Although there are a number of reasons to be optimistic about China's long-term economic future, the short- to medium-term challenges are considerable

Although there are a number of reasons to be optimistic about China's long-term economic future, the short- to medium-term challenges are considerable. To run down current excess residential property supply it is possible that China's residential property construction activity could fall by as much as 50%. With housing construction representing around 9% of GDP this would cause a major slowdown in the economy and perhaps even a recession. This would have major effects on countries to which China has trade and financial links. Commodity exporters such as Australia and Brazil would be particularly vulnerable. Furthermore, capital repatriation by Chinese investors could hit property markets in Canada, Australia, the UK and Hong Kong, while any move by China to sell its foreign currency reserve holdings could also lead to global asset price volatility, including a spike in US Treasury yields. Read more: (VIEW LINK)