Peak China Housing

Kenneth Rogoff and Yuanchen Yang

No 27697, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: China’s real estate has been a key engine of its sustained economic expansion. This paper argues, however, that even before the Covid-19 shock, a decades-long housing boom had given rise to severe price misalignments and regional supply-demand mismatches, making an adjustment both necessary and inevitable. We make use of newly available and updated data sources to analyze supply-demand conditions in the fast-moving Chinese economy. The imbalances are then compared to benchmarks from other economies. We conclude that the sector is quite vulnerable to a sustained aggregate growth shock, such as Covid-19 might pose. In our baseline calibration, using input-output tables and taking account of the very large footprint of housing construction and real-estate related sectors, the adjustment to a decline in housing activity can easily trim a cumulative 5-10 percent from the level of output (over a period of years).

JEL-codes: F39 G01 R3 (search for similar items in EconPapers)
Date: 2020-08
New Economics Papers: this item is included in nep-cna and nep-ure
Note: AP EFG
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Citations: View citations in EconPapers (3)

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