% in the first quarter. So while Chinese workers face job losses amid the slowdown, many are also further away from being able to afford their own homes. That could create a massive political and economic headache for the new administration, as the Communist Party has persuaded Chinese to accept one-party rule in return for increasing prosperity.

The GDP slump was especially surprising given that China is awash with cash, with the money supply booming as the new government led by Xi Jinping has allowed credit to keep flowing abundantly to encourage an economic rebound.


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