World's biggest mutual fund company, Vanguard Group Inc. tells investors that the economy of China is dependent on its real estate market rather than stocks.
Vanguard Group Inc. declared that investors interested on China's economic development should watch its property market instead of using the Chinese stock market to gauge whether to invest or not. In a report by Bloomberg, Vanguard's chief economist Joseph Davis said that the real risk is real estate and not the stocks. He explained that should a housing market crash like what happened in the U.S. in 2007 happen to China, it will most likely lead to a recession, although it is still quite improbable in the near future.
According to the same post by Bloomberg, the recent slowdown experienced by the Chinese economy is caused by the transition of the country from being driven by industry to now an economy dependent on consumers. This move is making investors nervous both domestic and overseas which is feeding the instability that caused the global market meltdown in August. Davis also added that real estate is a better barometer of how things are going in China's economy. He said in the last six years that Chinese economy has been slowing down 80 percent of it can be attributed to lack of investments in real estate.
Meanwhile, in a report by Stuff.co.nz, one real estate firm said that there is a slowly increasing demand from overseas Chinese buyers of property in Christchurch which they believe is cheaper than in Auckland. The agency, Bayleys Canterbury has found an ingenious way to attract Chinese buyers by producing brochures in Mandarin. These are distributed in trade shows, Chinese stores and supermarkets, as well as in offices like law firms. Bayleys Canterbury manager Peter Whalan said that the number of Chinese buyers has been growing steadily in the last three years.
