China property sector major drag on economy; contracts for 4th straight qtr

China’s property downturn showed little signs of improvement in the three months through June, with its output contracting for the fourth straight quarter and clouding the growth outlook for the rest of the year.

Output in the real estate industry, a key economic contributor, contracted 7% in the second quarter from a year ago, the National Bureau of Statistics said in a report Saturday. It remained the biggest drag on the world’s second-largest economy among all sectors, and performed worse than the first quarter of 2022, when it decreased by 2%, the report showed.

Fresh strains on the sector has emerged recently where households in dozens of cities have stopped paying mortgages due to property developers’ failure to complete construction of their homes. State media cited analysts as saying that it may hurt the stability of the financial system if home buyers in more places follow suit.

In June, home sales declined 23.4% from a year ago and property investment dropped by 9.4%, according to official figures released Friday.

China’s economy grew 0.4% in the second quarter, missing economists’ forecasts of a 1.2% expansion and hitting the slowest pace since the country was first hit by the coronavirus outbreak two years ago, data showed.

Hotels and restaurants, one of the most affected industries, saw its output falling 5.3% last quarter, making it the second-worst performing sector. That compared to a drop of 0.3% in the previous three-month period. Covid lockdowns and suspension of dining-in services in several major cities have dealt a heavy blow, while fears of getting infected also discouraged consumers.

The transport, warehousing and postal industry decreased 3.5% from the same period in 2021, while output in industrial enterprises rose 0.4%.

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